The Baltic Region

2018 Vol. 10 № 2

Economics

The Functional and the Instrumental in Market Definition: a Laboratory for Natural Experiments in the Baltics

Abstract

Reforms of natural monopolies need clear delineations between the industries where market mechanisms contribute to social welfare and those where the costs of a transition to a market economy outweigh the benefits. In this article, we emphasise the difficulty of finding the optimum modes of governance within industries as a whole. Using the tools of the transaction cost economics, we show that, alongside the problem of market boundaries and the resultant position and behaviour of a company — an object of antimonopoly regulation — it is necessary to consider the hypothesis about the market being a special mechanism for coordinating interactions between economic entities. In particular, such determinants of transactions as asset specificity, uncertainty, and frequency can create a basis for abandoning the price mechanism. Williamson’s heuristic models suggest that if an activity is characterized by high specificity, uncertainty, and frequency, the very organisation of this activity precludes transaction cost minimisation through the price mechanism employed either in full or in part (hybrid institutional agreements). This can be explained by excessive risks and ensuing high transaction costs. A more efficient solution is the organisation of interactions within a group of legal entities in control (within a single economic entity). In order to compare the practical implementation of institutional alternatives, we examine the modes of governance in the gas supply industry. A major focus is the Baltic region where two interconnected pipelines — the Nord Stream and the OPAL — were constructed. Different ways to handle transactions relating to gas supply were employed at the time. We compare these ways and conclude that it is necessary to consider the determinants of a transaction to select the best structural alternative and to avoid choosing a wrong governance structure.

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Platform Markets: Their Place in the Theory of Mesoeconomic System: Development and a Challenge to Spatial Studies

Abstract

Over the past three decades, researchers across different disciplines have paid close attention to the development of platform markets — an emergent long-term trend in economic policy. I consider platform markets as institutional and technological systems. Platforms create systems of rules and mechanisms that stimulate agents to adopt, maintain, and improve standards disseminated by the most successful platforms. Similarly to economic zones and clusters, platform markets are two-factor mesoeconomic systems. In this article, I consider the differences between two-factor systems and traditional one-factor groupings (agglomerations, industries, and conglomerates). I present a general theoretical framework for studying two-factor mesoeconomic systems, which is employed in a comparative analysis. A specific feature of platforms is the contribution of digital technology to the formalisation of relevant external effects and institutions, whereas economic zones are characterised by the external effects of agglomeration and clusters — by locally specific effects. Platforms are replacing economic zoning and clustering on the research agenda.

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Economic Geography

One Belt - One Road Initiative: A Window of Opportunity for Russia’s Western Border Regions

Abstract

In recent years, global geo-economic transformations have been considerably affected by the development of the People’s Republic of China, its reviving leadership and ambitions, and its increasing efforts to reformat and integrate the Eurasian space. The One Belt — One Road Initiative is a manifesto and a tool to advance China’s long-term geostrategic interests that spread to the bordering states and regions and to the prospects of their socioeconomic development. The initiative encompasses transportation and logistics, production and investment, finances, research and technology, humanitarian affairs, and foreign policy. In this article, we will highlight the key geoeconomic and geopolitical aspects of the One Belt — One Road initiative implementation, based on the Chinese and Russian studies. Another goal is to weigh up the risks and benefits associated with the extension of the project to Russian territories. Special attention is paid to Russia’s western borderlands — 17 regions that account for 8.6 % of the country’s territory, 17.4 % of the total GRP, and 20.8 % of the national population. We analyse the factors in effect — including geopolitical ones, as well as current trends in the development of Russia’s western borderlands. It is shown that the inclusion into the Chinese Eurasian integration initiatives creates additional incentives for a positive re-evaluation of the Russian space as a whole and holds special relevance for Russia’s western borderlands. We analyse the possibility of including Russia’s Baltic regions — the infrastructural and economic island of the Kaliningrad exclave among them — into the One Belt — One Road Initiative.

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Equivocality in Delineating the Borders of a Cluster: The Baltic’s Case

Abstract

Increasing competition between states striving to integrate into the global economic system has created a need for a spatially targeted regional policy as a means of boosting national competitiveness. The regional polarisation approach, which seeks to create new and support the existing nodes of a regional economic system — clusters, technopoles, industrial districts, etc., — has gained wide currency in public administration. The heralds of such forms of spatial networking are various institutional, cultural, organizational, technological, social, and cognitive proximities. Combinations of these proximities create the unique mosaic of a regional milieu. Geographical proximity translates into the boundaries of spatial networks, which rarely follow the existing administrative divisions. Thus, the identification of spatial networks is becoming the focus of regional governance. This article is part of a complex study on equivocality in identifying the boundaries of spatial networking. In this work, we pay particular attention to delineating the boundaries of territorial clusters. This form of spatial networking is both a contemporary tool for targeted regional development and a result of spontaneous functional integration of economic entities. Building on an extensive factual base, we present a complex model of territorial cohesion for delineating the boundaries of a territorial cluster. The model makes it possible to integrate data on geographical, institutional, cultural, organisational, technological, social, and cognitive proximities. The properties of a cluster as a form of networking warrants distinguishing between internal, external, thematic, and absorptive types of boundaries. The feasibility of this approach is tested in the Baltics’ national and regional clusters, with special attention being paid to the Latvian IT-cluster. Committed to economic clustering and glocal cluster interactions beyond national borders, the Baltics are an ideal case study for testing our model. Latvia’s mature IT-cluster is an important national growth point. Regional and industry-specific policies should consider the differences between the cluster’s geographical and non-geographical boundaries.

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Spatial Planning

Marine Spatial Planning: Theoretical Aspects

Abstract

In this article, I consider marine spatial planning (MSP) as a complex of analyses, calculations, and evaluations aimed to prove feasibility of economic activities and contribute to their development in a certain part of a sea or an ocean. A most likely comprehensive MSP object is an integrated segment of coastal/marine area. Consisting of a marine part and a coastal area, such segments are a product of zoning. In this article, I explore the key MSP stages — from identifying the panning object to evaluating the natural resource potential and performing calculations for relevant aquaterritorial structures. The basic principles of the geographical division of marine geosystems are the following ones: identifying relatively integrated marine sectors and relatively integrated coastal sectors and connecting them into a single whole. A hierarchical approach is key to transboundary marine basins. I propose the following techniques: geographical zoning, identification of an area and basin-specific combinations of natural resources, geoinformation modelling, and forecast analysis for different activities and relevant spatial elements of aquaterritorial structures.

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Spatial Planning in the European Union: Practices to Draw on in Russia

Abstract

In this article, we employ a systemic-complex methodology to consider the targets, functions, and content of spatial planning in European countries and compare them to urban planning practices in Russia. We analyse concepts and terminology used in spatial planning and related areas — territorial, marine, and underground planning. The article examines the evolution of the ideas of spatial planning in the EU. We consider the documentary framework for spatial planning from the last third of the 20th century to the present. The basic principles of spatial planning are identified in the article. We describe the level of territorial development management in the EU and its member states. The concept of ‘best practices’ is interpreted as an approach that includes the transfer of expert knowledge, concepts, ideas and practices developed in certain conditions and their adaptation to the needs of a different set of conditions in order to attain similar goals using the components of the transferred technique, model, or policy. We present a classification of spatial planning systems. We show how civil society is being involved in spatial planning in the EU and Russia. We stress the need to draw on the EU spatial planning experience, in particular, the involvement of civil society in project evaluation. At the same time, it is important to take into account the features of Russian natural and socioeconomic conditions.

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Baltic Cooperation in Marine Spatial Planning

Abstract

Marine spatial planning is a relatively new area of cooperation in the Baltic Sea region — a site of long-term joint efforts towards environmental protection and sustainable development. At the beginning of the 21st century, the integrated management of coastal zones and marine spatial planning emerged as a new area of international cooperation. Despite intensive theoretical work on the mentioned concepts, the development of a harmonised spatial planning in the Baltic Sea region is complicated by the complex nature of the problem, a relatively intensive exploitation of marine resources, diverse interests of the stakeholders, and differences in national institutional systems. We describe the key stages of the process, which is regulated by the EU standards on the one hand and affected by the activity of such organisations as VASAB and HELCOM, on the other. In this article, we examine basic documents defining the principles and scope of marine planning and analyse recent research works into spatial development. We conclude that marine spatial planning is a principal tool of the EU’s integrated policy. Many European countries of the Baltic region are seeking cooperation with Russia to preserve the natural and economic environment of the Baltic Sea. Most joint spatial planning projects have been initiated by Finland, Sweden, Germany, and Poland.

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Current and Prospective Transport Connections between Poland’s Border Voivodeships and Russia’s Kaliningrad Region

Abstract

Transport is an important tool to support interregional cross-border cooperation. Moreover, transport is a traditional area of cooperation between neighbouring regions. In this study, we analyse the features and configuration of today’s transport links between Russian and Polish border regions and examine a range of transport projects aimed at a more diversified and intensive cooperation. We believe that priority should be given to the projects that are beneficial to all the parties. As of the beginning of 2018, Russian-Polish cross-border cooperation was sustained by road, railway, and, to a degree, marine transport links. There is a vast variety of projects aimed to create new transport links between the border regions. These projects differ in timelines, scopes, and the range of resources required. In our opinion, the most promising project in a short-term perspective is the establishment of a waterway connection between Russian and Polish ports. The project includes the seaport terminal in Pionersky in the Kaliningrad region. Another promising project is the launch of a crossborder passenger railway connection using a European gauge.

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