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Vol. 5, No. 2, 2019
Corresponding author:
1 Vinnytsia National Agrarian University, Ukraine.
E-mail: agment@vsau.vin.ua
ORCID: https://orcid.org/0000-0001-6385-3877
2 Vinnytsia National Agrarian University, Ukraine.
E-mail: оksanakubai11@gmail.com
ORCID: https://orcid.org/0000-0001-5099-489X
DOI: https://doi.org/10.30525/2256-0742/2019-5-2-117-123
SCIENTIFIC-METHODOLOGICAL AND PRACTICAL PRINCIPLES
OF REGIONAL ECONOMIC SYSTEMS INTEGRATION
Anatolii Mazur1, Oksana Kubai2
Abstract. The purpose of this study is to identify and describe the trans-boundary economic interactions and cross-
border development of the regions in various organizational forms of cooperation as a direction of globalization of
the regional economic systems. Study of transformational processes in the national economy from the perspective
of regionalization of social development opens up a list of scientific problems that are already urgent today and in
the future will require new or additional justification. First and foremost, they include justification of the content
and essence of economic regions, which operate outside the common market of the state and which are open
for other national systems of the world economy within the framework of the interregional cooperation. Practice
shows that territorial and economic systems are not limited to political and administrative boundaries but are
able to function beyond their borders. This tendency needs scientific and theoretical justification in the meaning
of a new paradigm of regional development. Methodology. The methodological basis for the study of theoretical
and practical aspects of the functioning and development of regional economic systems in the conditions of
interregional cooperation is the modern theories and concepts of regional development, including transborder
cooperation. Practical implications. Modern publications do not adequately and deeply consider the issues of the
nature of emergence and organization of regional communities’ international interactions, peculiarities of the
forms of organization and economic feasibility of their existence. The essence of the research lies in justification of
the scientific concept of development of the regions’ cross-border interaction as the objective tendency synthesis
of the state and regions in the implementation of the extended economic reproduction. The article deals with the
theoretical and practical issues of the regional economic communities’ development in the trans-boundary space
of Ukraine. The terminological concepts “national economy” and “economy of Ukraine” are distinguished. And the
necessity of promoting for Euroregions creation, expansion of cross-border cooperation was established. Value/
originality. It is established that the modern development of the world economy is based on the interaction of the
border regions, which in total provide the cross-border movement of goods and services in the globalized economy.
Key words: integration, regions, processes, systems, development, regionalization, globalization.
JEL Classification: R58, B41, P43
1. Introduction
The problem of reducing the “capacity” of the national
governments in solving the economic problems in the
conditions of globalization and regionalization of social
development remains urgent during the last twenty years.
There are objective reasons for this. First, the autonomy
of the entities that develop the economic policies at the
level of the national economic complex is narrowing.
Secondly, the circle of the economic and political market
players, which influence the government decisions, is
expanding. Thirdly, there is a new subject of economic
interests – the international regional association. The
process of regionalization initiated the emergence of
two trends that affect the mechanism of the public
administration: 1) activation of the foreign economic
activity of the internal regions of the country and their
desire to gain greater independence in making strategic
decisions; 2) dependence of transnational cooperation
of the country on the achieved arrangements and
agreements within the framework of the international
regional associations. All these points put the science
before the difficult task of theoretical rethinking of the
role and importance of the state in regulating the social
relations and design of regionalism as a science and
practice of the economic transformation both within
the state and abroad.
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Transformation processes in the national economy
inevitably lead to the transformation of the state
governance mechanisms, which manifests itself in the
growing importance of the interregional market for
goods and services, which leads to the weakening of
the state’s position, the existing mechanisms in the
field of the economic policy also substantially change.
If in the 50s and the 60s the main influence on the
decision making was made by the factors of the national
level, at present the world economic system should be
considered as a complex three-level combination of the
national, regional, and international markets as such,
whose subjects interacting with each other, determine
the effective vector of the economic policy of national
states and supranational economic institutions.
The design of the updated regionalism for the
business practice forms the vector of regionalism as
a new paradigm of the social development, in which the
regional economies act as a “generator” of the economic
reproduction. Changing the paradigm offers a variety of
new research challenges, which it can deliver, as well as
the usefulness of the practical measures it can encourage.
The aforementioned aspects only reveal a list of problems
that in the future will require new or additional research.
The urgency of the identified topics and the lack of
the generally accepted vision of the interregional ties
and intergovernmental economic development on their
basis dictates the need for a deeper consideration of
the essence of the regions integration as the economic
category of describing the peculiarities of their
formation and defining the prospects for the growth
of the national economies through the contribution of
regional economic systems.
2. Fragmentation of the common market
of the regions of Ukraine
The reality of the present is that the central government
structures and their governing bodies in the regions and
at the local level believe that they have the power for the
subordinate and politically defined economy, although in
practice they are not able to determine the real economic
area of influence. As a result, certain territorial units
subordinate to other management structures and regions,
and within the boundaries of the country – to other states.
The state controls the entire economy and regions,
the state administrations – the administrative areas
subordinated to them, as if they are the economic
structures, and the local governments develop economic
growth strategies in the subordinate territories,
considering that their sphere of influence extends within
the specified boundaries. These durability and vitality of
the central trend of management are clear – it serves as
a platform for defining and implementing the course of
the state economic policy.
The government must objectively see the whole
economy, the local governments also believe in their holistic
vision of the economic reality, and the regions consider
the economy as an existing state system. To a large extent,
such a perception of the economic realities is a distortion
of the economic reality and simplification of the real
political economy. The situation is radically changing when
considering the national economy from the perspective of
the regional paradigm of development (Figure 1).
Economic region
Joint market of
Ukraine
Economic system
National
political
jurisdiction
e
d
С
Б
a
A
A
Figure 1. System of the Economic Regions
In this case, the aggregate of the economic regions
(Fig. 1) forms the national economy. However, if the
national economy lies within the borders of the state’s
national boundaries, the boundaries of the economic
regional communities are defined by the sphere of
influence of these economies on the economic space.
It is clear that this discrepancy is not in favour of the
Economic region
Joint market of
Ukraine
Economic system
National
political
jurisdiction
e
d
С
Б
a
A
A
Figure 2. The Common Market of Ukraine
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national government since it loses its influence on
economic activity, which is beyond its jurisdiction. The
situation becomes clear when the aim is to define the
territory of influence of the central governmental bodies.
Obviously, this will be a common market (Figure 2).
So, as can be seen from Fig. 2, the geographical
boundaries of the common market serve as the
jurisdiction of the national government, but this is not the
entire national economy. Part of the economic space goes
beyond the common market and does not subordinate
to the national government, being within the national
boundaries of the country. In practice, these territories
are the objects of the various forms of cross-border
cooperation. This reality brings us to the specification
of economic terminology. Obviously, the term “national
economy”, in our understanding, means the boundaries
of the economic regions within the jurisdictions of the
national government and, accordingly, the common
market. The “Economy of Ukraine” is a broader term
in the content; it denotes the entire national economic
system, including that part that extends beyond the
national boundaries (Mazur, 2007).
3. Enhancement of regional influence
on economic development
The last decade of the twentieth century and the
beginning of the twenty-first century fully testify to the
fact that the global economic processes are becoming
increasingly dominant, pushing the national economies
in the background and as if dissolving them in a giant
economic mechanism. During this transformation, one
of the most important turning points in the history of the
world society occurs, yet not enough understood by the
theoretical science and practice – the devaluation of the
states, which for many decades have been the system-
forming organizational structures. The boundaries of
the national states have become tight for the productive
forces, which have begun to evolve at a rapid pace, and
as a result, the generated market structures have gone
well beyond the national boundaries and economies.
The national states have faced a fundamentally new
situation: they lose the opportunity to effectively use
such levers of the traditional macroeconomic regulation
as import barriers and export subsidies, the national
currency rate, and the refinancing rate of the central
national bank. With the expansion of globalization
processes, the increasing part of the state sovereignty is
distributed between the regional and global regulatory
institutions (Kuhn, 1970). At the same time, in the
governmental structures, the international trade is
interpreted on the basis of the national understanding,
defining the state borders of Ukraine as the border
between “our” and “their” economies.
Beginning of the radical economic reforms in the
state has become even more accompanied by a shift in
emphasis from the trade with the CIS countries to the
ties with other countries of the world. In the developed
countries of the world, about one-fifth of the domestic
products produced within the country are sold on the
external market. Thus, the export quota of GDP of the
large European countries ranges within 21-24%, and
only in the small Western European countries, it makes
up about 40% (Horovyi, 2002).
4. Directions of the development
of regional economic systems
The mentioned information emphasizes a new
direction in the development of the regional economic
systems, which needs theoretical understanding.
Recently, more and more researches are concentrated
on the components of the economic activity at the border
of the administrative boundaries of Ukraine and other
foreign countries. This makes us take a new look at the
modern economy in general and at Ukrainian one, in
particular. Of course, the deep meaning is often lost in the
scientific discussions, where each scientist defends his
ideas, but such activities substantially enrich the original
hypotheses. The opposite approach characterizes the
economic world as a set of the independent productions
and workers who solve their production and sales, as well
as personal problems in chaotic conditions of the political
economy (Barnes, Ledebur, 2003).
The thesis and antithesis, in this case, should not be
interpreted as politics and economics that cannot be
understood, but on the contrary – as an opportunity of
politics and economics to create a new vision of the political
economy. In other words, it is necessary to find a consensus
between politics and economy, in order to successfully
and on a scientific basis solve urgent problems of the
present both from the part of the national governments
and subjects of the regional economic relations. Hence
the basis of the positive promotion of reality on the part
of both participants is proposed: the national economy is
a set of the regional economies, that’s why the boundaries
of the government influence on their activities are
determined only by the common market; the non-
matching of the administrative boundaries of the country
with the economic space, which subordinate to specific
regions, creates preconditions for the interpenetration of
the economic relations beyond the borders between the
neighbouring states (Figure 3) (Mazur, 2007).
Economic region
Joint market of
Ukraine
Economic system
National
political
jurisdiction
e
d
С
Б
a
A
A
Figure 3. Global Economic Interdependence
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For example, A is a system of the regional economies
of Ukraine, and B – surrounding economic regions of
the neighbouring countries. In this case, most of the
economic regions of Ukraine (system A) border and
have common boundaries with the economic regions
of other economic systems (Russia, Moldova, Romania,
Poland, and Hungary).
In reality, the intensity of interdependence of the
regions can become more complex. Fig. 3 gives the
opportunity to see the dependence under the influence
of the market of two economic regions of different
economic systems (for example, the Baltic States – c,
Switzerland – d, Vinnytsia region – a, of the economic
system A of Ukraine) in implementation of the
integration economic processes.
5. The essence and content
of interregional integration
We emphasize that the category “economic
integration” should have at least two meanings.
The first one is based on an understanding of the
interdependence of the industrial sectors in the
economy and the vertical and horizontal integration of
industries. The second one we interpret as an association
of the economic activity, especially the trade of
several countries, for example, through creating free
trade zones, customs unions, common markets, and
economic unions (Storonianska, 2004).
In accordance with the second meaning, we
observe the integration of the regional economies and
economic systems when one or more economic regions
become an integral part of two different economic
systems, with certain local economies becoming
parts of each of them managed jointly. For example,
the Transcarpathian region as a region is the part of
two economic systems – Ukraine and Hungary; Lviv
region of three ones – Krakow voivodeship (Poland),
Tiumen region (Russia), Transdnistria (Moldavia),
etc. Logics of the integration processes become clear
when imposing the state boundaries on the global
network of economic systems and their economic
regions (Figure 4).
Economic region
Joint market of
Ukraine
Economic system
National
political
jurisdiction
e
d
С
Б
a
A
A
Figure 4. Global Economy (rhombi A-G – regional economies)
The data of Figure 4 allow making at least two
intermediate judgments: 1) the economic systems
go beyond the national political jurisdiction; 2) they
are subject to the jurisdiction of other countries.
Accordingly, for those regions beyond the national
boundaries and under the integration, the growth
will depend on the successful functioning of these
economic systems and decisions of the external and
internal order of these states.
6. Forms of interregional cooperation
The regional activity of the countries is manifested
in their participation in the international agreements
(WTO Secretariat Regional Trade Integration under
Transformation (2002). The seminar is Regionalism
and the WTO, Geneva). Moreover, the latest trend
identified by WTO is increase in the number of
countries that choose the trade integration agreements
as a prerequisite for implementing an expanded scheme
of deeper integration within the region. Formation of
the regional unions is considered as:
а) the method of the rapid transformation of the
economic complexes on the basis of the advantages of
international cooperation;
b) the form of the regional association to confront the
stronger entities of the world economy and minimize
the negative effects of globalization;
c) the possibility of integration within the region
for the formation of the additional competitive
advantages, as well as common mechanisms for
agreement and harmonization of interests of the
countries (Petrenko, 2003).
The presented theoretical aspects of the essence
and reasons for the economic integration of the
regions are confirmed in practice. In the boundary
belt of Ukraine in 1993, the international Association
“Carpathian Region” was created which included
5 regions of Hungary, 3 neighbouring voivodeships
of Poland, 6 regions of Slovakia and Transcarpathian,
Lviv, Ivano-Frankivsk, and Chernivtsi regions
of Ukraine. The purpose for the creation of this
association is to organize and coordinate the
joint activities, promote the economic, scientific,
environmental, cultural, sporting, educational
cooperation, as well as support for individual
projects for development of the border infrastructure
of the neighbouring territories, promote the contacts
and cooperation of the international organizations
(Petrenko, 2003).
In September 1995, the agreement on the creation of
Euroregion Bug between Biała Podlaska, Chełm, and
Lublin voivodeships of Poland, Volyn region of Ukraine,
and Brest region of Belarus was signed. Later, Lviv region
joined the agreement. The main task of the Euroregion
Bug activity is: design of the strategy for development
of the Euroregion; creation of the information base;
organization of the advertising campaign of the
Euroregion and attraction of the foreign investments;
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development of the communication infrastructure
projects; development and implementation of the
environmental projects, including “Clean Bug”;
organization of joint trade, cultural and sports events
(Bielienkii, 1996).
The priority for the creation of Euroregions at the
western borders of Ukraine does not exclude the
possibility of creating them on the borders with Russia,
which has many positive points – both for Ukraine and
for Russia.
In 2003, the Euroregion Dnipro (Chernihiv
region of Ukraine, Briansk region of the Russian
Federation, Gomel region of the Republic of Belarus)
was created on the eastern border of Ukraine.
At present, the corresponding work on the formation
of the Euroregions Yaroslavna (Sumy region of
Ukraine and Kursk region of the Russian Federation),
Dniester (Vinnytsia, Odesa regions of Ukraine and
border counties of the Republic of Moldova) is
carried out. The prospect of creating the Euroregions
Slobozhanshchyna is quite realistic, which on the basis
of Kharkiv and Belgorod regions can later include other
neighbouring regions – Sumy, Poltava, and Luhansk –
on the part of Ukraine and Kursk and Voronezh – on
the part of Russia. The issue of developing the project
of Euroregions Sian (Lviv region of Ukraine and
Podkarpackie voivodeship of the Republic of Poland)
is under consideration. There are negotiations on
the entry of the Mykolaiv region of Ukraine into the
Euroregion Pomerania (Mikula, 2003).
In 2005, a new step in Ukraine-EU relationship
within the framework of the “ Wider Europe” initiative
was taken, which was supported by the last stage of
EU extension. The European Neighbourhood Policy
proposed the instruments, which should provide
the new impulse to cross-border cooperation:
moreover, in the long run, this instrument can
be extended to all regions of Ukraine, which will
stimulate the interregional cooperation as a whole,
and the “Neighbourhood Programs” themselves
have the potential to become such an instrument.
Today, Ukraine is offered four such programs:
“Poland – Ukraine – Belarus” (with the indicative
TACIS funding budget of € 8 million for the whole
period), Hungary – Slovakia – Ukraine (with the
indicative TACIS funding budget of € 4 million for the
whole period), Romania-Ukraine (with the indicative
TACIS funding budget of € 6,5 million for the whole
period), and the transnational program (CADSES
initiative (with the indicative TACIS funding budget
of € 5 million for the whole period for Ukraine and
Moldova)) (Voloshko, 2005).
In 2012, on the initiative of Vinnytsia region, the
transnational formation of the Euroregion Dniester was
founded.
It comprised of Vinnytsia region and six administrative
districts of the Republic of Moldova. The aim of the
association is the implementation of the integrated and
harmonious development of the territories adjacent
to river Dniester. Realization of this goal involves the
following:
1) organization, coordination, and deepening of
relations in the economy, trade, science, education,
culture, tourism;
2) implementation of the common cross-border
investment projects;
3) implementation of the regional projects on the
reduction of unemployment among the population of
the border regions by increasing the economic potential;
4) organization of contacts with the relevant
international organizations, foundations, institutes,
agencies, and other organizations.
The main promising projects include:
1. The bridge across the river Dniester in Yampil,
Vinnytsia region (the estimated cost is € 9 million).
2. Construction of sewage treatment in settlements of
Vinnytsia region and Moldova along the river Dniester
(the estimated cost of works is € 5 million.
3. Construction of the international Vinnytsia)
airport.
4. Construction of roads to Bronnytsia-Ungur
crossing point (the estimated cost is € 3 million).
The experience of the functioning of Euroregions
is currently considered to be the most efficient
organization of cross-border cooperation. Under
conditions of overcoming the problematic moments
in organization and activity of the existing Euroregions
and in attracting other border areas of Ukraine to the
process of integration in the form of Euroregions, the
most effective use of the potential of the border areas
of the country is possible, which, firstly, will provide
the greater independence in the development of these
regions, and secondly, will fully stimulate the process
of integration of the country into the world values by
joining the European Economic Space.
There are examples of less fortunate and formalized
participation of border countries in the form of
combinations of transnational alliances, such as the
Berentz-European Council, Council of the Baltic
States, etc. (Euro (1999) “Severnoe Syianye” v polytyke
Evropeiskoho Soiuza [“Northern Light” in the policy
of the European Union], Moscow: Euro). They are
experimental in the sense that the composition of their
participants testifies to the desire to establish horizontal
cooperation between NATO member states, neutral
states, and post-Soviet republics.
7. Reserves of interregional cooperation
The analysis of the cross-border cooperation with the
participation of Ukrainian regions gives grounds for
talking about the existence of a number of obstacles and
problems of development, which should include the
following:
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1. Lack of effective regional policy of cross-border
cooperation, which is associated primarily with the crisis
social and economic situation of Ukraine as a whole.
2. Existence of the significant differences in
administrative and territorial arrangements and patterns
of territories division in accordance with EU standards.
This can include the differences in the current legislation
in relation to the “field of the economic activity”
(customs, tax, banking, and insurance regulation).
3. Differences in the development of the adjacent
border regions, in particular, limitation of the financial
security, which restrains participation of the local
authorities in the international development projects.
4. Limitation of powers and rights in accordance with
the current legislation of the local self-government
bodies regarding participation in the international
associations, establishment of the foreign economic
relations, etc.
5. Low awareness of the feasibility and possible results
of Euroregional associations’ activity with participation
of the border regions of Ukraine and lack of a clear
position on the legitimacy of this activity.
At the same time, the perspective of this direction of
economic development is obvious. The border area of
Ukraine covers 96 administrative districts and 5 areas
of city councils; 19 out of 25 regions of the state are
border ones. The natural and resource potential of
these territories makes up 18.5% of the potential of
Ukraine, and the population – 21.8%. The industry of
the border territories employs 22.8% of the production
and industrial potential of the country; and almost 19%
of the industrial products of Ukraine are manufactured
(Pila, Chmir, 2003).
The concrete proposals on the main directions of
Ukraine’s adaptation to the world market should come
from the already adopted course on multi-vector,
development of relations with CIS countries, and
especially with Russia, and with the need to expand the
economic ties with EU countries.
Since it is difficult to build one’s own economy and
relations with other countries alone, participation in
the regional organizations is a perspective for Ukraine.
UNO, as already noted, recognizes the importance
of the regional groupings to accelerate the process of
globalization and facilitate the participation of national
governments in them (Klochko, 2001).
8. Directions for improving
the regulatory influence on the nature
of interregional integration processes
Inclusion of Ukraine in the globalization
processes mostly depends on the formation of
a new mechanism of the foreign economic activity,
based on the principles of ensuring the continuous
nature of the economic ties, a gradual transition
from the administrative to self-regulating system,
demonopolization, deideologization, compliance with
the criteria of the economic cooperation, guaranteeing
the country’s security. In our opinion, formation
of the basics of such mechanism (legal bases,
organizational forms, economic upsurges) will go
towards unification with the world structures, creation
of the real incentives for foreign investors, consistent
implementation of the economic reform in this field,
reduction of the exaggerated dependence of Ukraine
on the external revenues, products of fuel and energy
complex, grounded protectionism, promotion of new
equipment and technologies attraction.
9. Conclusions
Conducted researches of the theory and practice of
the integration processes of the regional economies
allow making some important generalizations:
- the global economy is a system of interconnected
economic systems and their components – regional
economies;
- government structures and economies do not
coincide in the global economy; therefore, nations
are economically interdependent and have common
elements of the economic systems within the common
markets;
- the states, which possess the parts of the economic
system, located within their national boundaries,
are interested in the effective operation of the whole
economic system, which is proved by the practical
examples of cooperation;
- the policy directed only to the economy within the
borders of the national boundaries to ensure the growth
of the competitive advantage of one of the countries
will necessarily have a retroactive effect on the activity
of each of the economic systems.
The trends in the world economic development in
the most concrete form affect the specifics of the border
areas management, namely:
- such regions legally ensure the cross-border
movement of goods in the conditions of trade
liberalization;
- the border regions carry out contact and barrier
functions under the pressure of the dynamic growing
trans-border movement of the population in the form
of the international migration of labour resources,
tourism, business and educational trips, which is a
manifestation of globalization of the world inter-
economic relations;
- the regional integration associations are formed in
the event of backward or repressiveness of the border
areas due to their peripheral positions;
- the general educational trend includes strengthening
the rights and empowering the local authorities, in
particular, in the area of cooperation with the relevant
authorities of the neighbouring territories of foreign
countries.
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