Economic Science Rural

ISSN 1691-3078
ISBN 978-9934-8304-7-1
ECONOMIC SCIENCE FOR

RURAL DEVELOPMENT
Proceedings of the International
Scientific Conference
No. 31
Integrated and Sustainable

Regional Development
“ECONOMIC SCIENCE FOR RURAL
DEVELOPMENT”
Proceedings of the
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No. 31
Integrated and Sustainable Regional Development
Jelgava
2013
Economic Science for Rural Development No. 31, 2013 1

ISSN 1691-3078
L. Rantamäki-Lahtinen Turning Rural Potential into Success
TIME SCHEDULE OF THE CONFERENCE
Preparation – September, 2012 – April 20, 2013

Process – April 25-26, 2013
Latvia University of Agriculture, Latvia, 2013

Aleksandras Stulginskis University, Lithuania, 2013
Banat University of Agricultural Sciences and Veterinary Medicine Timisoara, Romania, 2013
Bremen University of Applied Sciences, Germany, 2013
Daugavpils University, Latvia, 2013
Fulda University of Applied Sciences, Germany, 2013
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Kaunas University of Technology, Lithuania, 2013
Khyber Pakhtunkhwa Agricultural University, Peshawar, Pakistan, 2013
Klaipeda University, Lithuania, 2013
Latvian State Institute of Agrarian Economics, Latvia, 2013
Lithuanian Institute of Agrarian Economics, Lithuania, 2013
Mykolas Romeris University, Lithuania, 2013
Pope John Paul II State School of Higher Education in Biala Podlaska, Poland, 2013
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Riga International School of Economics and Business Administration, Latvia, 2013
Riga Technical University, Latvia, 2013
Seinajoki University of Applied Sciences, Finland, 2013
Siauliai University, Lithuania, 2013
Slovak University of Agriculture in Nitra, Slovakia, 2013
6]HQW,VWYDQ8QLYHUVLW\+XQJDU\
Turiba University, Latvia, 2013
University of Latvia, Latvia, 2013
University of Agriculture in Krakow, Poland, 2013
University of Bremen, Germany, 2013
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University of Helsinki, Finland, 2013
University of Social Science, Poland, 2013
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University of Zielona Gora, Poland, 2013
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Warsaw University of Life Sciences, Poland, 2013
Wroclaw University of Technology, Poland, 2013
ISSN 1691-3078
ISBN 978-9934-8304-7-1
Abstracted / Indexed: AGRIS, EBSCO

http://www.llu.lv/ef/konferences.htm
http://www.fao.org/agris/
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2 Economic Science for Rural Development No. 1-10

31, 2013
ISSN 1691-3078
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Professor Baiba Rivza President of the Academy of Agricultural and

Forestry Sciences of Latvia; academician of Latvian
Academy of Sciences; foreign member of Academy of
Agricultural Sciences of Russia; foreign member of the
Royal Swedish Academy Geargophily (Italy), foreign
member of the Royal Swedish Academy of Agriculture
and Forestry
Professor Algirdas Miskinis Vilnius University, Lithuania
Professor Barbara Freytag-Leyer Department of Home Economics, Fulda University of
Applied Sciences, Germany
Professor %RŭKOPHU Department of Economics of the Swedish University of
Agricultural Sciences, Uppsala, Sweden
Professor Bartosz Mickiewicz Dean of the Faculty of Economics, West Pomeranian
8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQPoland
Professor Alina Danilowska Head of Department of Economics and Economic Policy
of Warsaw University of Life Sciences, Warsaw, Poland
Professor Maria Parlinska Faculty of Economic Sciences, Warsaw University of
Life Sciences, Poland
Professor Julius Ramanauskas Dr. hab., prof. Klaipeda University, Lithuania
Professor Irina Pilvere Dean of the Faculty of Economics of Latvia University
of Agriculture
Associate professor Aija Eglite Latvia University of Agriculture, foreign member of
the Academy of Sciences of Bulgaria
Associate professor Modrite Pelse Latvia University of Agriculture
Professor Tiiu Pass Tartu University, Estonia
Professor Mona Vintila Professor West University of Timisoara, Romania
Professor Arild Sæther Faculty of Economics and Social Sciences of the
University of Agder, Kristiansand, Norway
Associate professor Andra Latvia University of Agriculture
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Professor Ingrida Jakusonoka Latvia University of Agriculture
Professor Aina Dobele Latvia University of Agriculture
Associate professor Inguna Leibus Latvia University of Agriculture
Assistant professor Dace Viksne Latvia University of Agriculture
Associate professor Aina Muska Latvia University of Agriculture
The chief facilitator and project leader – assoc. professor Aija Eglite
Economic Science for Rural 1-10

Development No. 31, 2013 3
ISSN 1691-3078
Editorial Board
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Associate professor Aija Eglite Latvia

Professor Barbara Freytag-Leyer Germany
3URIHVVRU%RŭKOPHU Sweden
Professor Arild Sæther Norway
Professor Antoni Mickiewicz Poland
Associate professor Kaie Pappel Estonia
Professor Julius Ramanauskas Lithuania
Professor Bartosz Mickiewicz Poland
Professor Veronika Bugina Latvia
Professor Anastasija Vilcina Latvia
Associate professor Modrite Pelse Latvia
Professor Alina Danilowska Poland
Professor Mona Vintila Romania
Professor Maria Parlinska Poland
Editor – in-chief and responsible

compiler of the proceedings: Associate professor Aija EGLITE
Assistant to the responsible compiler: Zane BULDERBERGA
Language Editor: Gunta GRINBERGA-ZALITE
Layout designer: Agnese RADZELE-SULCE

31, 2013
ISSN 1691-3078
Reviewers
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international review.
All reviewers were anonymous for the authors of the articles.
The following 112 UHYLHZHUV IURP VFLHQWL¿F DQG DFDGHPLF LQVWLWXWLRQV RI 10 countries
(VWRQLD *HUPDQ\ +XQJDU\ WKH &]HFK 5HSXEOLF 5RPDQLD /LWKXDQLD 3RODQG 6ORYHQLD
Pakistan, and Latvia) have written 288 reviews.
Adolfs Rucins Dr.sc.ing., leading researcher (Research Institute of Agricultural Machinery,

Latvia)
Agnese Krievina Dr.oec., researcher (Latvian State Institute of Agrarian Economics, Latvia)
$JQHVH5DG]HOH6XOFH Dr.oec., assist.prof. (Latvia University of Agriculture, Latvia)
$JQLHV]ND%UHOLN 3K'SURI:HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQ3RODQG
Aija Eglite Dr.oec., assoc. prof. (Latvia University of Agriculture, Latvia)
Aija van der Steina Dr. oec., lecturer (Turiba University, Latvia)
Aina Dobele Dr.oec., prof. (Latvia University of Agriculture, Latvia)
Aina Joppe Dr.oec., assist.prof. (University of Latvia, Latvia)
Aina Muska Dr.oec., assoc.prof. (Latvia University of Agriculture, Latvia)
Aivars Strautnieks Dr.oec., assoc.prof. (Latvia University of Agriculture, Latvia)
$OHNVDQGHU*U]HODN 3K'DVVRFSURI3R]QDQ8QLYHUVLW\RI(FRQRPLFV3RODQG
Alina Danilowska Dr.hab., assoc.prof. (Warsaw University of Life Sciences, Poland)
$OLQD2F]DFKRZVND 'U.RV]DOLQ8QLYHUVLW\RI7HFKQRORJ\3RODQG
Anastasija Vilcina Dr.oec., prof. (Latvia University of Agriculture, Latvia)
$QGD=YDLJ]QH Dr.oec., assist. prof. (Latvia University of Agriculture, Latvia)
$QGUD=YLUEXOH%HU]LQD Dr.oec., assoc.prof. (Latvia University of Agriculture, Latvia)
$QGU]HM.UDVQRGHEVNL 'UKDELQ]GHDQ8QLYHUVLW\RI$JULFXOWXUHRI&UDFRZ3RODQG
$QGU]HM3LRWU:LDWUDN Dr.hab., prof. (University of Warsaw, Poland)
$QLWD$X]LQD Dr.oec., assoc.prof. (Latvia University of Agriculture, Latvia)
$QWRQL0LFNLHZLF] 3K'SURI:HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQ3RODQG
Arturs Praulins 'URHFVFLHQWL¿FVHFUHWDU\5HVHDUFK,QVWLWXWHRI/DWYLDQ0DULWLPH$FDGHP\
Latvia)
Audruis Gargasas Dr., assist.prof. (Aleksandras Stulginskis University, Lithuania)
%DLED5LY]D Dr.hab.oec., prof. (Latvia University of Agriculture, Latvia)
%DUWRV]0LFNLHZLF] 3K'SURI:HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQ3RODQG
Biruta Sloka Dr.oec., prof. (University of Latvia, Latvia)
%RŭKOPHU Dr., prof. (Swedish University of Agricultural Sciences, Sweden)
Bogdan Klepacki Dr.hab., prof. (Warsaw University of Life Sciences, Poland)
Daiga Kunkulberga Dr.sc.ing., assoc.prof. (Latvia University of Agriculture, Latvia)
Daina Paula Dr.oec. (Bank of Latvia, Latvia)
']LQWUD$WVWDMD Dr.oec., assoc.prof. (BA School of Business and Finance, Latvia)
Elita Jermolajeva Dr.oec., assoc.prof. (Daugavpils University, Latvia)
Evelina Spakovica Dr.oec., assist. prof. (Latvia University of Agriculture, Latvia)
Gediminas Kuliesis Dr. senior research fellow (Lithuanian Institute of Agrarian Economics,
Lithuania)
*U]HJRU].RV]HOD PhD, (Warsaw University of Life Sciences, Poland)
*XQLWD0D]XUH Dr.oec., assoc.prof. (Latvia University of Agriculture, Latvia)
Gunta Grinberga-Zalite Dr.oec., assist. prof. (Latvia University of Agriculture, Latvia)
+DOLQD.DOX]D Dr. oec., prof. (University of Natural Sciences and Humanities in Siedlce,
Poland)
1-10
ISSN 1691-3078
Hana Mohelska 3K'DVVRFSURI8QLYHUVLW\RI+UDGHF.UDORYHWKH&]HFK5HSXEOLF

Ieva Andersone Dr.oec., lecturer (Riga Technical University, Latvia)
Ieva Brence 'UVFDGPLQLVWUDVVRFSURI8QLYHUVLW\&ROOHJHRI(FRQRPLFVDQG&XOWXUH
Latvia)
Ilham Huseyinov Dr., assoc.prof. (University of Mediterranean Karpasia, Turkey)
,O]H6SURJH Dr.sc.administr., assist.prof. (Information Systems Management Institute,
Latvia)
,O]H8SLWH Dr.oec., assist.prof. (Latvia University of Agriculture, Latvia)
Inara Jurgena Dr.oec., assoc.prof. (Latvia University of Agriculture, Latvia)
Inesa Voroncuka Dr.oec., prof. (University of Latvia, Latvia)
,QJD,]GRQDLWH0HG]LXQLHQH 3K'DVVRF.ODLSHGD6WDWH&ROOHJH/LWKXDQLD
Ingrida Jakusonoka Dr.oec., prof. (Latvia University of Agriculture, Latvia)
Ingrida Kantike Mg.oec., lecturer (Latvia University of Agriculture, Latvia)
Inguna Leibus Dr.oec., assoc.prof. (Latvia University of Agriculture, Latvia)
Inguna Gulbe Dr.oec., assist.prof. (Latvia University of Agriculture, Latvia)
Irina Pilvere Dr.oec., prof. (Latvia University of Agriculture, Latvia)
,YDUV0X]LV Dr.paed., prof. (Riga Teacher Training and Educational Management Academy,
Latvia)
,]DEHOOD6LNRUVND:RODN Dr.hab., prof. (Warsaw University of Life Sciences, Poland)
Irija Vitola Dr.oec., prof. (Latvia University of Agriculture, Latvia)
Jan Eisler $VVRFSURI3ULYDWH8QLYHUVLW\&ROOHJHRI(FRQRPLF6WXGLHVWKH&]HFK
Republic)
Jan Hybel 'UKDESURI8QLYHUVLW\RI&RPSXWHU6FLHQFHDQG(FRQRPLFVLQ2OV]W\Q
Poland)
Jan Jarre Dr.rer.pol., prof. (University of Applied Sciences Munster, Germany)
Jan Polcyn 3K'DVVRFSURI7KH6WDQLVODZ6WDV]LF6WDWH6FKRRORI+LJKHU9RFDWLRQDO
Education in Pila Poland)
Janina Sawicka Dr.hab., prof. (Warsaw University of Life Sciences, Poland)
Jaroslaw Golebiewski Dr.hab. (Warsaw University of Life Sciences, Poland)
Javid Ullah Dr., prof. (University of Agriculture Peshawar, Pakistan)
Joanna Kisielinksa Dr.hab. (Warsaw University of Life Sciences, Poland)
Johana Paluchova PhD, (Slovak University of Agriculture in Nitra, Slovakia)
-RVHI.UDX]H 3K'8QLYHUVLW\RI(FRQRPLFWKH&]HFK5HSXEOLF
-RVHI0H]HUD 'ULQJ&VFVHQLRUUHVHDUFKHU,QVWLWXWHRI$JULFXOWXUDO(FRQRPLFVDQG
,QIRUPDWLRQ&]HFK5HSXEOLF
Justyna Franc-Dabrowska Dr.hab., assoc. dean, (Warsaw University of Life Sciences, Poland)
Karolina Pawlak 3K'DVVLVWSURI3R]QDQ8QLYHUVLW\RI/LIH6FLHQFHV3RODQG
Konstantins Didenko Dr.oec., prof. (Riga Technical University, Latvia)
Krisjanis Abolins MBM (Latvia University of Agriculture, Latvia)
.U\VW\QD.U]\]DQRZVND Dr.hab., prof. (Warsaw University of Life Sciences, Poland)
Liga Mihejeva Dr.oec., prof. (Latvia University of Agriculture, Latvia)
Liga Paura Dr.agr., assoc. prof. (Latvia University of Agriculture, Latvia)
Ligita Bite Dr.oec., assist.prof. (Latvia University of Agriculture, Latvia)
Linda Silina Dr.oec., assist.prof. (Latvia University of Agriculture, Latvia)
Ludwik Wicki Dr.hab. (Warsaw University of Life Sciences, Poland)
/XNDV]3RSODZVNL PhD, assoc. prof. (Agricultural University of Krakow, Poland)
Maija Senfelde Dr.oec., prof. (Riga Technical University, Latvia)
Maria Parlinska Dr.hab., prof. (Warsaw University of Life Sciences, Poland)
Marian Podstawka Dr.hab., prof. (Warsaw University of Life Sciences, Poland)

1-10
31, 2013
ISSN 1691-3078
Minna Vare PhD, principal research scientist (MTT Agrifood Research, Finland)
Modrite Pelse Dr.oec., assoc.prof. (Latvia University of Agriculture, Latvia)
Natalia Pavlikha 'UKDESUȖI3RSH-RKQ3DXO,,6WDWH6FKRRORI+LJKHU(GXFDWLRQLQ%LDáD
Podlaska, Poland)
1HOLMD-H]GDNRYD Director General (State Revenue Service, Latvia)
Nina Drejerska PhD, assist.prof. (Warsaw University of Life Sciences, Poland)
3HWHULV5LY]D Dr.hab.sc.ing., prof. (Latvia University of Agriculture, Latvia)
Pjotr Kulyk PhD, vice-dean (University of Zielona Gora, Poland)
Pribeanu Gheorghe PhD, assoc. prof. (Vasile Goldis West University of Arad, Romania)
5HPLJLMXV&LHJLV Dr.hab., prof. (Vilnius University, Lithuania)
Rimantas Krankalis Dr., assoc. prof. (Siauliai University, Lithuania)
Romena Sulca Dr.oec., assist.prof. (Latvia University of Agriculture, Latvia)
Ruta Petrauskiene Dr. assoc.prof. (Kaunas University of Technology, Lithuania)
6DQGLMD5LY]D Mg.oec., lecturer (Latvia University of Agriculture, Latvia)
Sandra Gusta Dr.oec., assist.prof. (Latvia University of Agriculture, Latvia)
Sandris Ancans Mg.oec., lecturer (Latvia University of Agriculture, Latvia)
6NDLGULWH']HQH Mg.oec. (Latvia University of Agriculture, Latvia)
Stanislavs Keiss 'URHFSURI8QLYHUVLW\&ROOHJHRI(FRQRPLFVDQG&XOWXUH/DWYLD
Svetlana Saksonova Dr.oec., assoc.prof. (University of Latvia, Latvia)
Tatjana Tambovceva Dr.oec., assoc. prof. (Riga Technical University, Latvia)
7HRGRU6NRWDUF]DN 3K'SURI:HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQ3RODQG
Ugis Zalitis Dr.oec., assoc. prof. (BA School of Business and Finance, Latvia)
8W]'RUQEHUJHU 'USURI/HLS]LJ8QLYHUVLW\*HUPDQ\
Valentina Andrejeva 'URHF-RLQ6WRFN&RPSDQ\³2ODLQIDUP´/DWYLD
Vera Boronenko Dr.oec. (Daugavpils University, Latvia)
Veronika Bugina Dr.oec., prof. (Latvia University of Agriculture, Latvia)
Vita Zarina Dr.oec., asoc.prof. (Turiba University, Latvia)
Vladislavs Vesperis 'URHF&URVV6HFWRUDO&RRUGLQDWLRQ&HQWUH/DWYLD
Voldemars Strikis Dr.h.c., prof. (Latvia University of Agriculture, Latvia)
9XOIV.R]OLQVNLV Dr.hab.oec., prof. (Latvia University of Agriculture, Latvia)
:RMFLHFK*RWNLHZLF] 3K'SURI8QLYHUVLW\RI:DUPLDDQG0D]XU\LQ2OV]W\Q3RODQG
Zane Bulderberga Mg.oec., lecturer (Latvia University of Agriculture, Latvia)
Zanete Ilmete Dr.oec., prof. (University of Latvia, Latvia)
=VX]VDQQD1DDUQH7RWK PhD, assoc.prof. (Institute of Economics and Methodology, Hungary)
1-10
3-13
ISSN 1691-3078
Foreword
Every year the Faculty of Economics, Latvia University of Agriculture holds the international
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This year researchers from Europe and Asia representing not only the science of economics in
the diversity of its sub-branches have contributed to the conference; they have expanded their
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and multi-dimensional development of the contemporary science. The conference is dedicated
to topical themes of rural development; hence, the research results are published in three
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was published in 2000.
Professors, doctors of science, associate professors, assistant professors, PhD students, and
other researchers from the following higher education, research institutions and enterprises
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1. Latvia University of Agriculture, Latvia

2. Aleksandras Stulginskis University, Lithuania
3. BA School of Business and Finance, Latvia
4. %DOWLF3V\FKRORJ\DQG0DQDJHPHQW8QLYHUVLW\&ROOHJH/DWYLD
5. Banat University of Agricultural Sciences and Veterinary Medicine Timisoara, Romania
6. Bremen University of Applied Sciences, Germany
7. Daugavpils University, Latvia
8. Fulda University of Applied Sciences, Germany
9. ,QVWLWXWHRI$JULFXOWXUDO(FRQRPLFVDQG,QIRUPDWLRQWKH&]HFK5HSXEOLF
10. Kaunas University of Technology, Lithuania
11. Khyber Pakhtunkhwa Agricultural University, Peshawar, Pakistan
12. Klaipeda University, Lithuania
13. ³/DWYHQHUJR´-6&/DWYLD
14. /DWYLDQ5XUDO$GYLVRU\DQG7UDLQLQJ&HQWUH/DWYLD
15. Latvian State Institute of Agrarian Economics, Latvia
16. Lithuanian Institute of Agrarian Economics, Lithuania
17. Mykolas Romeris University, Lithuania
18. Pope John Paul II State School of Higher Education in Biala Podlaska, Poland
19. 3R]QDQ8QLYHUVLW\RI(FRQRPLFV3RODQG
20. 3R]QDQ8QLYHUVLW\RI/LIH6FLHQFHV3RODQG
21. Professional Association of Project Managers, Latvia
22. 5H]HNQH+LJKHU(GXFDWLRQ,QVWLWXWLRQ/DWYLD
23. Riga International School of Economics and Business Administration, Latvia
24. Riga Teacher Training and Educational Management Academy, Latvia
25. Riga Technical University, Latvia
26. Seinajoki University of Applied Sciences, Finland
27. Siauliai University, Lithuania
28. Slovak University of Agriculture in Nitra, Slovakia
29. State Regional Development Agency, Latvia
30. 6]HQW,VWYDQ8QLYHUVLW\+XQJDU\
31. /DWYLDQ5XUDO$GYLVRU\DQG7UDLQLQJ&HQWUH/DWYLD
32. Turiba University, Latvia
33. University of Latvia, Latvia
34. 8QLYHUVLW\&ROOHJHRI&XOWXUHDQG(FRQRPLFV/DWYLD
35. University of Agriculture in Krakow, Poland
36. University of Bremen, Germany
8 Economic Science for Rural Development No. 31, 2013

1-10
ISSN 1691-3078
37. 8QLYHUVLW\RI(FRQRPLFVLQ3UDJXHWKH&]HFK5HSXEOLF
38. University of Helsinki, Finland
39. University of Social Science, Poland
40. 8QLYHUVLW\RI6]F]HFLQ3RODQG
41. University of Zielona Gora, Poland
42. 9HQWVSLOV8QLYHUVLW\&ROOHJH/DWYLD
43. ³9LGHV&HQWUV´/WG/DWYLD
44. Warsaw University of Life Sciences, Poland
45. :HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQ3RODQG
46. Wroclaw University of Technology, Poland
The following topical themes have been chosen for the conference:
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— Integrated and Sustainable Regional Development
— Rural Development and Entrepreneurship
— 0DUNHWLQJDQG6XVWDLQDEOH&RQVXPSWLRQ
— Finance and Taxes
— Home Economics
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methodological research results, meeting the requirements of international standards,
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manuscript has been reviewed by one reviewer from the author’s native country
or university, while the other reviewer came from another country or university. The third
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for the authors of the articles. Every author received the reviewers’ objections or
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author’s comments, the Editorial Board of the conference evaluated each article. Altogether,
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for publication.
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No. 30 Production and Cooperation in Agriculture

Finance and Taxes
No. 31 Integrated and Sustainable Regional Development
No. 32 Rural Development and Entrepreneurship

Marketing and Sustainable Consumption
The publishing of the Proceedings before the conference will promote exchange of opinions,
discussions, and collaboration of economic scientists on the international level. The
research results included into the Proceedings are available worldwide to any interested
person.

ISSN 1691-3078
The abstracts of the conference proceedings provided in English are submitted to the
international databases:
AGRIS – International Information System for the Agricultural Sciences and Technology set up
by the Food and Agriculture Organisation of the United Nations (FAO UN) (www.fao.org/agris/),
and selected papers are submitted to especially comprehensive scholarly, multidisciplinary
databases containing full research texts:
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SUR¿OH HKRVW GHIDXOWGE OEK as well as
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for the development of future conference proceedings and organisation of international
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and the Editorial Board as well as supporting staff for their contribution organising the
conference.
On behalf of the conference organisers

Dr. oec. Aija Eglite
Associate Professor of the Faculty of Economics
Latvia University of Agriculture
Aija.Eglite@llu.lv

ISSN 1691-3078
Content
Integrated and Sustainable Regional Development

Grazyna Krzyminiewska Food Crisis Versus Threats to the World’s Social and 16
Economic Stability
Aldona Zawojska, Property Rights and Macroeconomic Performance in 20
Tomasz Siudek Central and Eastern European EU Member States
Agnieszka Brelik, Issues of Public Goods on a Multi-Functional 28
Anna Matuszczak Development of Rural Areas
Irina Arhipova Latvia Research Funding and Quality of Research 33
Activities
Inga Shina, Theoretical Aspects, Regulation and Experience In The 40
Madara Uzkalna Management of the Public and Private Partnership in
Latvia and the European Union
Hanna Pondel European Union Funds in the Pro-Environmental 45
Development of Polish Rural Areas
Remigijus Kinderis, Cluster as Harmonious Cooperation of the Business 52
Giedrius Jucevicius Models of Wellness Tourism Members
Antoni Mickiewicz, Characteristics of Measures Undertaken Within the 58

Pawel Mickiewicz Framework of Axis 2 “Improving the Environment and
the Countryside” Under the RDP 2007-2013
Dagmara K. Zuzek Business Activity of Small and Medium Enterprises 67
in Poland in Light of the Concept of Sustainable
Development
Bazyli Czyzewski 3UR¿WDELOLW\RI/DQG)DFWRURQWKH&RQGLWLRQVRI 73
Sustainable Development – Frames of New Land Rent
Theory
Joanna Hernik Szczecin as a Tourist Destination – Use of 79
Accommodation Facilities and Suggestions for
Sustainable Development
Liga Jankova EU Funds Financing for Member States 85
Tatjana Staube, Regional Specialization Performance to be Improved in 92
Ineta Geipele Latvia for the Multinational Industrial Companies
Natalija Cudecka-Purina, New European Union Member States Towards 98
Dzintra Atstaja, Sustainable Waste Management, Involvement of
Vladimirs Cudeckis Individuals into the System
Magdalena Zwolinska- Management and Use of Natural Resources in the 104
Ligaj Development of Rural Economic Functions in Lublin
Voivodeship
Aldis Bulis, Latvian Logistics Cluster and its Development 111
Roberts Skapars Perspectives
Andris Ozols, National Innovation system of Latvia and Triple Helix 146
-ŅQLV(JOŝWLV Model of Innovation Development
Elena Ozola
Jelena Lonska Latvia’s “Success Story” in the Context of Real and 122
Subjective Well-Being

ISSN 1691-3078
$.ƗUNOLƼã,/ƯSHQƯWH'DåLNǌWVPƝVOXQRUPDWƯYXL]VWUƗGHVPHWRGLVNLHDVSHNWL
Agnieszka Baer- Processes of Convergence/Divergence of Labour 129

Nawrocka, Productivity in Agriculture of Selected Regional Trade
Agnieszka Sapa Agreements
Anna Matuszczak, Situation in the Agricultural Regions of the EU 136
Agnieszka Brelik Depending on Their Level of Development
Irena Silinevica Implementation Problems of Development Strategies: 140
Case Study of Dagda County
Egle Gaule, E-Governance Development External Factors Analysis: 146
Gintaras Zilinskas Lithuanian Municipalities on Rural-Urban Divide
Ligita Simanskiene, How to Select the Rates of Sustainable Development 153
Audrius Kutkaitis, in Rural Territories: the Insights to Methodological
Angelija Buciene Approach
Krystyna Krzyzanowska Corporate Social Responsibility: A Case Study of a 159
Logistics Company
Agnieszka Siedlecka 'H¿QLWLRQDQG0HDVXUHPHQWRI2EMHFWLYH4XDOLW\ 164
of Life for Assessing the Level of Sustainable
Development of Rural Communities
Hans-Heinrich Bass, Water Management and Water Harvesting: how to 170
Klaus von Freyhold, 2YHUFRPH&RQVWUDLQWVLQ&RPPXQLW\*DUGHQLQJLQ
Cordula Weisskoeppel Semi-Arid Mali
Irina Pilvere, Less Favoured Area Payments in the Regions of Latvia 175
Inga Sikunova
Zinta Zalite, The Development of Forest Property Rights from Early 184
Anita Auzina 20th Century to Modern Times
Anda Zvaigzne, Main Factors of Direct Effect on Employment in Latvia 190
Inese Saulaja,
Dzesija Zeiferte
Irina Curkina, Role of Mineral Deposits in the National Economy of 198
Ilze Sproge, Latvia in 1935 – 2011
Sandra Jekabsone
Sandra Jekabsone, Export and Import Dynamics of Mineral Resources in 205
Ilze Sproge, Latvia in the Period of 2000-2012
Irina Curkina
Ilze Sproge, Mineral Resources and Long Term Development in 214
Irina Curkina, Latvia
Sandra Jekabsone
Emils Pulmanis, Polycentric Development Projects Initialisation Process 220
Zaneta Ilmete Problems in Latvia
Zanete Garanti, Towards Multi-Dimensional Regional Cluster 225
Andra Zvirbule-Berzina ,GHQWL¿FDWLRQ
Ligita Melece Innovative Solutions for Rural Areas: Development of 234
Social Capital
Jonas Jasaitis Rural Development in Baltic States: Case Study of 241
Lithuania (Survey of the Last Century)
Irina Kulitane, Possibilities for the use of Innovation in Vidzeme 248
$QDVWDVLMD9LOFLŪD Planning Region
Kaspars Naglis-Liepa, Adaptation of Bioenergy Village Concept in Small 256
Modrite Pelse Towns of Latvia
12 3-13 Economic Science for Rural Development No. 31, 2013

ISSN 1691-3078
Aleksandrs Rubanovskis Integrating Education into National Economy in a 261
Balanced way
Inara Kantane, Management Development Challenges in Small 267
Biruta Sloka, Companies in the Regions of Latvia
Anastasija Vilcina

ISSN 1691-3078
ISSN 1691-3078
“ECONOMIC SCIENCE FOR RURAL
DEVELOPMENT”
Proceedings of the
,QWHUQDWLRQDO6FLHQWL¿F&RQIHUHQFH
INTEGRATED AND SUSTAINABLE

REGIONAL DEVELOPMENT

ISSN 1691-3078
G. Krzyminiewska Food Crisis Versus Threats to The World’s Social and Economic Stability
FOOD CRISIS VERSUS THREATS TO THE WORLD’S SOCIAL AND

ECONOMIC STABILITY
Grazyna Krzyminiewska1, associate professor

8QLYHUVLW\RI(FRQRPLFV3R]QDQ3RODQG
Abstract. The paper Food Crisis versus Threats to the World’s Social and Economic Stability concerns the issues of
UXUDO DQG IRRG HFRQRP\ 7KH SUREOHP LV H[DPLQHG RQ WKUHH ¿HOGV )LUVWO\ LW GHVFULEHV UHDVRQV IRU WKH IRRG FULVLV
Secondly, it indicates how the price growth and limited access to food may contribute to social destabilisation, not
only on the regional scale. Thirdly, it describes the latest mechanisms established by international institutions in order
to counteract social and economic crises caused by the increase of food prices and to lower the risk of protests and
VRFLDOXQUHVW,QWKHSDSHUWKHDXWKRUVWDWHVWKDWIRRGFULVLVDVZHOODVUHEHOOLRQDQGDUPHGFRQÀLFWVFRQWULEXWHWRWKH
GLVUXSWLRQRIVRFLDORUGHU7KHSDSHUSRLQWVRXWKRZWKHVFLHQWL¿FPHWKRGVKHOSSUHGLFWWKHVHHYHQWV7KHDUWLFOHXVHV
the qualitative analysis, descriptive analysis, and the method of historical reconstruction.
Key words: food crisis, world’s stability.
Introduction 1. Reasons for the food crisis

Social stability understood as maintaining a social order )RRG DQG $JULFXOWXUH 2UJDQL]DWLRQ RI WKH 8QLWHG
ZLWKLQ D GH¿QLWH FRPPXQLW\ WKH VRFLHW\ RI D SDUWLFXODU Nations ensures that even though the world is not in
country or, lastly, within the global community, is an jeopardy of a serious food crisis, there are still numerous
autotelic value, i.e. a value that cannot be overestimated. alarming occurrences within rural and food economy which
The statement that social peace expressed by predictability PD\ VLJQL¿FDQWO\ DIIHFW WKH ZRUOG¶V VWDELOLW\ )RU PDQ\
of conditions in which an individual lives and acts, its years, people have been dealing with certain occurrences
VHQVHRIVHFXULW\SRVVLELOLW\WRIXO¿OLWVQHHGVVHHPVWR that have become vividly discernible during the food
take a central part in the hierarchy of values. Realisation crisis which has emerged along with the economic crisis.
of these values is intrinsically good, though very often There are a few reasons for unsettling the world’s food
scarce. Disturbances of social order in different societies stability. Both the sources of international organisations
do not only affect themselves but can also translate into a (the World Bank, the FAO, humanitarian organisations)
tension increase in neighbouring countries, or encourage and economists’ analyses indicate a few structural and
unrest in the whole region. In contemporary globalised short-term reasons.
ZRUOG WKH ULVN RI ³VSUHDG´ RI VRFLDO XQUHVW LV HVSHFLDOO\ The structural factors encompass:
KLJK GXH WR ZLGHQLQJ LQWHQVL¿FDWLRQ DFFHOHUDWLRQ DQG — growth of the world population;
JURZLQJLQÀXHQFHRIPXWXDOUHODWLRQVRQWKHJOREDOVFDOH — G\QDPLFGHYHORSPHQWRI&KLQDDQG,QGLD
Destabilisation may jeopardise a certain society — investment negligence in agriculture, especially on
due to several reasons, both those typically political, the hunger-struck areas;
FRQQHFWHGZLWKDUPHGFRQÀLFWVRUSRZHUVWUXJJOHZKLFK — exploitation of agricultural areas for biofuel crops;
may be caused by economic reasons, generating poverty, — global climate changes.
unemployment or social exclusion, or those connected The short-term factors encompass:
with social inequity triggering social agitation, including — current weather anomalies;
revolutions and social revolt. The items on the list of — trade policies of some countries;
reasons which may lead to destabilisation are numerous — high prices of oil;
and interconnected, since social unrest is eventually — VSHFXODWLRQ RQ ¿QDQFLDO PDUNHWV ZLWK DJULFXOWXUDO
caused by several factors. and food commodities.
The present paper focuses on one of the very Undoubtedly, the dynamics of population growth in
socially fragile factors which may adversely affect social the world (in 2011, the number of the world’s population
peace, i.e. the one connected with food security. Food exceeded 7 billion) translates into a demand for food
GH¿FLHQF\ KDV EHHQ SUHVHQW LQ KXPDQ OLIH IRU DJHV LQ (UN, 2011). The problem might deepen, as according
different scopes – the subjective, spatial, and temporal. to the forecasts of international organisations; the
It has always found an outlet in protests, rebellions, SRSXODWLRQJURZWKZLOOEHVLJQL¿FDQW¿UVWDQGIRUHPRVWLQ
UHYROXWLRQV RU DUPHG FRQÀLFWV DQG LQ WKH UHFHQW \HDUV those regions of the world which already at present suffer
it has again become subject of the world’s major serious problems with ensuring access to food.
attention. A growth of global food demand is also a result of
The aim of the following deliberations is to indicate the changing consumption pattern typical of the new
the threats which a lack of food security may pose to the HFRQRPLF SRZHUV VXFK DV &KLQD DQG ,QGLD ZKHUH WKH
world’s social stability. It concerns not only the so-called process of the societies getting richer goes along with
fragile populations but it also translates into the situation increased meat consumption. A demand for meat
of communities of well-developed countries. strongly affects the prices of corn which animals are fed
___________________________
1
&RUUHVSRQGLQJDXWKRUE-mail: grazyna.krzyminiewska@ue.poznan.pl

ISSN 1691-3078
ZLWK 7KH FKDQJH RI WKH FRQVXPSWLRQ SDWWHUQ LQ &KLQD Undoubtedly, the nutrition level of population is
is considerable; an annual growth of pork consumption OLQNHGVLJQL¿FDQWO\ZLWKWKHOHYHORIZHDOWK7KHZHDOWKLHU
from 2005 equals 2.2%, beef consumption – 0.7%, is a country/society and the higher GDP per capita, the
and poultry consumption – 4.9% (Agra Europe, 2011). smaller is the jeopardy of poverty, malnutrition, or even
$W WKH VDPH WLPH SHRSOH DUH GHDOLQJ ZLWK LQVXI¿FLHQW hunger. The countries which have taken the lowest places
resources of production capital in agriculture. The FAO on the list of the world’s social development are especially
sources quote that in the recent 20 years the investment fragile, because they react strongly to even relatively
in agriculture has fallen dramatically in relation with the slight turbulences on the agricultural and food markets.
1970s and 1980s. In the last decade, there occurred 8QIRUWXQDWHO\LWFRQ¿UPVWKHWKHVLVWKDWWKHZRUOG¶VIRRG
a slight increase in the pace of capital accumulation in situation explicitly reveals deep social inequity which has
agriculture and just before the crisis it equalled only not been eliminated by globalisation processes.
SHU \HDU 7R D VLJQL¿FDQW H[WHQW LW LV D UHVXOW RI The issues of food security are among the greatest
the policy of highly developed countries which leads to challenges for developing countries whose inhabitants
a limitation of areas under crop and yield of agricultural assign from 50 to 80% of their income to food, whilst
produce (FAO, 2011). in developed countries, the rate equals 18%. High and
Generally, the situation affects food prices which are volatile food prices put the poorest inhabitants of the
also a result of the growing biofuel production (mainly, world at a tremendous risk.
in the USA and the EU), as the high oil prices make their The problem of the unsettled food security should also
SURGXFWLRQ PRUH SUR¿WDEOH 7KH SURJUHVVLQJ SURFHVV EH GLVFHUQHG LQ WKH FRQWH[W RI VSHFXODWLRQ RQ ¿QDQFLDO
of growing plants which are not used as food staple markets. According to numerous sources, shortages
but as energy resource contributes to a limited access on the food market are increasingly drawing attention
to food. The extent of change within crop exploitation RI JUHDW FDSLWDO IXQGV DQG WKH LQÀXHQFH RI LQYHVWRUV¶
LV YHU\ VLJQL¿FDQW DV DFFRUGLQJ WR WKH 2[IDP RI speculation on the food market and short-term contracts
vegetable oils in Europe and in the USA over a half of RQWKHIRRGSULFHVZDVVLJQL¿FDQWLQDQG81
WKHSURGXFHGPDL]HDUHLQWHQGHGIRUHQHUJ\SURGXFWLRQ World Economic Situation and Prospects). Investors
This results in an increase in prices of plants intended invested their assets in raw materials, agricultural raw
as food staple. materials included, bringing about spiking prices in a
The food prices’ issue is linked with the global very short time. Financial institutions offer the so-called
climate changes which make agriculture a highly risky agrofunds, accessible to an average investor which treats
business. This problem will worsen, as, according to investing in food in the same way as subprime lending.
climate change specialists, extreme weather – droughts, A suspicion arises that skyrocketing food prices are a
ÀRRGV KXUULFDQHV ± ZLOO DGYHUVHO\ DIIHFW DJULFXOWXUH LQ result of intentional spreading panic in order to create
numerous countries which translates into food supply and an impression of an inevitable food disaster and, in
SULFHYRODWLOLW\,QWKHORQJUXQ³LWLVHVWLPDWHGWKDWDVD consequence, use the panic to speculative investment
result of climate changes and an increased concentration strategies. It has its explicit economic consequences,
of carbon dioxide in the air, the corn productivity on the as the price growth impairs economic development,
global scale will rise by ca. 9%, providing that new areas and more expensive raw materials become a hampering
of land in developed countries are used (otherwise, i.e. IDFWRU 7KH VLWXDWLRQ GRHV QRW EHQH¿W WKH JOREDO
if presently exploited grounds were still exploited, there economy contending with deep economic problems.
might occur a crop fall by 5%. […] The strongest falls will Fluctuating prices may adversely affect the agricultural
concern the Northern Africa, where the productivity may VHFWRU DQG LQ FRQVHTXHQFH LQÀXHQFH WKH ZRUOG¶V IRRG
decrease by even 80%, and the Southern Africa (over security. It regards not only a threat for consumers but
30%). It will lead to growing disproportions in access to DOVR IRU SURGXFHUV DV SULFH YRODWLOLW\ PDNHV LW GLI¿FXOW
IRRG´*U]HODN6WHSLHQ for farmers to plan production and sales, or import of
7KH HIIHFW RI WKHVH IDFWRUV KDV VLJQL¿FDQWO\ DIIHFWHG food, and it is worth adding that the price growth does
the spiking prices of agricultural yield and food products not unambiguously translate into the producers’ higher
on the world’s markets. Starting from 2000, the prices income. The EU experts claim that the rate in the supply
measured by the FAO Food Price Index are constantly FKDLQ LQ WKH IDUPHUV¶ LQFRPH KDV IDOOHQ VLJQL¿FDQWO\
growing, beating new records. ZKLOVW WKH SUR¿WV RI IRRG SURFHVVRUV DQG UHWDLOHUV DUH
To avert global food shortages, the world has to start constantly growing.
producing much more and in a more sustainable way.
Otherwise, the near future may not only be characterised 2. Food versus threat to social stability
by a high food price level (and, in consequence, $FFRUGLQJWR86ZLHUF]\QVNDVRPHH[SHUWVRQIRRG
restricted access to food in less developed regions, or security maintain that the situation on the world food
in poorer classes of highly-developed countries) but PDUNHWV LV VHULRXV ³:KHQ D SRSXODWLRQ H[SHULHQFHV
LWV VLJQL¿FDQW GH¿FLHQF\ ZLOO H[SDQG WKH KXQJHU DQG a sudden threat to its existence, violence and protests
malnutrition-struck areas in the world (at the end of are a very probable reaction. In countries where the
WKH QXPEHU RI SHRSOH ZLWKRXW D VXI¿FLHQW DFFHVV institutions and trust in authorities is weakened, e.g.,
to food rose to over 1 billion people in the world) (UN, DIWHU ¿QLVKHG FRQÀLFWV RU ZDUV VXFK DQ DQ[LHW\ PD\
2011). It is especially vivid in some regions of the world easily spread, and eventually may jeopardise the region’s
which, in the long perspective, have had problems with stability. Food crises known so far in the history of
GHYHORSPHQW LQFOXGLQJ LQVXI¿FLHQW IRRG SURGXFWLRQ humanity have usually had local character and emerged
FRQÀLFWV SRSXODWLRQ JURZWK DQG XQGHUGHYHORSPHQW RQ DV D UHVXOW RI QDWXUDO GLVDVWHUV RU DUPHG FRQÀLFWV 7KH
QXPHURXV¿HOGV±VRFLDOHFRQRPLFDQGSROLWLFDO situation today differs completely from the previous

ISSN 1691-3078
RQHV¿UVWDQGIRUHPRVWEHFDXVHRIWKHJOREDOFKDUDFWHU Man, 2009). At present, the number of people, whose

of the present crisis which is not triggered by one but a basic existence is endangered, is growing due to the
ZKROHUDQJHRIIDFWRUV6ZLHUF]\QVND7KHUHLVQR spreading economic crisis. What we are experiencing
doubt that contemporary food security is not strictly an now is a wave of violent protests throughout the whole
economic problem or a sensitive social issue but it is also European Union. Demonstrations, strikes and pickets are
a serious political problem. In the last few years, namely held in protest against the policy of social cuts, dictated
the problem of spiking food prices has led to important by the crisis. This is an answer to the lowering standard
social unrest. of life among many Europeans, high unemployment, and
7KH ¿UVW YLROHQW ZDYH RI SURWHVWV HPHUJHG LQ WKH YHU\RIWHQLQDELOLW\WRIXO¿OEDVLFQHHGV7KHODWHVWZDYH
period between February 2007 and May 2008 in 30 of protests, summoned by the European Trade Union
countries of the world. The most acute problems took &RQIHGHUDWLRQ(78&LQ1RYHPEHUGHPRQVWUDWHV
SODFHRQ+DLWLLQ&DPHURRQ(J\SW%DQJODGHVK%XUNLQD expressly that even though Europe can ensure food
)DVR,YRU\&RDVW*XLQHD,QGLD,QGRQHVLD0DXULWDQLD security because of its agricultural policy, the worsening
0H[LFR0RURFFR0R]DPELTXH6HQHJDODQG8]EHNLVWDQ economic situation of numerous families may lead to a
where there were some fatalities among the protesters. decreased access to basic commodities, food included.
The protests against the high food prices not only Therefore, increasing food prices will also in this area be
triggered the social unrest in those countries but were a central issue to destroy a sense of security. This, in
DOVRUHÀHFWHGLQWKHHFRQRP\FORVHGVWRFNPDUNHWVHJ WXUQPD\WULJJHUXQUHVWDQGVRFLDOFRQÀLFWV
in Egypt, disturbances in foreign trade etc.).
The background of the second wave of social protests 3. Food security – mechanisms of averting
DQG DUPHG FRQÀLFWV FDOOHG ³WKH $UDE 6SULQJ´ RU ³WKH social and economic crises
$UDE $ZDNHQLQJ´ IURP 'HFHPEHU ZDV WKH Diminishing jeopardies of outbursts of social unrest
FLWL]HQV¶GLVVDWLVIDFWLRQZLWKOLYLQJFRQGLWLRQVGHHSHQLQJ are becoming a challenge for global politics. It is not
unemployment, political situation – corruption, nepotism about simple restriction of economic activity concerning
in authorities, limitation of civil rights by autocratic the agricultural and food markets but about establishing
authority of the state, and also the growing prices of food. mechanisms of sustainable economy which would limit
7KH LQÀXHQFH RI WKH JURZWK LQ IRRG SULFHV RQ WKH adverse consequences of the above mentioned factors.
SURWHVWV LQ QXPHURXV $UDE FRXQWULHV LV FRQ¿UPHG E\ Among the initiatives, which aim at reducing food
the analyses carried out by a scientist team from the prices, is certainly the establishment of a public, global
1HZ (QJODQG &RPSOH[ 6\VWHPV ,QVWLWXWH 1(:&6 LQ supervising system ensuring access to reliable and up-
&DPEULGJH XQGHU 0DUFR /DJL¶V PDQDJHPHQW 7KH WHDP to-date information on supplies of food commodities,
presented a study of economic reasons underlying possibility of export and demand for import, and
the revolution in the North African countries in 2010- LQIRUPDWLRQ FRQFHUQLQJ ¿QDQFLDO WUDQVDFWLRQV ZKLFK
2011. The scientists used in their analyses the index should have a stabilising effect on the market. The system,
RI ÀXFWXDWLRQ RI DJULFXOWXUDO DQG IRRG SURGXFHV DQG which is originally designed to counteract speculation
discovered that the price growth preceded social unrest, on agricultural markets, was established by the G-20.
acting as a catalyst for moods in those communities. AMIS (Agricultural Market Information System), which
Thanks to mathematical models, the researchers pointed encompass such international organisations as FAO,
D VSHFL¿F IRRG SULFH WKUHVKROG DERYH ZKLFK WKH WKUHDW ,)$'2(&'81&7$':)3WKH:RUOG%DQNDQG:72LV
of next riots become likely. The analysis of price growth to systematically gather, analyse and spread information
dynamics was linked with other reasons which also on the present and forecasted situation on food markets
point to the issue of speculation with food commodities and changes in agricultural policy. Its objective is an
and excessive use of plants to biofuel production. The improved transparency of the world food market which is
crucial position of this issue is not to be underestimated, supposed to limit mechanisms causing excessive volatility
as hunger and malnutrition of millions of people are at of prices and speculative actions. This is an effect of
stake. What we are dealing with is both a humanitarian the recently emerged belief that the action, which had
and political problem. The areas jeopardised by hunger EURXJKW DERXW D GLVDVWHU RQ ¿QDQFLDO PDUNHWV PD\
or struck by it pose a potential threat due to possible similarly cause a disaster on the markets of agricultural
XQFRQWUROOHG PLJUDWLRQ RI SHRSOH DQG FRQÀLFWV UHVXOWLQJ raw materials. The system should facilitate monitoring
in warfare. of the process of establishing prices of agricultural
The conducted study is a very important warning to the produce and commodities in the world. The Rapid
world, especially to its policy-makers. It points out that Response Forum (RRF) is also supposed to serve this
certain steps to restrict the price growth of agricultural purpose. Thanks to the Forum, international community
produce may essentially contribute to lessening the has a chance to react promptly to alarming situations
tension in the world. The problem does not exclusively RQWKHZRUOG¶VDJULFXOWXUDODQGIRRGPDUNHWV$MXVWL¿HG
concern undeveloped countries but it is also beginning question arises, though, whether gathering all
to affect highly-developed regions. Only recently information into a coherent system, enabling a
ca. 33 million people in Europe were described as faster reaction to the price growth of agricultural
exposed to risk of undernutrition (Ljungqvist, UDZ PDWHULDOV LV D VXI¿FLHQW LQVWUXPHQW WR
Man, 2009), which is both a social and economic reduce unfavourable occurrences. Undoubtedly,
problem, as it considerably raises health care costs global reforms are necessary to weaken the unfavourable
connected with hospitalisation of people suffering from occurrences in this respect. Therefore, a proposal of
undernourishment-related illnesses. The costs are WKH (XURSHDQ &RPPLVVLRQ RI 2FWREHU LV D ZRUWK
estimated at ca. EUR 120 billion per annum (Ljungqvist, mentioning occurrence. It actually acknowledges

ISSN 1691-3078
that the current policy of supporting biofuels has an and the Middle East, 1HZ (QJODQG &RPSOH[
DGYHUVH LQÀXHQFH QRW RQO\ RQ QDWXUDO HQYLURQPHQW EXW Systems Institute, arXiv: 10 August 2011.
also on food security. A consequence of change within Retrieved: http://arxiv.org/pdf/1108.2455.pdf.
WKLVZD\RIWKLQNLQJLVDSURSRVDOWRUHVWULFWVLJQL¿FDQWO\ Access: 12 November 2012.
the biofuel production. 3. *U]HODN $ 6WHSLHQ 6 Konsekwencje
zmian klimatycznych dla rolnictwa – wybrane
Conclusions problemy (Consequences of Climate Changes for
The analysis shows that Agriculture – Selected Issues). In: Agroekonomia
1. Hunger or limited access to food has always been a w warunkach rynkowych. Problemy i wyzwania,
UHDVRQIRUJUHDWFRQÀLFWVUHYROXWLRQVRUZDUVLQWKH (Agroeconomics on Market Conditions. Problems
world’s history. and Challenges) HG $ *U]HODN $ 6DSD =HV]\W\
2. &RQWHPSRUDU\ ZRUOG KDV JDLQHG QXPHURXV ZD\V Naukowe 150, Wydawnictwo Uniwersytetu
to ensure people’s food security, avoiding violent (NRQRPLF]QHJR3R]QDQ
UHDFWLRQV RI FRPPXQLWLHV ZKR ¿JKW IRU WKHLU EDVLF 4. Averting Tomorrow’s Global Food Crisis. The
existence. European Union’s role in Delivering Food Justice in
3. Food is both a humanitarian, social, economic, and a Resource-constrained World. Retrieved: www.
political problem as well as an important instrument, oxfam.org/grow. Access: December 2011.
allowing to maintain a social order. 5. Ljungqvist, O., de Man, F. (2009). Undernutrition –
4. Sustainable economy, meaning an agreement on A Major Health Problem in Europe. NutrHosp 24,
international level, should aim at limiting the factors, pp. 368–370.
ZKLFK DUH SUHVHQWO\ LGHQWL¿HG DV UHVSRQVLEOH IRU 6. 6ZLHUF]\QVND 8 Przyczyny swiatowego
growth in food prices. It should also dynamise joint kryzysu zywnosciowego oraz jego wplyw na
preventive actions against food crises in different najbiedniejsze kraje swiata.: Globalne ocieplenie
parts of the world which, as a result of growing i kryzys zywnosciowy. Fundacja Polskie Centrum
economic problems of highly developed countries, Pomocy miedzynarodowej, Ministerstwo Spraw
DUHVLJQL¿FDQWO\ZHDNHQHG Zagranicznych RP (Reasons for Global Food Crisis
5. 6FLHQWL¿F PHWKRGV PD\ EH XVHG WR SUHGLFW IRRG
DQG LWV ,QÀXHQFH RQ WKH 3RRUHVW &RXQWULHV RI WKH
crises.
World: Global Warming and Food Crisis. Foundation
“Polish Centre of International Assistance”), Ministry
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cbr.net.pl/index.php. Access: 10 October 2012. United Nations, New York Retrieved: http://www.
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Crises and Political Instability in North Africa archive/2011wesp.pdf. Access: 14 November 2012.

ISSN 1691-3078
A. Zawojska, T. Siudek Property Rights and Macroeconomic Performance in
Central and Eastern European EU Member States
PROPERTY RIGHTS AND MACROECONOMIC PERFORMANCE IN

CENTRAL AND EASTERN EUROPEAN EU MEMBER STATES
Aldona Zawojska1+, Dr.oec.; Tomasz Siudek2, Dr.habil.oec.

1
Warsaw University of Life Sciences, Department of Economics and Economic Policy
2
:DUVDZ8QLYHUVLW\RI/LIH6FLHQFHV'HSDUWPHQWRI(FRQRPLFVDQG2UJDQL]DWLRQRI(QWHUSULVHV
Abstract.8VLQJWKHGDWDEDVHRIHLJKW&HQWUDODQG(DVWHUQ(XURSHDQWUDQVLWLRQHFRQRPLHVFRPSLOHGIURPWKH:RUOG
Bank collection of World Development Indicators, the authors examine the relationship between high contract-intensive
money as an indicator of contractual and property rights (or a general measure of the quality of governance and
institutions) and performance of several macroeconomic indicators (GDP growth, FDI to GDP ratio, employment rate
HWFRYHUWKHSHULRGIURPWR7KH3HDUVRQ¶VFRUUHODWLRQFRHI¿FLHQWVZHUHXVHGWRGHWHUPLQHWKHVWUHQJWKRI
WKHUHODWLRQVKLSV$GGLWLRQDOO\WKHDXWKRUVXVHGPXOWLSOHDQGVLPSOHUHJUHVVLRQDQDO\VHVZLWK&,0EHLQJDQH[SORUDWRU\
YDULDEOH7KHSHULRGDYHUDJHVRI&,0IRULQGLYLGXDOFRXQWULHVZHUHWKHKLJKHVWLQ6ORYHQLDZKHUHDVWKHORZHVWLQ/DWYLD
DQG/LWKXDQLD&URVVFRXQWU\GLVSHUVLRQRIWKLVUDWLRKDVQDUURZHGHVSHFLDOO\IURPRQZDUGV2YHUDOORXUUHVXOWV
provide little empirical support for the notion that the better performance of the national economy is strongly related
WR WKH EHWWHU HQIRUFHPHQW RI SURSHUW\ ULJKWV 7KHUH ZDV D VWDWLVWLFDOO\ VLJQL¿FDQW SRVLWLYH DVVRFLDWLRQ EHWZHHQ &,0
DQGHFRQRPLFJURZWKUDWH+XQJDU\HPSOR\PHQWUDWHWKH&]HFK5HSXEOLF)',(VWRQLDKRXVHKROGFRQVXPSWLRQ
VSHQGLQJ WKH &]HFK 5HSXEOLF DQG 6ORYHQLD QHZ EXVLQHVV GHQVLW\ +XQJDU\ DQG JURVV ¿[HG FDSLWDO IRUPDWLRQ E\
private sector (the whole group of countries), and negative association with long-term unemployment (Slovakia). The
PXOWLSOHUHJUHVVLRQUHVXOWVVKRZXQH[SHFWHGQHJDWLYHVLJQL¿FDQWUHODWLRQVKLSEHWZHHQ&,0DQGHFRQRPLFJURZWKUDWHV
in Latvia, Slovakia and in the whole group of the countries.
Key words:FRQWUDFWLQWHQVLYHPRQH\SURSHUW\ULJKWVHFRQRPLFJURZWK&HQWUDODQG(DVWHUQ(XURSH
JEL code: E02, K11, E51
Introduction institutions and institutional framework playing the key

“The reason why men enter into society, is the role in this respect.
preservation of their property; and the end why they Experience from, for example, transition economies
choose and authorize a legislative, is, that there may be VXJJHVWV WKDW ZLWKRXW HI¿FLHQW LQVWLWXWLRQV WKH VWDQGDUG
laws made, and rules set, as guards and fences to the production factors are not capable of delivering rapid
properties of all the members of the society, to limit the growth (Eicher T.S. et al., 2006). Many authors (e.g.
power, and moderate the dominion, of every part and 1RUWK '& (FRQRPLGHV * (JJHU 3+
member of the society.” Nooruddin I., 2010) view institutions as a primary
John Locke (1764, §222) determinant of economic performance and argue that
good national economic performance and overall well-
EHLQJLVDFRQVHTXHQFHRIKDYLQJWKHULJKWFRQ¿JXUDWLRQ
Mainstream economics used to explain differences
of economic and political institutions. There is also a
in economic performance by physical and/or human
growing number of empirical institutional studies that
capital and technological change as sources of
examine the link between institutions and economic
HFRQRPLF JURZWK &RQWHPSRUDU\ HFRQRPLVWV KRZHYHU
performance (Efendic A., Pugh G., Adnett N., 2011).
seek the deeper, more fundamental factors that
By investigating the role that property rights play in
PD\ LQÀXHQFH ORQJWHUP HFRQRPLF JURZWK ,W LV WKH
economic performance, this study will provide further
New Institutional Economics (NIE) that essentially
LQVLJKW LQWR DQ H[LVWLQJ ¿HOG RI UHVHDUFK RQ LQVWLWXWLRQV
contributes to explaining economic growth and
and development.
development by considering not only the standard
Following this introduction, the paper is structured as
factors of production but also institutions.
follows. The next section approaches the main concepts
Throughout this study, institutions are understood as
of property rights as well as perspectives about their
IRUPDODQGLQIRUPDO³UXOHVRIWKHJDPH´RUUXOHVVKDSLQJ
economic role discussed in the relevant literature. The
the behaviour of economic agents) and their enforcement
third section consists of description of data sources,
FKDUDFWHULVWLFV DV GH¿QHG E\ 'RXJODV & 1RUWK
variables and methods applied. The third section offers
,QVWLWXWLRQV PD\ KDYH D GLUHFW LQÀXHQFH RQ HFRQRPLF
RZQ UHVHDUFK UHVXOWV 7KH ¿QDO VHFWLRQ FRQVLVWV RI
outcomes (e.g. through affecting transaction costs) or
conclusions and recommendations.
LQGLUHFW LQÀXHQFH HJ WKURXJK LQFHQWLYHV WR LQYHVW LQ
physical or human capital).
$FFRUGLQJWR$QGU]HM:RMW\QDZKRGUDZVRQ Institution of property rights
WKH¿QGLQJVRIZRUOGZLGHVWXGLHVWKHSUHYDLOLQJDWWHQWLRQ 7KHSKUDVH³SURSHUW\ULJKWÚHIHUVWRDQRZQHU¶VULJKW
in the growth literature has been recently placed on to use a good or asset for consumption and/or income
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E-mail addressDOGRQDB]DZRMVND#VJJZSO

ISSN 1691-3078
generation. It can also include the right to transfer it enforcement and property rights institutions that support
to another party, in the form of a sale, gift or bequest non-self-enforcing transactions have also an impact on
as well as the right to contract with other parties by the forms of assets held by the population. In countries
renting or mortgaging a good or asset, or by allowing with institutional weaknesses, where uneven legal and
RWKHUSDUWLHVWRXVHLW$OFKLDQ$$'HPVHW]+ political environment makes it sensible to hide one’s
Besley T., Ghatak M., 2010). assets (including money) and economic activities from the
$FFRUGLQJWR'RXJODV&1RUWKSURSHUW\ULJKWV government, people will be more willing to use the cash
are an important element of the institutional structure of rather than other payment methods in order to carry out
an economy since, like other institutions, they structure their transactions. This behaviour allows people avoiding
incentives in human exchange, whether economic, social ULVNVRIDVVHWVVHL]XUHDQGH[SURSULDWLRQDVZHOODVWD[LQJ
or political. Generally, economic rules (institutions) by the government. Additionally, if formal contracts
GH¿QH SURSHUW\ ULJKWV 1RUWK '& 7KH VHFXULW\ cannot be effectively enforced by a court, or are avoided
of property rights and the effective enforceability of because they leave written evidence of the transactions
contracts are two main conditions necessary for market that one wishes to conceal from the authorities, then
economy. Strong property rights regime lays the cash becomes more attractive when compared to less
foundation for growth, freedom and overall well-being of liquid money since it completes the concealment of the
nations (Sullivan J.D., Rogers J., Bettcher K.E., 2007). WUDQVDFWLRQ +RXVHKROGV IDUPHUV DQG ¿UPV PD\ DOVR
In the economic literature, property rights enforcement prefer to maintain their assets in the form of cash (and
is not merely considered a key driving force behind eventually demand deposits) rather than time deposits
economy’s performance but also a crucial attribute of DQGRWKHU¿QDQFLDO FODLPV EHFDXVHWKH\ODFN FRQ¿GHQFH
state (government) capacity to perform its basic tasks. in the integrity, safety and soundness of banks and other
Various alternative measures of property rights LVVXHUV RI ¿QDQFLDO FODLPV RU EHFDXVH WKH\ GRXEW WKH
(mostly of subjective nature) are used as institutional government’s competence in the prudential regulation of
variables in the empirical research (e.g. Property ¿QDQFLDOHQWLWLHV&ODJXH&HWDO
rights component of the Heritage Foundation’s Index of &RQYHUVHO\ LQ FRXQWULHV ZLWK PRUH VHFXUH SURSHUW\
Economic Freedom, Legal system and property rights rights and effective contract enforcement, people
sub-index of the Fraser’s Economic Freedom of the have little motive either for keeping cash or using it
:RUOG ,QGH[ PHDVXUHV RI FRUUXSWLRQ WKDW UHÀHFWV DQ LQ ODUJH WUDQVDFWLRQV ,Q VXFK D FDVH ³WKH\ SUHIHU WKDW
expropriation of private property by the state, etc.). transactions be formally recorded in case there is a
In the study, the authors consider single measure of dispute to be resolved, and they are relieved of the
LQVWLWXWLRQDO TXDOLW\ ± &RQWUDFWLQWHQVLYH PRQH\ &,0 inconvenience and danger of dealing in large amounts
ZKLFK LV UHFRJQL]HG DV ³DQ REMHFWLYH PHDVXUH RI WKH RI FXUUHQF\´ &ODJXH & HW DO :KHQ SHRSOH
enforceability of contracts and the security of property EHOLHYHWKDWHQIRUFHPHQWRI¿QDQFLDOFRQWUDFWVLVFUHGLEOH
ULJKWV´&ODJXH&.QDFN6.HHIHU32OVRQ0 DQG VXI¿FLHQW WKH\ ZLOO EH PRUH GLVSRVHG WR DOORZLQJ
&,0 PHDVXUHV WKH H[WHQW WR ZKLFK SURSHUW\ ULJKWV LQ other parties to hold their funds in exchange for some
DQ\ FRXQWU\ DUH VXI¿FLHQWO\ VHFXUH WKDW LQGLYLGXDOV DUH FRPSHQVDWLRQ&ODJXH&HWDO
ZLOOLQJ WR KROG OLTXLG DVVHWV YLD ¿QDQFLDO LQWHUPHGLDULHV &,0 UDWLR LV DOVR XVHG E\ UHVHDUFKHUV DV D SUR[\
&KULVWRSKHU &ODJXH HW DO DUH DPRQJ WKH ¿UVW for investments in the contract intensive sectors –
UHVHDUFKHUV WKDW HPSOR\HG &,0 WR PHDVXUH WKH HIIHFW LQYHVWPHQWVWKDWUHÀHFWWKHOHJLWLPDF\RIWKHLQVWLWXWLRQV
of institutional quality on investments and per capita WKDW HQFRXUDJH LPSHUVRQDO H[FKDQJH &RPSWRQ 5$
income growth in a cross-country regression analysis. *LHGHPDQ '& DQG -RKQVRQ 1' $GGLWLRQDOO\
These authors documented a strong positive cross- &,0 UHÀHFWV WKH WUXVW LQ JRYHUQPHQW RU ³KRZ PXFK
country relationship between those variables. faith investors have in the government’s ability and
&RQWUDFWLQWHQVLYH PRQH\ LV WKH UDWLR RI GHPDQG DV ZLOOLQJQHVV WR HQIRUFH¿QDQFLDO FRQWUDFWVDQG WR UHIUDLQ
well as the time savings and foreign currency deposits IURPH[SURSULDWLQJ¿QDQFLDl assets (Knack S., Kugler M.
of resident sectors other than the central government to and Manning N., 2003).
EURDGPRQH\DQGLVGH¿QHGDV0í&0ZKHUH0
LV D EURDG GH¿QLWLRQ RI WKH PRQH\ VXSSO\ DQG & LV WKH
amount of currency held outside banks. This variable can Methodology/approach of own empirical
EHDOVRGH¿QHGDVWKHUDWLRRIQRQFXUUHQF\PRQH\WRWKH research
WRWDOPRQH\VXSSO\7KLVUDWLRFRPSDUHV¿QDQFLDODVVHWV The empirical research is descriptive and quantitative
that depend on functioning formal contract enforcement in nature and is based on the New Institutional Economics
LH E\ WKLUG SDUWLHV WR ¿QDQFLDO DVVHWV WKDW GR QRW theory. Through econometric analysis, the study seeks
depend on formal contract enforcement. to identify the association between institutions and
Highly contract-intensive money is the ratio of the economic growth and other variables describing national
time, savings and foreign currency deposits of resident HFRQRPLHV 7KH DXWKRUV H[SHFW WR ¿QG D SRVLWLYH
sectors other than the central government to broad correlation between country’s property rights quality and
PRQH\ GH¿QHG DV 0í00 ZKHUH 0 LV QDUURZ several macroeconomic metrics, including GDP growth
GH¿QLWLRQRIWKHPRQH\VXSSO\7KLVPHDVXUHUHÀHFWVWKH rate.
SURSHQVLW\WRLQYHVWLQ¿QDQFLDODVVHWV+LJKO\FRQWUDFW Institutional studies have given rise to a question:
intensive sectors include banks, insurance, trading and How to measure or proxy for institutions? Different
other service companies. institutional proxies in empirical research suggest
7KH UDWLRQDOH EHKLQG XVLQJ &,0 DV D SUR[\ IRU that there is no single variable perfectly representing
property rights is the conviction that the same contract institutions. The institutional variable of interest in this

ISSN 1691-3078
Table 1
Description of variables used in the analysis
Variable
Variable name 'H¿QLWLRQ Source
acronym
Money: M1
The sum of currency outside banks and demand
021<B&1 (current local
deposits other than those of central government. International
FXUUHQF\XQLWV/&8
Monetary Fund (IMF):
The sum of currency outside banks, demand deposits
International Financial
Money and quasi other than those of the central government, and
Statistics (IFS) & data
040<B&1 money: M2 the time, savings and foreign currency deposits of
¿OHV
FXUUHQW/&8 resident sectors other than the central government. It
corresponds to lines 34-35 in the IMF’s IFS.
&RQWUDFWLQWHQVLYH Authors’ own
&,0 0í00
money calculation
$JULFXOWXUHLQFOXGHVIRUHVWU\KXQWLQJ¿VKLQJDQG Economic Policy
Agriculture,
cultivation of crops and livestock production. Value & Debt: National
VA_AGR value added
added is the net output of a sector after adding up all accounts: Shares of
(% of GDP)
outputs and subtracting intermediate inputs. GDP
Employment to The proportion of a country’s population that is Labour & Social
EMP_TP population ratio, employed. Ages 15 and older are generally considered Protection: Economic
15+, total (%) the working-age population. activity
Firms using banks to
7KHSHUFHQWDJHRI¿UPVXVLQJEDQNVWR¿QDQFH World Bank (WB),
FRM_BN ¿QDQFHLQYHVWPHQW
investments. Enterprise Surveys
RI¿UPV
Annual percentage growth rate of GDP at market
prices based on constant local currency. GDP is the
GDP_ GDP growth
sum of GVA by all resident producers in the economy
RATE (annual %)
plus any product taxes and minus any subsidies not
included in the value of the products.
*URVV¿[HGFDSLWDO
Private investment covers gross outlays by the private
formation, private
*)&)B35 VHFWRULQFOXGLQJSULYDWHQRQSUR¿WDJHQFLHVRQ
sector World Bank national
DGGLWLRQVWRLWV¿[HGGRPHVWLFDVVHWV
(% of GDP) accounts data, and
The market value of all goods and services purchased 2(&'1DWLRQDO
+RXVHKROG¿QDO by households. It excludes purchases of dwellings but $FFRXQWVGDWD¿OHV
&21)B consumption includes imputed rent for owner-occupied dwellings.
HOUS expenditure It also includes payments and fees to governments to
(% of GDP) obtain permits and licenses, and the expenditures of
QRQSUR¿WLQVWLWXWLRQVVHUYLQJKRXVHKROGV
Industry, value ,QGXVWU\FRUUHVSRQGVWR,6,&GLYLVLRQV,W
VA_IND added comprises value added in mining, manufacturing,
(% of GDP) construction, electricity, water, and gas.
7KHQHWLQÀRZVRILQYHVWPHQWWRDFTXLUHDODVWLQJ
IMF, IFS and
management interest (10% or more of voting stock)
Foreign direct Balance of Payments
in an enterprise operating in an economy other than
investment, net databases; WB,
FDI_NV that of the investor. It is the sum of equity capital,
LQÀRZV Global Development
reinvestment of earnings, other long-term capital,
(% of GDP) Finance, and WB and
and short-term capital as shown in the balance of
2(&'*'3HVWLPDWHV
payments.
&RQVLVWRIQHW)',DQGSRUWIROLRLQYHVWPHQW7KH)',
is total net: net FDI in the reporting economy from IMF, Balance of
3ULYDWHFDSLWDOÀRZV foreign sources less net FDI by the reporting economy Payments Statistics
&37)B35 total to the rest of the world. Portfolio investment excludes Yearbook and data
(% of GDP) liabilities constituting foreign authorities’ reserves ¿OHVDQG:%DQG
and covers transactions in equity securities and debt 2(&'*'3HVWLPDWHV
securities.
New business density
New businesses registered are the number of new World Bank’s
NBUS_ (new registrations
limited liability corporations registered in the calendar Entrepreneurship
DNS per 1000 people
year. Survey and database
aged 15-64)

ISSN 1691-3078
&RQWLQXHWR7DEOH
:RUNHUVZKRKROGWKHW\SHRIMREVGH¿QHGDVD³VHOI
HPSOR\PHQWMREV´LHMREVZKHUHWKHUHPXQHUDWLRQ
Self-employed, total
LVGLUHFWO\GHSHQGHQWRQWKHSUR¿WVGHULYHGIURP
SELF_EMP (% of total
the goods and services produced): employers,
employed)
own-account workers, and members of producers’ International Labour
cooperatives. 2UJDQL]DWLRQ.H\
Unemployment, total The share of the labour force that is without work but Indicators of the
UEM.TOTL (% of total labour DYDLODEOHIRUDQGVHHNLQJHPSOR\PHQW'H¿QLWLRQVRI Labour Market
force) labour force and unemployment differ by country. database
Long-term
The number of people with continuous periods
unemployment
UEM.LTRM of unemployment extending for a year or longer,
(% of total
expressed as a percentage of the total unemployed.
unemployment)
Source: authors’ construction based on the World Bank data
Table 2
Descriptive statistics for CIM in the selected EU countries, 1990-2011
POL CZE HUN EST LVA LTU SLK SLV EU-8
Mean 0.582 0.502 0.576 0.475 0.382 0.389 0.566 0.751 0.532
Standard deviation 0.104 0.134 0.049 0.107 0.072 0.064 0.099 0.133 0.149
Observations 22 17 22 21 19 19 16 21 157
1RWHV 3RODQG ± 32/ WKH &]HFK 5HSXEOLF ± &=( +XQJDU\ ± +81 (VWRQLD ± (67 /DWYLD ± /9$ /LWKXDQLD ± /78
Slovakia – SVK; Slovenia – SVN
Source: authors’ calculations based on the World Bank data
study is the highly contract-intensive money (denoted in Research results and discussion
RXUDQDO\VLVE\&,0FRQVLGHUHGDVDPHDVXUHRIde facto $FFRUGLQJ WR WKH LQYHQWRUV RI &,0 LWV PHDVXUH
property rights institutions. Highly contract-intensive captures the quality of the property rights and contract
money has been estimated as 0í00 enforcement institutions. Given this, we can expect
The panel data used in this study is drawn from the KLJKHU&,0UDWLRVZKHUHSURSHUW\ULJKWVDUHVWURQJHUDQG
World Bank World Development Indicators available third-party enforcement is more credible and smaller
at: http://data.worldbank.org/data-catalog/world- ratios where property rights are less developed and
development-indicators. The data set consists of statistics protected, and third-party enforcement is defected.
RQ WKH HLJKW &HQWUDO DQG (DVWHUQ (XURSHDQ FRXQWULHV ,Q RWKHU ZRUGV WKH KLJKHU &,0 FRQWUDFW HQIRUFHPHQW
(which joined the EU in 2004) over the period 1990 to and property rights institutions will be judged more
2011. All these are post-socialist transition countries, positive.
whose initial conditions were largely comprised of similar In the period 1990-2011, Slovenia on average
institutional formats. Due to the lack of data for the whole GLVSOD\HG WKH VWURQJHVW &,0 UDWLR ZKLOH /DWYLD DQG
period, the authors have analysed shorter time series for Lithuania reached its lowest levels. An average ratio
some variables and/or countries. The variables used in for our group of eight transition countries was at 0.53
this analysis are listed and explained in Table 1. (Table 2).
The authors employ simple empirical strategies to The pattern of change observed in Figure 1 indicates
DQDO\]H WKLV FURVVFRXQWU\ GDWD VHW 6LQFH WKH DXWKRUV a downward trend in the high contract-intensive money
do not attempt to estimate any kind of the causal effects ratio in Slovenia and Estonia (1991-2011), Slovakia
RI &,0 WKH\ IRFXV UHVW VROHO\ RQ WKH DVVRFLDWLRQDO WKH &]HFK 5HSXEOLF 3RODQG
relationship between this institutional measure and other (1990-2011) and Latvia (1991-2009), and respectively
variables. Therefore, the authors used three empirical upward trend in Hungary (1990-2011) and Estonia
VWUDWHJLHV &RQWUDFW LQWHQVLYH PRQH\ LV RQH RI (1991-2011).
explanatory variables of economic growth (a multiple 6LQFHWKHKLJKHVWKLVWRULFDOOHYHOVRI&,0KDYH
regression); (2) The technique of correlation to test the occurred in different periods for different countries: in
VWDWLVWLFDOVLJQL¿FDQFHRIWKHDVVRFLDWLRQEHWZHHQ&,0DQG 3RODQGWKH&]HFK5HSXEOLF6ORYDNLDDQG6ORYHQLDGXULQJ
other variables describing economic performance; (3) 1997-2001; in Hungary over 1995-1998; in Estonia in
6LPSOHELYDULDWHUHJUHVVLRQVZKHUHWZR\HDUODJJHG&,0 2004 and 2008; in Latvia in 2006-2008; in Lithuania over
is a single explanatory variable. The dependent variables 2008-2009.
used in single regression analysis may be grouped 7KH DXWKRUV ¿QG HYLGHQFH RI WKH GHFOLQLQJ FURVV
into two categories: variables related to growth (GDP country dispersion (sigma-convergence1 RI &,0 UDWLR
growth rate), and variables related to other economic EHWZHHQDQGZLWKLWVFRHI¿FLHQWVRIYDULDWLRQ
performance characteristics. across eight states equal to 0.33 and 0.15 respectively.

ISSN 1691-3078
Fig. 1. CIM vs. time in the selected EU countries, 1990-2011
Table 3
Multivariate regression estimates for eight European Union Member States, 1990-2011
Dependent variable: GDP growth rate (GDP_RATE)

Independent
POL CZE HUN EST LVA LTU SVK SVN EU-8
variables
&RHI¿FLHQWV
&2167$17 -149.1 -57.2 82.3 -99.2 131.0 205.3 * -15.2 46.2 -0.43
EMP_TP 0.98 1.61 -0.92 0.62 -0.10 1.02 0.88 * -0.17 0.11
FDI_NV 1.71 * 0.38 0.00 0.65 1.70 -0.74 0.45 ** 0.49 0.04
&21)B+286 1.59 -1.19 -0.54 0.88 -1.91 -3.81 * -0.13 -0.95 0.01
SELF_EMP 0.39 1.64 1.50 5.24 1.09 0.10 -0.40 0.52 0.07
&,0 -17.59 5.26 -48.31 -57.38 -57.42 * -12.45 -27.39 ** 14.21 -6.55 *
R-squared 47.01 35.63 25.85 48.35 66.27 80.15 90.55 32.67 6.80
1RWHV 3RODQG ± 32/ WKH &]HFK 5HSXEOLF ± &=( +XQJDU\ ± +81 (VWRQLD ± (67 /DWYLD ± /9$ /LWKXDQLD ± /78
6ORYDNLD±69.6ORYHQLD±691 6LJQL¿FDQWDWWKHOHYHO 6LJQL¿FDQWDWWKHOHYHO
7KH OLWHUDWXUH UHYLHZ SURYLGHG E\ $QGU]HM :RMW\QD transition countries are so much institutionally divergent
(2002) suggests unclear evidence about impact of that they should not be treated as a homogeneous region.
institutions on economic growth in transition economies Furthermore, economic growth differences depend
LQFOXGLQJ &HQWUDO DQG (DVWHUQ (XURSHDQ FRXQWULHV much more on the policies adopted than on the type of
possibly due to many different types of institutions institutions. Nevertheless, relatively sluggish economic
EHLQJ FRQVLGHUHG GLI¿FXOWLHV WR PHDVXUH LQVWLWXWLRQV growth in Poland at the beginning of the 20th century
quantitatively and many non-institutional factors was caused by the gradual deterioration of institutional
affecting economic growth. According to the authors, environment.
___________________________
1
The term sigma-convergence originates from the economic growth literature (e.g. Barro R.J., Sala-i-Martin X,
1992).

ISSN 1691-3078
Table 4
3HDUVRQFRUUHODWLRQFRHI¿FLHQWVEHWZHHQ&,0DQGVHOHFWHGHFRQRPLFPHWULFV
in eight EU Member States, 1990-2011
Contract-intensive money (CIM)

Variables
POL CZE HUN EST LVA LTU SVK SVN EU-8
VA_AGR 0.47* .. -0.64** .. 0.20 -0.36 0.48 0.66** -0.22*
EMP_TP 0.04 0.56* -0.82** 0.23 -0.27 -0.46 -0.18 -0.58** -0.27
FRM_BN -0.74 -0.59 0.54 0.54 0.80 0.56 -0.99** -0.99** 0.13
FDI_NV -0.16 0.14 0.03 0.62** -0.49* -0.30 0.01 -0.12 -0.05
GDP_RATE -0.13 -0.23 0.50* -0.38 -0.62** -0.37 -0.53* 0.04 -0.18
*)&)B35 .. .. .. .. -0.35 -0.44 0.52 .. 0.41**
&21)B+286 0.33 0.77** -0.54** -0.14 -0.39 0.12 -0.18 0.71** -0.26**
VA_IND 0.02 .. .. .. 0.19 -0.39 -0.53* 0.52* 0.45**
UEM_LTRM 0.07 -0.55 0.76** -0.23 -0.14 -0.45 -0.78** 0.59* 0.00
NBUS_DNS -0.41 0.02 0.86* -0.96* -0.25 0.40 0.22 0.00 0.21
&37)B35 -0.08 0.44 -0.01 -0.38 -0.26 0.10 0.26 0.12 -0.08
SELF_EMP 0.77** -0.69 0.02 -0.22 0.02 -0.19 -0.77 0.44 0.17
UEM_TOTL 0.42 -0.14 -0.07 -0.31 0.43 0.29 0.28 0.65** -0.14
1RWHV 6LJQL¿FDQWDWWKHOHYHO 6LJQL¿FDQWDWWKHOHYHO±GDWDDUHQRWDYDLODEOH
Although the theoretical connection between property LQGLFDWHVLJQL¿FDQWO\QHJDWLYHUHODWLRQEHWZHHQ&,0DQG

rights and economic growth is uncontroversial, authors’ economic growth rate. In Slovakia, there seems to be
results of multiple linear regressions of growth rate DOVR D VWURQJ QHJDWLYH FRUUHODWLRQ RI &,0 ZLWK )LUPV
7DEOH VXJJHVW WKDW &,0 GRHV KDYH VLJQL¿FDQW EXW XVLQJ EDQNV WR ¿QDQFH LQYHVWPHQW DQG ZLWK /RQJ WHUP
negative effect on GDP growth rates in Latvia, Slovakia unemployment as well as a moderate negative correlation
and in all the countries treaded as one group. The other with Value added in industry. In Lithuania, no statistically
FRHI¿FLHQWVWKDWZHUHVWDWLVWLFDOO\VLJQL¿FDQWWKURXJKRXW VLJQL¿FDQW FRUUHODWLRQ ZDV IRXQG EHWZHHQ &,0 DQG WKH
ZHUH)',QHWLQÀRZVDVRI*'33RODQGDQG6ORYDNLD selected variables. In Slovenia, with the highest, in the
employment to population ratio (Slovakia) and household JURXS RI FRXQWULHV XQGHU VWXG\ &,0¶V YDOXHV LQ WKH
¿QDOFRQVXPSWLRQH[SHQGLWXUHDVRI*'3/LWKXDQLD SHULRG WKH\ ZHUH VWDWLVWLFDOO\ VLJQL¿FDQWO\
7KH RYHUDOO ¿W RI WKLV UHJUHVVLRQ ZDV IRXQG WR EH TXLWH associated with seven of twelve considered indicators;
high (with R2 value ranging from 26% for Hungary to fairly high and positively with Household consumption,
91% for Slovakia). and with Value added both in agriculture and in
7KH ELYDULDWH FRUUHODWLRQ FRHI¿FLHQWV EHWZHHQ &,0 industry.
and variables describing economic situation of the The authors introduced two-year lagged values
countries are presented in Table 4. The authors expected RI &,0 WR FDSWXUH WKH WLPH QHFHVVDU\ WR UHVSRQG WR
WR¿QGSRVLWLYHUHODWLRQVKLSEHWZHHQ&,0UDWLRDQGDOORI changing institutional environment and to demonstrate
those variables, except for unemployment. In Poland, the possible initial effect of the property rights on the
WKHUH ZDV VWDWLVWLFDOO\ VLJQL¿FDQW DQG SRVLWLYH &,0¶V selected variables describing economic performance.
correlation with Agriculture value added (% of GDP) Table 5 reports the results of the simple linear regression
DQG 6HOIHPSOR\PHQW ,Q WKH &]HFK 5HSXEOLF &,0 ZDV models for the selected countries.
positively related to Employment rate and Household 7KH WZR\HDU ODJ RI WKH H[SODQDWRU\ &,0 YDULDEOH
¿QDOFRQVXPSWLRQH[SHQGLWXUHRI*'3,Q+XQJDU\ GRHV QRW KDYH D VWDWLVWLFDOO\ VLJQL¿FDQW HIIHFW RQ
&,0 \LHOGHG H[SHFWHG SRVLWLYH FRUUHODWLRQ ZLWK macroeconomic variables with exception of EMP_TP (all
economic growth, New business density and Household FRXQWULHV DSDUW IURP WKH &]HFK 5HSXEOLF DQG (VWRQLD
consumption as well as unexpected (negative) with SELF_EMP (Poland and Slovakia), VA_AGR (Latvia,
Agriculture value added, Employment, and (positive) with Slovenia), VA_IND (Slovakia and Slovenia), GDP_RATE
Long-term unemployment. For Estonia, in the analysed +XQJDU\*)&)B35/DWYLD&21)B+2863RODQGWKH
SHULRG&,0ZDVSRVLWLYHO\UHODWHGWRQHWLQÀRZVRI)RUHLJQ &]HFK5HSXEOLF(VWRQLD6ORYHQLD8(0B727/DQG8(0B
direct investment (% of GDP) but strongly negatively to LTRM (Poland, Hungary, Latvia and Slovenia), FRM_BN
New business density. Results for Latvia and Slovakia (Estonia), and NBUS_DNS (Lithuania and Slovakia).

ISSN 1691-3078
Table 5
Simple linear regressions of macroeconomic variables on CIM (lagged 2 years)
in eight EU Member States, 1990-2011
Dependent Contract-intensive money at time t-2 (CIM ) – independent variable

t = -2
variables POL CZE HUN EST

(at time t) r b r b r b r b
VA_AGR 0.30 5.2 .. .. -0.45 -15.1 .. ..
EMP_TP -0.50 -15.7* 0.34 3.9 -0.46 -11.4* 0.32 8.6
FRM_BN -0.91 -26.5 -0.44 -18.1 -0.99 -600.2 0.99 199.3*
FDI_NV 0.01 0.2 0.45 10.5 -0.13 -42.1 0.12 6.2
GDP_RATE 0.01 0.2 -0.10 -2.2 0.59 33.9** -0.19 -15.1
*)&)B35 .. .. .. .. .. .. .. ..
&21)B+286 0.74 13.7** 0.79 9.3** -0.39 -21.8 -0.64 -16.6**
VA_IND -0.19 -5.7 .. .. 0.45 9.2 .. ..
UEM.LTRM 0.58 48.4** -0.27 -20.3 0.79 118** -0.38 -30.6
NBUS_DNS -0.43 -0.1 -0.71 -17.7 -0.73 -56.1 0.92 15.4
&37)B35 0.12 2.5 0.45 9.1 -0.05 -5.3 -0.26 -16.8
SELF_EMP 0.65 18.3** -0.40 -3.9 0.24 4.4 -0.02 -0.1
UEM_TOTL 0.79 31.7** 0.18 2.3 -0.59 -23.3** -0.16 -4.5
LVA LTU SLK SLV
r b r b r b r b
VA_AGR 0.55 12* -0.05 -2.4 0.43 3 0.58 4.2*
EMP_TP -0.54 -28.4* -0.55 -14.9* -0.66 -10.9** -0.52 -8.1*
FRM_BN 0.41 29.3 -0.89 -324.6 -0.94 -69.3 -0.74 -92.5
FDI_NV -0.30 -9.7 -0.41 -12.5 0.36 12.1 0.03 0.4
GDP_RATE -0.10 -9.5 0.16 13.9 -0.19 -6.6 0.44 10.9
*)&)B35 -0.77 -70.7** -0.60 -23.3 0.28 11.5 .. ..
&21)B+286 0.08 2.1 -0.17 -4.6 -0.11 -2.6 0.60 10.1**
VA_IND 0.23 10.1 -0.21 -5.8 -0.53 -9.2* 0.60 10.1**
UEM_LTRM 0.50 85.2* 0.39 75.1 -0.46 -35.9 0.66 42.7**
NBUS_DNS -0.72 -12.2 -0.92 -6.2** -0.90 -6.6** -0.83 -6.8
&37)B35 -0.27 -9.2 -0.05 -1.7 0.46 20.6 -0.17 -6.3
SELF_EMP 0.28 10.2 0.17 9.6 -0.64 -21.5** 0.23 2.6
UEM_TOTL 0.70 41.5** 0.44 30.2 0.80 25.4 0.59 5.2*
1RWHV DQG LQGLFDWH VLJQL¿FDQFH RI UHJUHVVLRQ FRHI¿FLHQWV E DQG FRUUHODWLRQ FRHI¿FLHQWV U DW WKH DQG
5% level, respectively; (..) – data are not available.
Conclusions, proposals, in economic activity and thus in the process of

recommendations HFRQRPLF GHYHORSPHQW 7KH FRQFHSW RI &,0
1. The aim of the research was to seek evidence is based on the assumption that the ways the
RI D UHODWLRQVKLS EHWZHHQ &RQWUDFWLQWHQVLYH ¿QDQFLDO DVVHWV DUH PDLQWDLQHG GHSHQG RQ WKH
money and the performance of the national SURSHUW\ ULJKWV GH¿QLWLRQ DQG HQIRUFHPHQW :KHQ
HFRQRPLHV RI HLJKW &HQWUDO DQG (DVWHUQ (XURSHDQ KRXVHKROGV IDUPHUV DQG ¿UPV RSHUDWH LQ D VWDEOH
post-socialist countries that joined the European institutional environment, in which property
Union in 2004. Drawing on the existing literature ULJKWV DUH ZHOO GH¿QHG DQG SURWHFWHG LW LV OHVV
on the subject, the idea behind this approach risky to have assets deposited on bank accounts
is that, on one side, property rights determine LQFOXGLQJ WLPHUHVWULFWHG DFFRXQWV &RQVHTXHQWO\
KRZ WKH UHVRXUFHV LQFOXGLQJ ¿QDQFLDO DVVHWV the proportion of deposits to the money supply will
were, are or will be allocated, and on other side, tend to rise. Effective property rights, other things
that (private) property rights play a key role being equal, will encourage investment, improve

ISSN 1691-3078
the productivity and, hence, lead to a higher rate of 5RVHQ]ZHLJ 0 HGV Handbook of Development
economic growth and development. Economics, Volume 5. North-Holland: Elsevier,
2. 7KH OLPLWDWLRQ RI &,0 UDWLR LV WKDW LW FDQ YDU\ QRW pp. 4525-4595.
only with respect to changes in governance of the 4. &ODJXH&.HHIHU3.QDFN62OVRQ0
SURSHUW\ULJKWVEXWPD\DOVREHLQÀXHQFHGE\LQWHUHVW Institutions and Economic Performance: Property
UDWHVLQÀDWLRQDQGRWKHUIDFWRUV0RUHRYHUHYHQLI Rights and Contract Enforcement.,Q&ODJXH&HG
&,0 LV D JRRG SUR[\ IRU HQIRUFHPHQW RI SURSHUW\ Institutions and Economic Development. Baltimore:
rights and contracts, an effective enforcement Johns Hopkins University Press, pp. 67-90.
of private property rights by the third parties 5. &ODJXH&.HHIHU3.QDFN62OVRQ0
DXWKRUL]HG E\ D JRYHUQPHQW FUHDWHV D GLOHPPD RI &RQWUDFW,QWHQVLYH 0RQH\ &RQWUDFW (QIRUFHPHQW
LQWHUSUHWDWLRQ VWDWHV WKDW DUH VXI¿FLHQWO\ FDSDEOH Property Rights, and Economic Performance.
of enforcing property rights may be also technically Journal of Economic Growth, Volume 4, Issue 2,
VWURQJ HQRXJK WR FRQ¿VFDWH ZHDOWK RI LWV FLWL]HQV pp. 185-211.
(Weingast B.R., 1995). 6. &RPSWRQ 5$ *LHGHPDQ '& -RKQVRQ 1'
3. Overall, the research results for the transition (2010). Investing in Institutions. Economics and
countries provide little empirical support for the Policy, Volume 22, Issue 3, pp. 419-445.
notion that the better performance of the national 7. Economides, G., Egger, P.H. (2009). The Role
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HLJKW&HQWUDODQG(DVWHUQ(XURSHDQVWDWHVRYHUWKH Volume 25, Issue 3, pp. 277–279.
period from 1990 to 2011, the authors found unclear 8. Efendic, A., Pugh G., Adnett, N. (2011). Institutions
results that economic growth, levels of foreign direct and Economic Performance: A Meta-regression
investments, new businesses creation and using Analysis. European Journal of Political Economy,
EDQNV E\ SULYDWH ¿UPV WR ¿QDQFH LQYHVWPHQWV JR Volume 27, Issue 3, pp. 586-599. Retrieved:
together with good property rights institutions as http://www.sciencedirect.com/science/article/pii/
SUR[LHG E\ &RQWUDFWLQWHQVLYH PRQH\ 7KH DXWKRUV S0176268010000790#. Access: 28.01.2012
UHVHDUFKSURYLGHGHYLGHQFHWKDW&,0ZDVVWDWLVWLFDOO\ 9. (LFKHU76*DUFLD3HQDORVD&7HNVR]8
positively correlated with economic growth rate How do Institutions Lead Some Countries to Produce
solely in Hungary; with employment rate – in the 6R 0XFK 0RUH 2XWSXW SHU :RUNHU WKDQ 2WKer. In:
&]HFK5HSXEOLFZLWK)',±LQ(VWRQLDZLWKKRXVHKROG (LFKHU67*DUFLD3HQDORVD&HGVInstitutions,
FRQVXPSWLRQ VSHQGLQJ ± LQ WKH &]HFK 5HSXEOLF DQG Development, and Economic Growth &DPEULGJH
Slovenia; with value added in agriculture – in Poland Massachusetts: The MIT Press. pp. 65–80.
and Slovenia; with value added in industry – in 10. Knack, S., Kugler, M., Manning, N. (2003). Second
Slovenia; with new business density – in Hungary, Generation Governance Indicators. International
DQG ZLWK JURVV ¿[HG FDSLWDO IRUPDWLRQ E\ SULYDWH Review of Administrative Sciences, Volume 69,
sector – in the whole group of countries. In Slovakia, Issue 3, pp. 345-364.
&,0 ZDV QHJDWLYHO\ DVVRFLDWHG ZLWK ORQJWHUP 11. Locke, J. (1764). The Second Treatise of Civil
unemployment to total unemployment ratio. Government, The University of Adelaide, Retrieved:
4. 6RPH SX]]OLQJ UHODWLRQVKLSV EHWZHHQ &,0 DQG http://ebooks.adelaide.edu.au/l/locke/john/l81s/
economic variables as well as lack of statistical chapter19.html#chapter19. Access:20.12.2012
VLJQL¿FDQFH LQ IDFW PD\ EH GXH WR OLPLWDWLRQ RI 12. Nooruddin, I. (2010). Coalition Politics and Economic
WKH OLQHDU PHWKRG DSSOLHG DQG LQVXI¿FLHQWO\ ORQJ Development: Credibility and the Strength of Weak
time-series. More generally, the obtained results Governments. &DPEULGJH &DPEULGJH 8QLYHUVLW\
suggest that further research is needed on the Press. p. 266.
interaction between property rights institutions and
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PDFURHFRQRPLFFRQGLWLRQLQWKH&HQWUDODQG(DVWHUQ
and Economic Performance&DPEULGJH&DPEULGJH
European countries, especially after their accession
University Press. p. 159.
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14. Sullivan, J.D., Rogers, J., Bettcher, K.E. (2007). The
Importance of Property Rights to Development.
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American Economic Review, Volume 62, Issue 5, Economic Development. Journal of Law, Economics,
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2. Barro, R.J., Sala-i-Martin, X. (1992). &RQYHUJHQFH 16. Wojtyna, A. (2002). Nowe kierunki badan nad rola
Journal of Political Economy, Volume 100, Issue 2, LQVW\WXFML ZH Z]URVFLH L WUDQVIRUPDFML 7KH 1HZ
pp. 223-251. Directions of Research on the Role of Institutions
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and Economic Development, In: Rodrik, D., Volume 10, pp. 1–24.

ISSN 1691-3078
A. Brelik, A. Matuszczak Issues of Public Goods in a Multi-Functional Development of Rural Areas
ISSUES OF PUBLIC GOODS IN A MULTI-FUNCTIONAL

DEVELOPMENT OF RURAL AREAS1
Agnieszka Brelik2, PhD

)DFXOW\RI(FRQRPLFV:HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQ
Anna Matuszczak3, PhD
)DFXOW\RI(FRQRPLFV3R]QDQ8QLYHUVLW\RI(FRQRPLFV
Abstract. The paper reviews the concept of public goods, indicating its various dimensions. The fundamental
objective of the paper is conceptualising public goods and answering a question whether agritourism can be treated
as a public commodity based on multi-functional characteristics of agriculture. The lack of such studies also raises
several essential issues and proposes objectives for this study: 1) to represent the main issues of public goods; and
2) to answer a question whether agritourism can be treated as a public commodity in a multifunctional
development of rural areas. The following research methods were employed in the present research: monographic
and descriptive methods, analysis and synthesis, and induction and deduction. Findings of foreign scientists were
DOVRXVHGLQWKHUHVHDUFKVLQFHWKHUHLVDODFNRIVFLHQWL¿FVWXGLHVRIDJULWRXULVPDVDSURYLGHURISXEOLFJRRGV
Key words: public goods, development, agritourism.
JEL code: Q18
Introduction Aim and scope of the paper

Multi-functionality of agriculture is inextricably The fundamental objective of the paper is
linked with creating public goods. A mechanism of conceptualising public goods and answering a question
public goods, seemingly simple, is a subject of study whether agritourism can be treated as a public
IRUPDQ\UHVHDUFKHUV%XFKDQDQ-5RZOH\&. commodity based on multi-functional characteristics
2OVRQ 0 :LONLQ - 5HGH¿QLWLRQ of agriculture. The paper reviews the concept of public
RI SUHYLRXV DJULFXOWXUH PRGHOV IRFXVLQJ FKLHÀ\ RQ goods, indicating its various dimensions according to the
the commodity output, and perceiving agriculture agritourism development. The lack of such studies also
exclusively as a food provider, has led to a search raises several essential issues and proposes objectives
IRU RWKHU GLUHFWLRQV RI GHYHORSPHQW &]\]HZVNL $ for this study: 1) to represent the main issues of public
Kulyk P., 2011). Multifunction is not a phenomenon goods; and 2) to answer a question whether agritourism
reserved only for agriculture but the problems are can be treated as a public commodity in a multifunctional
VSHFL¿FDVZHOODVSXEOLFJRRGVSURGXFHGLQWKLVVHFWRU development of rural areas.
A very important feature in this context is the natural The following research methods were employed in
character of the resources (especially land) in farming. the present research: the monographic and descriptive
However, the level of economic-social development methods, analysis and synthesis, and induction and
FDXVHV D VSHFL¿F JUDGDWLRQ RI IDUPLQJ YDOXHV LQ WKH deduction.
V\VWHP RI SXEOLF QHHGV $ VLJQL¿FDQW DVSHFW ZKLFK LV Findings of foreign scientists were also used in the
always paid attention to, is the biological character UHVHDUFK VLQFH WKHUH LV D ODFN RI VFLHQWL¿F VWXGLHV RI
and multitude of intentional as well as unintentional agritourism as a provider of public goods.
³DGGLWLRQDO´ SURGXFWV ZKLFK EHFRPH RI D SXEOLF
FRPPRGLW\ GLPHQVLRQ 2(&' 7KH HVVHQFH RI
multifunctional agriculture is to increase the tourist village Main issues of public goods
by enrichment of the attractiveness of the landscape The market and price mechanism that have
and the development of agritourism. There is a lack of enabled to adjust supply and demand, guaranteeing
VFLHQWL¿F VWXGLHV RI DJULWRXULVP DV D SURYLGHU RI SXEOLF optimal use of resources both on the microeconomic
goods, so a question arises whether the agritourism OHYHO DQG RQ WKH PDFUR VFDOH RSHUDWHV LQ WKH ¿HOG RI
can be a public commodity? The agritourism is local neoclassical economics with its assumptions of perfect
public commodity that has been presented in the study competition. However, in the real world, it was evident
due to the fairly small range of tasks, which should be that the market mechanism did not function as
adopted within the sphere of tourism. The study also smoothly and that it often diverged from the model
focuses on presenting a general overview of the main of perfect competition. One of the fundamental signs
issue of public goods in a multi-functional development in of market imperfections concerned certain types
rural areas. of goods the economics describes as public goods
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ISSN 1691-3078
Table 1
Public goods compared with other types of goods
Division
High degree Low degree
Exclusion
Public goods &RPPRQSRROJRRGV

Impossible or - national defence - natural resources; lake water, catching a
GLI¿FXOW - observing a sunset ¿VKKXQWLQJ
&OXEJRRGV Private goods
Easy Museums, cinemas, telephone services Services, products
Source: authors’ construction based on Stiglitz, 2004
(Hofmokl J., 2009). The theory of public goods is one means that goods publically consumed by one
of the elements of a wider theory of public choice individual do not eliminate the possibility of the
(Wilkin J., 2005)4, comprising, inter alia, the theory same commodity being consumed by another
of economic democracy, the theory of group interest, one, the goods are desired by the society, while
the theory of common goods, or the analysis of rent- the market mechanism is unable to provide
seeking mechanism. These theories function in the them. Typical cases of rival consumption concern
current of new institutional economics, which is an goods such as clothing or bread; whereas,
apt synthesis of the neoclassical economics and the EHQH¿WLQJ IURP D ¿UHZRUNV GLVSOD\ ZLOO EH RI QRQ
economics of institutionalism5. It is currently one of the rival consumption nature. It is impossible to
most rapidly developing trends of modern economics, exclude such it from consumption, since if
generating interest of other social sciences as well, someone is at a spot, which gives a good view
namely, political science, sociology, and law. The theory of the display, then a company organising
of public choice is called the economics of politics theory. the display is not able to forbid him/her to
7KLV UHODWLYHO\ QHZ ¿HOG RI HFRQRPLF VFLHQFHV LQYROYHV DGPLUH WKH VKRZ 2Q WKH FRQWUDU\ ¿UHZRUNV
applying methodological tools and assumptions of are not competitive consumption-wise, because
standard economics to analyse people’s behaviour in watching them by one person does not deprive
the activities of political character and in other areas of others of the possibility to watch the same
public sphere (Wilkin J., 2005). show;
A majority of goods and services available to — a rise in the number of users neither eliminates nor
human are acquired individually on the market and decreases the possibility of a certain commodity
they constitute our private goods (Wilkin J., 2010), being used by all users (they are non-competitive
a part of which people use without incurring high consumption-wise). Whereas, the property
(or even any) costs (public goods). What economic of certain goods is that they are available to
properties do such goods demonstrate? What everyone. One cannot prohibit others, in a simple
GLIIHUHQWLDWHV WKHP IURP WKH JRRGV WKDW IXO¿O KXPDQ manner and without a great degree of effort
QHHGV YLD SULYDWH PDUNHWV" $ GH¿QLWLRQ RI SXEOLF and means, to use those goods.
goods needs to be stipulated in order to answer these Without a doubt, such goods include fresh air,
questions. music, lake water as well as television or public
(FRQRPLFV GH¿QHV SXEOLF JRRGV DV PHDQV ZKLFK OLEUDULHV &RQVXPHUV RI WKRVH JRRGV PD\
DUH XVHG WR VDWLVI\ KXPDQ¶V QHHGV $ JHQHUDO GH¿QLWLRQ freely make use of them even when they
of public goods concentrates on two features: non- GR QRW SD\ IRU WKHP ZKLFK REYLRXVO\ LQÀXHQFHV
rivalry and non-excludability (Atkinson, A. and their readiness to incur such payments when
- 6WLJOLW] 6WDUUHWW ' 7KH WKHRU\ ZDV they are of obligatory nature (Hofmokl J.,
formulated in 1954 by an American economist and 2009).
VWDWLVWLFLDQ D 1REHO 3UL]H ZLQQHU OHFWXUHU DW WKH Public goods are also called non-market goods.
Massachusetts Institute of Technology, Paul Anthony 7KH\ DUH WKHQ GH¿QHG DV JRRGV DQG VHUYLFHV ZKLFK
Samuelson (Samuelson P.A., 1954) who assigned are linked with market transactions, and there
WKHP ZLWK WKH IROORZLQJ SURSHUWLHV ZKLOH GH¿QLQJ DUH QR YDOXH PHDVXUHV GH¿QHG IRU WKHP E\ WKH
the goods: market (Lojewski S., 2007). From the point of view
— QRRQHLVH[FOXGHGIURPWKHEHQH¿WVUHVXOWLQJIURP of institutionalised economics, public goods are an
their use (non-excludability from consumption) - extreme case of an external effect. In accordance
___________________________
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:LONLQ - 7KH WKHRU\ RI SXEOLF FKRLFH +RPR (FRQRPLFV LQ WKH VSKHUH RI HFRQRPLFV ,Q &KDSWHU , WKH
author presented a wide area of interest in the theory of public choice and its relations with a general theory of
economics and other social sciences. The material constituted the methodological foundations for the theory of
SXEOLFFKRLFHDQGLWVVLJQL¿FDQFHIRUWKHUDWLRQDOL]DWLRQRIWKHSXEOLFVSKHUH:DUV]DZDSS
5
/LWHUDWXUHUHYLHZRQWKHVXEMHFWRILQVWLWXWLRQDOHFRQRPLFVFRQGXFWHGE\*U]HODN$*U]HODN$&]\WHRULH
NU\]\VyZHNRQRPLF]Q\FKVąSU]\GDWQHGODZ\MDĞQLDQLDV\WXDFMLZJRVSRGDUFHĪ\ZQRĞFLRZHM"Ä5RF]QLNL1DXNRZH
6(5L$´7RP;,,=V

ISSN 1691-3078
ZLWK WKH GH¿QLWLRQ RI DQ H[WHUQDO HIIHFW6, they cause 7LHERXW&KDUOHV07ROOJRRGVRUFOXEJRRGV
D GLYHUJHQFH EHWZHHQ FRVWV DQG EHQH¿WV JHQHUDWHG are typically of local range and they occur in a situation
by private individuals and the society. In the context when a limited (selected) circle of users covers jointly, in
RI SXEOLF JRRGV DOO WKHLU EHQH¿WV DUH RI H[WHUQDO the form of periodic fees, the costs of operation, and in
nature, i.e. the goods are not used by buyers but by return acquires the right to use the goods freely, while at
all consumers. External effects can be liquidated or the same time excluding all other potential users. This in
strengthened through adequate setting of taxes and practice means that club goods include goods that meet
VXEVLGLHV ,W FDQ EH DFKLHYHG RQ WKH EDVLV RI &RDVH only one of the conditions presented by Samuelson. The
theorem (positive external effects) or Pigovian tax so-called country clubs could serve as an example of such,
(negative external effects) (Fiedor B., 2002). It results along with closed sports-recreation centres, residential
from the fact that both positive and negative external estate systems of day care for children, cable television,
HIIHFWVFDXVHLQHI¿FLHQFLHVLQWKHDOORFDWLRQRIUHVRXUFHV and theatres. Toll goods, as opposed to private goods,
in Paret’s sense and, as a reason for the unreliability of for which one pays as well, are divisible. Many people
market mechanisms, they are used as an argument for can use them at the same time without any detriment
the state’s intervention. to such a commodity. A theatrical performance or a
Hofmokl emphasises that reverting to the television programme can simultaneously be watched
concepts and views presented within the scope of by a large number of viewers. At the same time, it is
mainstream economics, a widely understood category HDV\ WR GH¿QH ZKLFK YLHZHUV DUH HQWLWOHG WR ZDWFK D
of public goods is clearly associated with the state’s performance, e.g. by checking the possession of entry
involvement in goods production and distribution. The tickets. Thorough research resulted in creating separate
need for such an involvement arises to a varying degree theoretical constructions for toll goods (Buchanan, 1965;
and it concerns not only the so-called pure public goods &RUQHV6DQGOHU
and mixed public goods but also certain types of private Additionally, a question arises whether the provision
goods – the so-called collective goods. From the start, of public goods on a local level produces the scale effects.
critics have been pointing out that private goods and The provision of public goods on a central level enables
pure public goods represent extreme examples of many, achieving the returns of scale; however, it is frequently
if not a majority of goods. ineffective (because of a varying demand of local
Samuelson recognised the existence of such communities for a certain commodity). Locally provided
intermediary cases but he questioned the yielding public goods generating positive external effects require
of problems related with them (Fiodor B., 2002; properly extensive borders of a territorial unit. In order
Samuelson A. 1954). Irrespectively of Samuelson’s to provide public goods effectively, a region incurring the
pessimism on the probable enterprise productivity, it costs needs to use all the external effects. In line with
appeared in the literature through the recognition of WKH GH¿QLWLRQ RI WKH :RUOG %DQN SXEOLF JRRGV JHQHUDWH
³LPSXUH SXEOLF JRRGV´ PL[HG SXEOLF JRRGV 7KH LGHD VKDUHG EHQH¿WV ZKHUHDV SXEOLF HYLOV JHQHUDWH VKDUHG
RI ³PL[HG JRRGV´ LV D VWDUWLQJ SRLQW IRU WKH GH¿QLWLRQ costs. The spatial reach of such external effects
of multi-functionality. In practice, there are many determines whether a good is local, regional, national,
goods and services, which fall into the category of pure RU JOREDO $V .RSF]HZVND VWUHVVHV WKDW one cannot
SXEOLF RU SULYDWH JRRGV &RQVHTXHQWO\ LW LV GLI¿FXOW WR automatically assume that the scope of reach is determined
conclude whether markets or the government is their by goods provider. Local goods can be delivered by
suitable providers. According to Wilkin (Wilkin J., 2010): the state, while global goods/evils by a city or region
both in modern economies and in public life a search .RSF]HZVND 7KH GH¿QLWLRQV RI SXEOLF JRRGV
continues for ways of merging effectiveness of market quoted above and used currently by economists are not
mechanisms and social needs for delivering goods of entirely consistent with the common understanding of a
public nature. Mixed goods, called merit goods, feature public commodity as a commodity available and destined
such characteristics. Merit goods give a start to complex IRU HYHU\RQH DQG OLQNHG ZLWK DQ RI¿FH RU D QRQSXEOLF
processes of redistribution, which involve applying LQVWLWXWLRQDVLPLODUGH¿QLWLRQZDVXVHGLQWKHHFRQRPLFV
exceptional taxes. Infrastructure limiting the pollution RI WKH ¿UVW KDOI RI WKH th century, and it is currently
of the natural environment is an example of a merit used in political discourse). Public goods understood in
commodity of positive external effects. WKLV ZD\ DUH W\SLFDOO\ GH¿QHG E\ HFRQRPLVWV DV VRFLDO
The questions evolve around the economics of goods. These are goods which ordinarily could be private
RYHUSRSXODWLRQ FRPLQJ ODUJHO\ IURP &KDUOHV 7LHERXW¶V goods but for a variety of reasons, usually as a result
SXEOLFDWLRQ WLWOHG ³/RFDO 3XEOLF *RRGV´ DQG D SLRQHHULQJ of social policy conducted by the public authorities, they
VWXG\ RI -DPHV %XFKDQDQ ³&OXE *RRGV´ %XFKDQDQ J., DUHDDYDLODEOHWRHYHU\FLWL]HQDQGWKH\DUH¿QDQFHGIURP
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6
$ FODVVLF GH¿QLWLRQ RI DQ H[WHUQDO HIIHFW LQYROYHV D WUDQVIHU RI D SDUW RI WKH FRVWV RU EHQH¿WV DULVLQJ IURP WKH
activities of one entity on third parties without adequate compensation. Instances of environment pollution
caused by the production of certain industrial goods are a typical example of external effects. External effects take
SODFHRXWVLGHRIWKHPDUNHWZKLFKLVWKHPDLQUHDVRQIRUWKHGLI¿FXOW\LQGHWHUPLQLQJWKHYDOXHRIDQGHQIRUFLQJ
FRPSHQVDWLRQ 7KHVH HIIHFWV DUH WR EH XQGHUVWRRG DV FRVWV RU EHQH¿WV RI HFRQRPLF QDWXUH DQG QRW H[FOXVLYHO\
¿QDQFLDO7KHLURFFXUUHQFHFDXVHVLQWHUIHUHQFHLQWKHIXQFWLRQLQJRIPDUNHWPHFKDQLVPDQGLWLVRQHRIWKHUHDVRQV
for market unreliability. The concept of external effects was introduced by a British economist Arthur Pigou in 1920,
as one of the central concepts of the welfare economics. It also plays a crucial role in the issues of environment
protection and sustainable development.

ISSN 1691-3078
the public funds (e.g. education or health care) (Baum R., FKLHÀ\ LQÀXHQFHV WKH IRUP RI WRXULVW RIIHU UHFUHDWLRQDO
6OHV]\QVNL-7DEOHLOOXVWUDWHVWKHFODVVL¿FDWLRQ quality of tourists, yet, above all the residents’ quality
of goods according to the degree of their use by the of life.
society. Agritourism as a public commodity is linked with
2DWHV 2DWHV : LGHQWL¿HV WKH YDULDWLRQ RI WKHWKHRU\RI³WKHWUDJHG\RIFRPPRQSDVWXUH´DQGWKH
society’s preferences as a rational argument in favour of issue of free riding. The goods and services provided by
decentralisation. The idea is that the centralisation and ORFDO JRYHUQPHQW IXO¿OOLQJ WRXULVW IXQFWLRQV DUH W\SLFDOO\
standardisation of goods provision to the population, of public character. There is often a temptation to use
ZKLFK LV GLYHUVL¿HG LQ UHVSHFW RI LWV SUHIHUHQFHV LV QRW a communal resource without incurring full costs of its
optimal from the point of effectiveness ³WKH DIÀXHQFH maintenance. It may be by taking over a part of demand
level will always be higher if the level of consumption of created for agritourism services without bringing in one’s
local public commodity is determined by each territorial own contribution. Municipalities neighbouring a cost-
unit on an individual basis as opposed to the value being incurring municipality might act as such free riders, in
determined from above when external effects and no cost hope of taking over tourists, or they could be tourist
limits occur.”7KHEHQH¿WVRIWKHVFDOHHIIHFWVDSSHDULQJ IDUPVFRPSHWLQJEHWZHHQRQHDQRWKHU.RSF]HZVND.
when the costs of providing public goods decrease as 2009). The model of multi-functional agriculture (apart
their amount increases weigh against decentralisation. from producing commodity output) recognises the
7KHEHQH¿WVRIVFDOHUHVXOWIURPKDUPRQLVLQJWKHSROLF\ VLJQL¿FDQFH RI UXUDO DUHDV DQG FDUH IRU WKH SURWHFWLRQ
when heterogenic preferences in individual regions are of water, soil resources, protection, and preservation
not taken into consideration. of habitats or landscape formation. Trying to make up
for economic lag requires the introduction of suitable
instruments of support creating favourable conditions for
Public goods provided by agritourism
the improvement of public goods and cultural diversity
Global public goods are the goods that are universal
of the Polish countryside. Placing in space goods of
to all countries, population groups and generations.
primary nature determines the location of goods of
The provision of such goods involves, inter alia, oxygen
complementary nature. The occurrence and saturation
SURGXFWLRQ FRDO VHTXHVWUDWLRQ VLJQL¿FDQW IRU WKH
of space with tourist infrastructure is non-uniform, as
prevention of climate change); bio-diversity conservation
the geographical environment resources are unequally
(regarding genetics, species, ecosystems); water
distributed in space. Tourist areas, through the quality,
protection; and ensuring food security. Since these are
character, type, and availability of tourist development,
universal goods that are of equal importance to all people
try to compensate for basic tourist goods. Agritourism
they ought to be paid for according to a uniform system
activity, accounting for the natural environment and
in all countries.
social-cultural factors, contributes to the transformations
In case of local public goods (consumed on a local
occurring in the areas. It means that in the remaining
level), payment for their provision should probably occur
spheres (spatial and economic ones) changes take place
on a local (national or regional) level. Among other
in the development of rural areas.
things, natural and cultural landscapes classify as one of
them, so are human-made elements as well as elements
of historic, cultural, or archaeological value, and elements Conclusions
constituting an important part of the environment. On Multi-functionality in agriculture was already
account of its disturbed ability to self-regulate, landscape noticeable in the past, while the scale of its occurrence
requires protection that will allow it to maintain a balance characterises the scope of using the labour resources and
and the landscape’s characteristic properties. Landscape real capital at farms as well as the scale of employment
protection involves maintaining its previous values, XQUHODWHGWRDJULFXOWXUH,QWKH3ROLVKVFLHQWL¿FOLWHUDWXUH
both primeval/natural as well as those created by man, a discussion has been conducted on the multi-functionality
WKURXJK DQ DGHTXDWH PDQQHU RI PDQDJHPHQW &XOWXUDO RI UXUDO DUHDV LQYROYLQJ HFRQRPLF GLYHUVL¿FDWLRQ RI
heritage of the countryside and establishing conditions the countryside, thus, increasing the opportunities of
for recreation and leisure pursuits (agritourism) provide employment in non-agricultural activity in the rural
for the uniqueness of Poland’s agricultural landscape. The DUHDV $ SUREOHP RI TXDQWL¿FDWLRQ DQG HYDOXDWLRQ RI
possibility of communing with nature is partly paid for non-commodity outputs of agriculture arises. Does the
by buying private goods (farm tourism holidays). In this production of market goods and non-market goods by
case, it means a risk of transforming a public commodity agriculture, including merit and public goods, enables
into a club commodity. measuring and valuing the effects of agricultural activity?
Agritourism as a tool for the development of By delivering market and non-market goods, the
municipalities, existing in symbiosis with the multi- concept of agritourism refers to the idea of sustainable
functional development of rural areas ought to, on the one development, whose message is emphasising that the
KDQGVHUYHDEDVLFIXQFWLRQHQDEOLQJWKHGLYHUVL¿FDWLRQ delivered public goods are subject to a choice made by
of local economy. On the other hand, it ought to act as a the society in line with the public choice theory. Due to
catalyst for the quality of life of the municipality residents the nature of the activities in the area of agritourism
and tourists. The factors affecting tourists’ experience of a as a public commodity, it is not possible to apply the
WRXULVWIDUPGHSHQGWRDVLJQL¿FDQWGHJUHHRQWKHOHYHORI ¿QDQFLDO SHUIRUPDQFH LQGLFDWRUV +HQFH WKH SUDFWLFDO
tourist appeal, natural assets, and quality of tourist offer purpose of the researchers will be developing methods
of a particular village, i.e. the so-called free goods, public RI YDOXDWLRQ RI WKH EHQH¿WV DQG FRVWV RI SURGXFWLRQ E\
goods, and external effects. The quality of public goods agritourism as a provider of public goods. In addition,

ISSN 1691-3078
an adequate compensation to farmers for the delivery of Theoretic Basis for the Division of Competences
VXFKJRRGVDQGWKHVL]HRISXEOLFIXQGVLQWHQGHGIRUWKH between Central and Local Authorities. Local
¿QDQFLQJRISXEOLFJRRGVE\DJULFXOWXUHDUHFRPELQHGLQ *RYHUQPHQWDQG3XEOLF&RPPRGLW\SS
this agritourism. Despite the fact that agriculture at the 9. &RUQHV R., Sandler, T. (1986). The Theory of
same time provides public goods and private is subject Externalities, Public Goods, and Club Good.
WR UHFHLSW RI WKHVH ¿UVW E\ WKH VRFLHW\ LV WR SURYLGH &DPEULGJH8QLYHUVLW\3UHVV.
IDUPHUV ZLWK FRPSHQVDWLRQ IRU ORVW EHQH¿WV FRQQHFWHG 10. Fiedor, B. (red.), (2002). Podstawy ekonomii
with the resignation of maximum exploitation of the srodowiska i zasobow naturalnych (The Base of
natural environment, which is a condition to compete on the Economics of the Environment and Natural
the market of agricultural produce. Therefore, if it is not 5HVRXUFHV:\G&+%HFN:DUV]DZD
possible to pay farmers for the provision of public goods 11. Hofmokl, J. (2009). Internet jako nowe dobro
through the market, the necessary institutional solutions wspolne 7KH ,QWHUQHW DV WKH 1HZ &RPPRQ
are required to guarantee the due compensation. &RPPRGLW\ 5HWULHYHG KWWSRWZRU]NVLD]NH
SOLPDJHVNVLD]NLLQWHUQHWBMDNRBGREURBZVSROQH
internet_jako_dobro_wspolne.pdf. Access January
Bibliography 2011.
1. $WNLQVRQ $ 6WLJOLW] - Lectures on Public 12. Lojewski, S. (2007). Ekonomia zasobow i srodowiska
Economics. McGraw-Hill, New York, pp. 483-487. (Resource and Environmental Economics). Wyd.
2. %DXP 5 6OHV]\QVNL - Nowe funkcje .368%\GJRV]F]
rolnictwa – dostarczanie dobr publicznych. 13. 2(&' 0XOWLIXQFWLRQDOLW\ WKH 3ROLF\
(New Function of Agriculture – Providing Public Implications, Paris.
*RRGV 6WRZDU]\V]HQLH (NRQRPLVWRZ 5ROQLFWZD L 14. 5RZOH\ &. Introduction in Social Choice
$JUREL]QHVX 5RF]QLNL 1DXNRZH WRP ;, ]HV]\W Theory. Vol. 1. The Aggregation of Preferences
p. 21. $OGHUVKRW 8. DQG %URRN¿HOG 86 (GZDUG (OJDU
3. Buchanan, J. (1965). An Economic Theory of Clubs, Publishing, pp. 11-28.
(&2120,&$QV 15. Samuelson, P.A. (1954). The Pure Theory of Public
4. Buchanan, J. (1962). The Relevance of Pareto Expenditure. Review of Economics and Statistics 36
2SWLPDOLW\ -RXUQDO RI &RQÀLFW 5HVROXWLRQ (4), pp. 387–389.
pp. 341-54. 16. Samuelson, Pure Theory, supra note 6, at 388-89;
5. &]\]HZVNL $ .XO\N 3 Dobra publiczne accord Samuelson, Diagrammatic Exposition, supra
w koncepcji wielofunkcyjnego rozwoju rolnictwa; QRWH DW 1RWLQJ WKH 'LI¿FXOW\ RI *HWWLQJ
ujecie teoretyczne i praktyczne (Public Goods in &RQVXPHUV WR 5HYHDO WKHLU 3UHIHUHQFHV IRU 3XUH
WKH &RQFHSW RI 0XOWLIXQFWLRQDO 'HYHORSPHQW RI Public Goods so that Optimal Production can be
Agriculture; Theoretical and Practical Approach). Determined); Samuelson, Aspects, supra note 7,
=HV]\W\ 1DXNRZH 6]NRO\ *ORZQHM *RVSRGDUVWZD at 334 (same).
:LHMVNLHJR Z :DUV]DZLH 3UREOHP\ 5ROQLFWZD 17. Starrett, D. (1988), Foundations of Public
6ZLDWRZHJR 7RP ;;9, =HV]\W Economics. &DPEULGJH8QLYHUVLW\3UHVV&DPEULGJH
s. 18-25. pp. 42-44.
6. *U]HODN $ &]\ WHRULH NU\]\VRZ 18. 7LHERXW &K0 A Pure Theory of Local
HNRQRPLF]Q\FKVDSU]\GDWQHGODZ\MDVQLDQLDV\WXDFML Expenditures,-32/(&21)RUDQRYHUYLHZ
Z JRVSRGDUFH ]\ZQRVFLRZHM" Do the Economic of this literature and an application of the economics
&ULVHV 7KHRULHV DUH 8VHIXO IRU ([SODLQLQJ WKH RIFRQJHVWLRQWRWKH,QWHUQHWVHH&KULVWRSKHU6<RR
6LWXDWLRQLQWKH)RRG(FRQRP\"³5RF]QLNL1DXNRZH Network Neutrality and the Economics of Congestion,
6(5L$´7RP;,,=V 94 GEO. L.J. 1847, 1863-1900 (2006).
7. .RSF]HZVND . Infrastruktura techniczna 19. Wilkin, J., (2010). Goods Delivered by Agriculture
jako przyklad dobra publicznego dostarczanego in Light of the Theory of Public Goods. Multi-
przez samorzad. SDPRU]DGORNDOQ\GREURSXEOLF]QH functionality of Agriculture. Research Directions,
(Technical Infrastructure as an Example of a Public Methodology Foundations and Practical Implications,
&RPPRGLW\3URYLGHGE\WKH/RFDO*RYHUQPHQW/RFDO ,5:L53$1:DUV]DZDS
*RYHUQPHQW 3XEOLF &RPPRGLW\ UHG - .OHHU 20. Wilkin, J. 2005. The Theory of Public Choice. An
&('(:8:DUV]DZDSS Introduction to Economic Analysis of Politics and
8. Oates, W. (1972). Fiscal Federalism, New York Functioning of the Public Sphere. Published by
+DUFRXUW %UDFH -RYDQRZLFK DIWHU %XNRZLF] * 6FKRODU:DUV]DZD

ISSN 1691-3078
I. Arhipova Latvia Research Funding and Quality of Research Activities
LATVIA RESEARCH FUNDING AND

QUALITY OF RESEARCH ACTIVITIES
Irina Arhipova1, Dr.sc.ing., professor

Faculty of Information Technologies, Latvia University of Agriculture
Abstract. 7KH HFRQRPLF FULVLV KDV KDG D VLJQL¿FDQW LPSDFW RQ IXQGLQJ LQ UHVHDUFK DQG GHYHORSPHQW 5 ' 7KH
main aspect of R&D reform is a clear balance between research funding and quality of research activities. The paper
presents the analysis how the structure of the Latvia R&D funding system promotes the quality of research activities
in research institutions
7KHDXWKRUFRQFOXGHGWKDWWKH¿QDQFLQJV\VWHPRI/DWYLD5 'ZLWKWKHEDVLF¿QDQFLQJJUDQWVDQGWKHH[WHUQDOJUDQWV
has a number of strengths and weaknesses. Regarding the research quality, the proportions of the basic research
grant amount distributed for the maintenance, remuneration and development tasks of a research institution differ.
In general, the lower is the value of the total research quality criteria, the bigger is the proportion allocated for the
VFLHQWL¿FVWDIIUHPXQHUDWLRQRIWKHWRWDODPRXQWRIWKHEDVLFUHVHDUFKJUDQW7KHFRPSHWLWLYHQHVVJUDQWVRIWKHUHVHDUFK
¿QDQFLQJUHSUHVHQWRIWKHWRWDOUHVHDUFKDPRXQWDQGVRKXJHSURSRUWLRQRIWKHFRPSHWLWLYHQHVVIXQGVLJQL¿FDQWO\
limits the possibilities of research institutions for a long-term planning. The existing funding system causes structural
LPEDODQFHDQGWKH/DWYLD5 'IXQGLQJV\VWHPLVPDLQO\FKDUDFWHUL]HGE\DSHUIRUPDQFHEDVHGV\VWHP
Key words:VFLHQWL¿FTXDOLW\UHVHDUFKIXQGLQJV\VWHPEDVLFUHVHDUFKJUDQW
JEL code: I230
Introduction Input-based mechanisms, which can be a part of

7KH HFRQRPLF FULVLV KDV KDG D VLJQL¿FDQW LPSDFW a formula and focus on inputs to research institutions,
on funding levels in research and development (R&D), such as the number of research personnel, are one of
and now, the main aspect of the R&D reform is a clear the approaches used in the R&D system. Performance-
balance between research funding and quality of research based mechanisms may be based on outputs, such as the
DFWLYLWLHV 7KH (8 &RPPXQLFDWLRQ RQ ³5HJLRQDO 3ROLF\ number of publications, or inputs, such as and the number
FRQWULEXWLQJWRVPDUWJURZWKLQ(XURSH´SXEOLVKHG of PhD students/staff with certain characteristics (young
in 2011, sets out the role for Regional Policy in contributing researchers). Usually the main funding mechanism is
to the implementation of the Europe 2020 strategy. accompanied by a funding formula, or the formulas are
Therefore, the necessary Latvia competitiveness, used to determine the block grant allocated to research
reorientation from labour-consuming to knowledge- institutions (Modernisation of Higher Education in Europe,
EDVHGHFRQRPLFVDVZHOODVQHFHVVLW\WRIXO¿OWKHWDUJHWV 2011).
of the strategy EU 2020 concerning higher education There are strengths and weaknesses of input-
and research (investment in research 3% from GDP, based and output-based funding types. The basic
young inhabitants with higher education predomination research grants secure the research institutions a long-
40%, etc.) will be provided. According to the European term planning and steering of activities, and the basic
8QLRQ¶V VWUDWHJ\ ³(XURSH ´ IRU VPDUW VXVWDLQDEOH grants enable institutions to initiate research with
DQGLQFOXVLYHJURZWKWKH&RPPLVVLRQFDOOHGRQPHPEHU VWURQJ HPSKDVLV RQ WKH ³IURQWLHU UHVHDUFK´ 7KH PDLQ
states to focus funding on relevant outputs rather than SUREOHPLVWRVKRZWKHEDVLFUHVHDUFKJUDQWV¶HI¿FLHQF\
LQSXWV XVLQJ FOHDUO\ GH¿QHG WDUJHWV DQG LQGLFDWRUV and relevance according to the inputs and outputs of
together with international benchmarking. Public funding UHVHDUFK LQVWLWXWLRQV &RPSHWLWLYHQHVV DQG WDUJHWHG
of research institutions, including higher education IXQGV UDLVH HI¿FLHQF\ DQG TXDOLW\ EXW UHVHDUFK IXQGLQJ
institutions, is one of the main sources of income for the is complicated due to bureaucracy and unwieldy
state research institutions in all the EU member states management (Rates of return and funding models in
(Figure 1). Europe, 2007).
Research institutions must be granted public funds in Research hypothesis – to assure the research
VXFK D ZD\ WKDW SURPRWHV HIIHFWLYHQHVV DQG HI¿FLHQF\ quality, the structural balance of the research funding
In general, most countries use a mixture of different system is necessary.
research funding mechanisms. In this sense, the funding The objective of the paper is to analyse how the
tools that have been experimented in some countries are structure of Latvia R&D funding system promotes the
as follows: quality of research activities in research institutions. The
— formula based funding, following discussion focuses on the Latvia R&D funding
— performance funding; mechanisms, through which more than 24% of the
— competitiveness and targeted funds. overall public funding is distributed.
___________________________
1
Corresponding author. Tel.: +371 63005705; fax: +371 6305705.
E-mail address: irina.arhipova@llu.lv.

ISSN 1691-3078
Source: author’s construction based on EUROSTAT data
Fig. 1. R&D expenditure by sector of performance in the EU and other countries in 2011 (% of GDP)
In order to achieve the aim, the following tasks were LW FRQVWLWXWHG RQO\ RI WKH WRWDO UHVHDUFK ¿QDQFLQJ
set to: in 2011. The basic funds allocated through objective
— to analyse the structure of Latvia research funding formulae are regarded as a capital to a research
system; institution for a long-term planning, for its adaptation to
— to analyse the basic research grant for the state changes in the demand, and for the outcome and quality
research institutions; of the basic research.
— to analyse different proportions of the basic research The basic grants enable the institutions to maintain
grant distributed for the maintenance, remuneration buildings, infrastructure etc. through periods of falling
and development tasks depending on the research UHYHQXHV IURP RWKHU VRXUFHV 7KH VL]H RI WKLV JUDQW
quality of a research institution. depends on a formula. The second tier of the research
¿QDQFLQJFRQVLVWVRI
The structure of research funding system — competitiveness research grants, provided by the
/DWYLDQ &RXQFLO RI 6FLHQFH XS WR RI WKH WRWDO
in Latvia
In 2011, approximately 76% of the total research research amount;
funding was constituted by external funding (foreign and — state research programmes, provided by the Ministry
HQWHUSULVH¿QDQFLQJDQGRQO\RIWKHWRWDOUHVHDUFK of Education and Science, are state commissions for
IXQGLQJ FRQVLVWHG RI WKH VWDWH ¿QDQFLQJ 7KH OHYHO RI WKH SHUIRUPDQFH RI VFLHQWL¿F UHVHDUFK LQ D VSHFL¿F
the external grants varies among different research economic, educational, cultural or other sector, which
areas of technical and natural sciences, human and is the state priority, with the purpose to promote the
social sciences. In 2011, approximately 25% of the total development of the particular sector, up to 4% of the
UHVHDUFK IXQGLQJ FDPH IURP SULYDWH IXQGV ¿UPV DQG total research amount;
RUJDQL]DWLRQV)LJXUH — R&D funds from individual ministries, up to 8% of
Latvia has a two-tier system for resource allocation the total research amount;
WR UHVHDUFK 7KH ¿UVW WLHU LV WKH EDVLF JUDQWV IURP WKH — UHVHDUFK FDUULHG RXW WR IXO¿O GHPDQGV RI WKH
Financial Act allocated by the Ministry of Education industry, the government and other public sector
and Science (MoES) to the research institutions. The RUJDQL]DWLRQV XS WR RI WKH WRWDO UHVHDUFK
second tier comprises resource allocation from the amount;
/DWYLDQ&RXQFLORI6FLHQFHVWDWHUHVHDUFKSURJUDPPHV — market-oriented research, provided by allocating the
foundations, R&D funds from individual ministries, the state budget resources to the practically applicable
EU, and private funds. projects, the purpose of which is to promote the
The total amount of the basic grants represents integration of science and manufacturing, the
RI WKH WRWDO VWDWH ¿QDQFLQJ EXW DW WKH VDPH WLPH GHYHORSPHQW RI WHFKQRORJ\RULHQWHG ¿HOGV DQG WKH

ISSN 1691-3078
Source: author’s construction based on Central Statistical Bureau of Latvia data
Fig. 2. R&D expenditure (mil LVL) by sector of performance in Latvia
creation of new jobs using the EU Structural Funds — the maintenance of research institutions
as well participation in the EU research programmes (maintenance of buildings and equipment, payment
(e.g. FP7), up to 51% of the total research of public utility services, work remuneration of
amount. administrative, technical and maintenance staff);
7KHVHFRQGWLHURIWKHUHVHDUFK¿QDQFLQJUHSUHVHQWV — UHPXQHUDWLRQ RI WKH VFLHQWL¿F VWDII LQYROYHG LQ WKH
RIWKHWRWDOUHVHDUFKDPRXQWDVRSSRVHGWR¿UVWWLHU SHUIRUPDQFH RI WKH VFLHQWL¿F UHVHDUFK VSHFL¿HG E\
RI UHVHDUFK ¿QDQFLQJ RU EDVLF JUDQWV ZKLFK UHSUHVHQWV the founder;
RQO\RIWKHWRWDOUHVHDUFKDPRXQW&RQWUDU\WRPRVW — development of the research institutions registered
of the other grants and sources of income of the research in the Register of Research Institutions, according
institutions, the basic grants are allocated to research as to these institutions’ operating strategy for
DSUHGRPLQDQWO\QRQVSHFL¿FDFWLYLW\UHODWHGIXQGV7KH achievement of objectives. The responsible ministry
distribution of the grants among the research institutions must approve the operating strategy of the research
depends on inputs/outputs and is based on historical institutions.
aspects. These grants are important for supporting the basic
research and improvement of its quality. The proportion
Basic research grant for the state RIWKHEDVLFJUDQWVFDQEHWLHGWRFR¿QDQFLQJRIH[WHUQDO
projects (Frolich N., 2006). The basic research grant for
research institutions in Latvia
VFLHQWL¿FLQVWLWXWLRQVLVJUDQWHGRQWKHEDVLVRIWKHVFLHQWL¿F
The amount provided by the basic research grant
for the state research institutions, the state institutions performance indicators: type of projects, publications’
of higher education and the research institutes of the LPSDFW RQ WKH GHYHORSPHQW RI VFLHQWL¿F NQRZOHGJH
state institutions of higher education that are registered cooperation with businesses and other customers,
in the Register of Research Institutions is allocated FRRSHUDWLRQLQKLJKHUHGXFDWLRQDQGVFLHQWL¿FTXDOL¿FDWLRQ
LQ DFFRUGDQFH ZLWK WKH SURFHGXUHV VSHFL¿HG E\ WKH DVZHOOWKHDYHUDJHQXPEHURIVFLHQWL¿FVWDIILQIXOOWLPH
&DELQHW RI 0LQLVWHUV RI WKH 5HSXEOLF RI /DWYLD 7KH equivalents (FTE) in research institutions. In Latvia, a
basic research grant is allocated as a lump sum to the mixed formula base funding and performance-based
state research institutions. The basic grants are not funding model has been introduced for the basic research
HDUPDUNHG IRU VSHFL¿F UHVHDUFK SXUSRVHV $FFRUGLQJ WR grant allocation. The basic funding will be distributed to
WKH /DZ RQ 6FLHQWL¿F $FWLYLW\ WKH EDVLF UHVHDUFK JUDQW research institutions according to the quality of research
RI WKH VWDWH VFLHQWL¿F LQVWLWXWLRQV VKDOO EH FRPSRVHG RI 7KH&DELQHWRI0LQLVWHUVof the Republic of Latvia, 2009).
resources for: The output-oriented, formula-based funding model used

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for allocation of funds for research institutions has three health, environment, agriculture and forest
main components: science, and K=1.3 for social and human
science;
BF = (I + P) x A (1) — PLVWKHUHPXQHUDWLRQRIWKHVFLHQWL¿FVWDII
— A LV WKH FRHI¿FLHQW RI UHVHDUFK TXDOLW\ RI UHVHDUFK
where institutions.
— I LV WKH PDLQWHQDQFH RI VFLHQWL¿F LQVWLWXWLRQV 7KH FRHI¿FLHQW RI UHVHDUFK TXDOLW\ RI UHVHDUFK
DQG GHSHQGV RQ WKH FRHI¿FLHQW K of the research institutions:
¿HOG K=2 for natural, engineering, technological, A = E x 0.12 (2)
Source: author’s construction based on MoES data
Fig. 3. The distribution of the resources for the maintenance of research institutions,
UHPXQHUDWLRQRIWKHVFLHQWL¿FVWDIIDQGGHYHORSPHQWRIUHVHDUFKLQVWLWXWLRQVLQ
GHSHQGLQJRQWKHFRHI¿FLHQWRIUHVHDUFKTXDOLW\

ISSN 1691-3078
where Web of Knowledge, 6&2386 or A&HCI, SSCI or other

E is the total sum of four criteria E1, E2, E3 and E4, leading internationally available research databases,
and: or 0.3 monographs per FTE of research personnel listed
— E1 is the discrete evaluation of the number of LQWKH86/LEUDU\RI&RQJUHVVFDWDORJXHV$WWKHVDPH
research projects per FTE; time, E2 criterion has a minimum value 0, if a research
— E2 is the discrete evaluation of the number of institution had no research publications during the
research publications per FTE; evaluated period.
— E3 is the discrete evaluation of the number of The total sum of the four criteria E can vary from
international and Latvian patents and licenses, WR DQG UHVSHFWLYHO\ WKH FRHI¿FLHQW RI UHVHDUFK
number of market-oriented research projects per quality of research institutions A from 0 to 1.44. Using
FTE; WKH IRUPXOD WR FDOFXODWH WKH PDLQWHQDQFH RI VFLHQWL¿F
— E4 is the discrete evaluation of the number of institutions I DQG UHPXQHUDWLRQ RI WKH VFLHQWL¿F
master degree and PhD theses per FTE and/or the staff P, the total amount of the basic grant BF using
% of young researchers from the total number formula (1) was evaluated each year for research
RI VFLHQWL¿F VWDII PD[ LI RU PRUH RI \RXQJ institutions using the previous year data. It is important
researchers). to note, that the Ministry of Education and Science
The maximum value of all criteria E1, E2, E3 and E4 is planning the basic research grant for each research
is 3 points, and the minimum value is 0 points. The institution in proportion to the annual state budget for
discrete value of Ei (i=1,..,4) criterion depends on the the total basic research grant. In 2012, the basic research
quantity and quality of research activities of research grant consisting of 8 mln LVL accounts only for 20% of
institutions. For example, the second criterion E2³GLVFUHWH the estimated total basic research grant, based on the
evaluation of the number of research publications per research institution’s quantitative and qualitative data for
)7(´ KDV D PD[LPXP YDOXH LI WKH ODVW ¿YH \HDUV D the year 2010.
research institution had 0.5 research publications per The basic funds allocated by the objective
FTE of research personnel published and indexed by formulae enable the institutions to maintain buildings,
Source: author’s construction based on MoES data
Fig. 4. The relationship between the maintenance of research institutions and remuneration of the
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ISSN 1691-3078
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objectives, according to institutions’ operating strategy. the quality criteria of the research institution E is shown in
The Figure 3 shows the distribution of the resources for the the Figure 4.
maintenance of research institutions, remuneration of the It is concluded that those research institutions
VFLHQWL¿FVWDIIDQGGHYHORSPHQWRIUHVHDUFKLQVWLWXWLRQVLQ that have E=12, on average are allocated 33% of the
GHSHQGLQJ RQ WKH FRHI¿FLHQW RI UHVHDUFK TXDOLW\ basic research grant for the maintenance of research
7KHUHVHDUFKLQVWLWXWLRQVZLWKWKHFRHI¿FLHQWRIUHVHDUFK institutions and 37% for the remuneration of the
quality A more than 1 have a possibility to arrange VFLHQWL¿F VWDII :KHUHDV WKH UHVHDUFK LQVWLWXWLRQV ZLWK
¿QDQFLQJQRWRQO\IRUWKHPDLQWHQDQFHDQGUHPXQHUDWLRQ the research quality E=8 or E=7 receive on average
but also for the development of the research institution. 42% of the basics research grant for the maintenance of
,IWKHFRHI¿FLHQWRIUHVHDUFKTXDOLW\A is less than 1, the research institutions and 58% for the remuneration of the
research institutions are not sustainable and have spent VFLHQWL¿FVWDII,QJHQHUDOWKHORZHULVWKHWRWDOUHVHDUFK
the basic research grant mainly for the remuneration of quality criteria E value, the bigger is the proportion of
the research personnel. WKHUHPXQHUDWLRQRIWKHVFLHQWL¿FVWDIIP within the total
amount of the basic research grant. The Table 1 gives
information about the relative distribution within the
Research results and discussion
basic research grant among the maintenance of research
5HJDUGLQJ WKH UHVHDUFK TXDOLW\ FRHI¿FLHQW GLIIHUHQW
LQVWLWXWLRQ WKH UHPXQHUDWLRQ RI WKH VFLHQWL¿F VWDII DQG
proportions of the amount of the basic research grant
other objectives, according to institution’s operating
are distributed for the maintenance, remuneration
strategy in 2012.
DQG IXO¿OPHQW RI GHYHORSPHQW WDVNV RI D UHVHDUFK
In Latvia research institutions, the increasing
institution. For example, in 2012, one-third of the
compliance obligations (due to the EU Structural Funds
fund was distributed for the higher quality research
SURMHFWVWKH/DWYLDQ&RXQFLORI6FLHQFHJUDQWVDQGWKH
LQVWLWXWLRQV ZLWK UHVHDUFK TXDOLW\ FRHI¿FLHQW A=1.44 or
(XURSHDQ IUDPHZRUN SURMHFWV VLJQL¿FDQWO\ UHGXFH WKH
E=12 to facilitate the development tasks of the research
research institutions’ room to manoeuvre and to set
institutions. Whereas, the distribution for the institutions
their own research agendas. It is estimated that 92%
ZLWKWKHUHVHDUFKTXDOLW\FRHI¿FLHQWA=1.32 or E=11 was of research institutions’ research income now comes
XSWRIRUWKHUHVHDUFKTXDOLW\FRHI¿FLHQWA=1.2 or IURP WKH (8 6WUXFWXUDO )XQGV WKH /DWYLDQ &RXQFLO
E ±XSWREXWIRUWKHUHVHDUFKTXDOLW\FRHI¿FLHQW of Science or other contract funding. As the result,
A=1.08 or E=9 – up to 7% of the basic research research subsidies cover only 8% of the total costs.
grant. The research institutions with the research quality Due to the EU Structural Funds projects, one of the
FRHI¿FLHQW A=0.96 or A=0.84 are not granted funds ELJJHVWFKDQJHVLQ/DWYLD5 'IXQGLQJLVWKHVLJQL¿FDQW
for the research institution’s development and are not increase in contract funding. The contract research
sustainable. in research institutions covers about 92% of all the
The analysis of the distribution between the funds research. The contract research includes all the
for the maintenance of research institutions and research activities that funded by third parties, but
UHPXQHUDWLRQ RI WKH VFLHQWL¿F VWDII VKRZV WKDW WKHUH not by the Ministry of Education and Science and the
is a big difference between the research institutions. /DWYLDQ &RXQFLO RI 6FLHQFH 7KH FRPSHWLWLYH IXQGLQJ
,W FDQ EH H[SODLQHG E\ WKH UHVHDUFK ¿HOG WKH QXPEHU raises quality, however these grants target often
RI UHVHDUFK SHUVRQQHO DQG VFLHQWL¿F VWDII DV ZHOO DV E\ areas that are too narrow and do not promote frontier
the maintenance of research buildings. The relationship research (Schmidt E.K., Langberg K., Aagaard K.,
between the maintenance of research institutions and 2006).
Table 1
Relative distribution of the basic research grant among the maintenance of research institution,
WKHUHPXQHUDWLRQRIWKHVFLHQWL¿FVWDIIDQGRWKHUREMHFWLYHV
according to institution operating strategy in 2012
TXDOLW\FULWHULD(
The remuneration of the Other objectives, according

Total research
The maintenance of
the research
VFLHQWL¿FVWDII
institutions
Number of
institutions operating
research institutions I
P strategy
on average in % of the total amount of basic research grant
12 6 33 % 37 % 30%
11 8 36 % 40 % 24%
10 13 37 % 47 % 16%
9 6 39 % 54 % 7%
8 or 7 8 42 % 58 % 0
Source: author’s calculations based on MoES data

ISSN 1691-3078
Now, the Ministry of Education and Science the lower is the value of the total research quality
is discussing a new funding model for R&D in criteria, the bigger is the share of the remuneration
Latvia in response to concerns about the R&D cost RIWKHVFLHQWL¿FVWDIIZLWKLQWKHWRWDODPRXQWRIWKH
effectiveness. The promoters of the reform considered basic research grant.
the previous funding system as the cause of structural 5. Now, the existing funding system is considered as
imbalance, because a part of the research institutions the cause of structural imbalance, because a part of
with low research quality does not have a real the research institutions with low research quality
IXQGLQJ IRU WKH GHYHORSPHQW 7KH ¿QDQFLQJ V\VWHP does not have real funds for the development. The
ZLOO LQÀXHQFH WKH UHVHDUFK VWUDWHJLHV RI WKH UHVHDUFK /DWYLD 5 ' IXQGLQJ V\VWHP LV PDLQO\ FKDUDFWHUL]HG
institutions. The Latvia R&D funding system is mainly by a performance based system.
FKDUDFWHUL]HGE\DSHUIRUPDQFHEDVHGV\VWHP
Bibliography
Conclusions 1. &RPPXQLFDWLRQIURPWKH&RPPLVVLRQ³(XURSH
1. 7KH ¿QDQFLQJ V\VWHP RI /DWYLD 5 ' ZLWK WKH EDVLF A strategy for smart, sustainable and inclusive
¿QDQFLQJ JUDQWV DQG H[WHUQDO JUDQWV KDV D QXPEHU JURZWK´ &20 ¿QDO. Retrieved:
of strengths and weaknesses. Regarding the basic http://eur-lex.europa.eu/LexUriServ/LexUriServ.
grants, there is clarity about the importance of GR"XUL &20),1(13') $FFHVV
WKLV DVSHFW LQ VFRSH RI WKH ¿QDQFLQJ V\VWHP 18 Decembe, 2012.
VLQFH WKH EDVLF ¿QDQFLQJ JUDQWV SURYLGH UHVHDUFK 2. Schmidt E.K., Langberg K., Aagaard K. Funding
institutions security and enable a long-term Systems and Their Effects on Higher Education
planning. In addition, the basic grants are 6\VWHPV1DWLRQDO6WXG\±'HQPDUN2(&'
VLJQL¿FDQW IRU UHVHDUFK LQVWLWXWLRQV SURYLGLQJ D Retrieved: http://www.oecd.org/education/skills-
SRVVLELOLW\ WR EH ÀH[LEOH DQG DGDSWDEOH WR FKDQJLQJ beyond Access: 18 December, 2012
conditions. Accordingly, the factual amount of 3. Frolich, N. Funding Systems and Their Effects
WKH EDVLF ¿QDQFLQJ JUDQWV LV QRW RQ WKH DVVXPHG on Higher Education Systems. National
level as they should be according to the estimated Study – Norway (2006), 2(&'. Retrieved:
value by the Ministry of Education and Science, http://www.oecd.org/norway/38308044.pdf
and represent only 8% of the total research Access: 18 Decembe, 2012.
amount. 4. Modernisation of Higher Education in Europe.
2. 7KH UHVHDUFK ¿QDQFLQJ E\ FRPSHWLWLYHQHVV JUDQWV Funding and Social Dimension (2011), Education,
represents 92% of the total research amount, Audiovisual and Culture Executive Agency,
and so huge proportion of competitiveness fund Retrieved: http://eacea.ec.europa.eu/education/
VLJQL¿FDQWO\ OLPLWV WKH SRVVLELOLWLHV RI UHVHDUFK eurydice/documents/thematic_reports/131EN.pdf.
institutions for a long-term planning. The research Access: 18 Decembe, 2012.
institution is forced to pay more attention to projects 5. Rates of return and funding models in Europe
with available funding rather than to projects (2007), Directorate-General for Education and
where research institution has a high competence Culture of the European Commission&HQWUHIRUWKH
and is more competitive. The research institutions 6WXG\ RI +LJKHU (GXFDWLRQ 0DQDJHPHQW &(*(6
ZLWK D KLJK FRHI¿FLHQW RI UHVHDUFK TXDOLW\ KDYH D Valencia University of Technology, Retrieved: http://
SRVVLELOLW\ WR DUUDQJH ¿QDQFLQJ QRW RQO\ IRU WKH www.go8.edu.au/__documents/university-staff/
maintenance and remuneration, but also for the events/2008/cost-and-compacts/eac2007-rates_of_
development of research institution. Otherwise, return_and_funding_models_in_europe.pdf Access:
the research institutions are not sustainable 18 Decembe, 2012.
and spend the research grants mainly for the 6. %Ņ]HV ¿QDQVŋMXPD SLHãťLUãDQDV NŅUWŝED YDOVWV
remuneration of the research personnel. ]LQŅWQLVNDMLHP LQVWLWźWLHP YDOVWV DXJVWVNROŅP XQ
3. 'HSHQGLQJ RQ WKH UHVHDUFK TXDOLW\ FRHI¿FLHQW YDOVWVDXJVWVNROX]LQŅWQLVNDMLHPLQVWLWźWLHP
different proportions of the amount of the basic 0LQLVWUX NDELQHWD QRWHLNXPL 1U 5ŝJŅ
research grant are distributed for the maintenance, JDGD QRYHPEUŝ SURW 1U &DELQHW
remuneration and development tasks of a research of Ministers of the Republic of Latvia, Retrieved:
institution. http://www.likumi.lv/doc.php?id=201012 Access:
4. The analysis of the fund distribution between 19 January, 2013.
the maintenance of research institutions and 7. =LQŅWQHV EŅ]HV ¿QDQVŋMXPV YDOVWV ]LQŅWQLVNDMLHP
UHPXQHUDWLRQRIWKHVFLHQWL¿FVWDIIVKRZVWKDWWKHUH LQVWLWźWLHPYDOVWVDXJVWVNROŅPXQYDOVWVDXJVWVNROX
is a big difference between research institutions. It ]LQŅWQLVNDMLHP LQVWLWźWLHP JDGŅ 0LQLVWU\ RI
LV H[SODLQHG E\ WKH UHVHDUFK ¿HOG WKH QXPEHU RI Education and Science of Latvia, Retrieved: http://
UHVHDUFK SHUVRQQHO DQG VFLHQWL¿F VWDII DV ZHOO E\ L]PL]PJRYOYXSORDGBILOH=LQDWQH%)BSGI
the maintenance of research buildings. In general, Access: 18 December, 2012.
Acknowledgement
3XEOLFDWLRQRIUHVHDUFKUHVXOWVKDVEHHQPDGHGXHWRWKHIXQGLQJRIWKH(5$)3URMHFWÄ3URPRWLRQRIVFLHQWL¿FDFWLYLWLHV
RI//8´&RQWUDFW1U'3$3,$9,$$

ISSN 1691-3078
I. Shina, M. Uzkalna Theoretical Aspects, Regulation and Experience in the Management of the
Public and Private Partnership in Latvia and the European Union
THEORETICAL ASPECTS, REGULATION AND EXPERIENCE IN THE

MANAGEMENT OF THE PUBLIC AND PRIVATE PARTNERSHIP IN
LATVIA AND THE EUROPEAN UNION
Inga Shina1, Dr.oec., assoc. professor; Madara Uzkalna2, Mg.oec.
Abstract. &XUUHQWO\WKHGHYHORSPHQWRIHQWHUSULVHVWDNHVSODFHLQDFRPSHWLWLYHDQGFRPSOLFDWHGHQWUHSUHQHXUVKLS
environment, which is subject to rapid changes. Public and private partnership (PPP) is an agreement between a state
agency (federal, state, or local) and a private sector. With this agreement, skills and means between public and private
sector are shared, ensuring the availability of services or equipment for public usage.
There is much research carried out concerning PPP in the European Union Member States, yet in Latvia there is little
and contradicting publicly available information concerning PPP. Society is not aware of PPP: normative regulation is
poor, parties involved in PPP lack knowledge and skills in the process of PPP project management. There is limited
study on the theoretical aspects carried out in Latvia market. These factors determine the topicality of the research.
The aim of the research is to analyse the theoretical aspects of PPP and to characterise the experience of PPP in the EU
Member States and Latvia, assessing interviews of PPP experts. In the research, the authors applied content analysis
and interviews. There are 143 literature sources, published between 2010 and 2012, analysed.
The authors conclude that society is poorly informed about PPP projects even though the facilitation of PPP application
is mentioned in the National Plan of Latvia. The biggest obstacles for implementation of PPP are the high proportion of
the shadow economy, poor normative regulation, and the shortage of competent specialists.
Key words:SXEOLFSULYDWHSDUWQHUVKLSVXVWDLQDEOHGHYHORSPHQWSDUWQHUEHQH¿WVDVVHVVPHQWFULWHULDRIWKHUHVXOWV
management.
JEL code: L32
Introduction has increased (Developing Public Private Partnerships…,

Nowadays, companies need to develop and grow 2012). The amount of PPP operations, which have
in this highly competitive and business- challenging UHDFKHGWKH¿QDO¿QDncial stage, totalled 6 billion EUR in
HQYLURQPHQWWKDWLVVXEMHFWWRUDSLGFKDQJHV&RPSDQLHV WKH(XURSHDQPDUNHWLQWKH¿UVWKDOIRI&RQWLQXRXV
strive to meet the interests of the owners, the market PPP planning and evaluation is still being carried out, and
interests, and society, in general. Entrepreneurs may LWLVUHÀHFWHGLQWKH(XURSHDQ&RPPLVVLRQUHSRUWVRQWKH
have a necessity to create a partnership in their business. ,QWHUQHW (XURSHDQ &RPPLVVLRQ PDQXIDFWXULQJ
Public and private partnership (PPP) is an agreement and construction and automotive industries (European
between the government agency (federal, state, or &RPPLVVLRQ
domestic) and the private sector. With this agreement, Many studies on PPP have been conducted in the
the skills and resources between the sectors (public EU and throughout the world, whereas there is limited
and private) are shared providing services or facilities information about PPP projects in Latvia. Society is not
DYDLODEOH IRU WKH SXEOLF XVH«´ 7KH 1DWLRQDO &RXQFLO IRU informed about PPP, the regulation is weak; parties
Public Private Partnerships, 2012). involved in PPP projects lack knowledge and skills in the
Based on the global interest and frequency of processes of PPP project management.
the PPP model usage in the European Union (EU) and No similar study has been implemented in Latvia
other countries, there is no doubt about usefulness of market, and this is why we are unable to compare the
PPP. In some EU countries, the work has been done results. These factors determine the topicality of the work.
in such a way that other countries could learn about The aim of the research is to analyse the management
PPP. Representatives of these countries share their processes of PPP in Latvia, evaluating expert references,
experience, talk about the challenges they have faced, DQG WR ¿QG WKH DQVZHU WR WKH UHVHDUFK TXHVWLRQ ± KRZ
so that others could plan and implement PPP in their process management is affecting PPP projects.
countries preventing potential failures and proceed To achieve this goal, a number of challenges have
with successful implementation of PPP projects. The been set and methods have been applied:
JOREDO¿QDQFLDOFULVLVKLWWKHZRUOGLQDQGDIIHFWHG 1) to explore the theoretical aspects of PPP management
implementation of PPP projects. In many countries, PPP and perform analysis of literature and normative
SURMHFWVZHUHFDQFHOOHG*UHHQ&-QHYHUWKHOHVV documentation for the conception of the situation;
there were countries which continued and are continuing 2) to describe PPP experience in the EU countries
the projects that had been launched, thus improving using constructive and experience - based content
their countries’ development and implementing projects analysis;
important to society. As country leaders are indicating, 3) to analyse the PPP management processes in
since the global economic crisis the demand for the PPP Latvia and to clarify experts’ opinion about PPP
___________________________
1
Tel.: +371 29224148, E-mail address: inga.shina@gmail.com
2
7HO(PDLODGGUHVVPDGDUDX]NDOQD#LQER[OY

ISSN 1691-3078
development possibilities in Latvia applying interview of the economic crisis. It is a means by which European
study methods. In the interview, seven experts social partners or employees are trying to help solve
were involved who had been closely associated with problems and to reduce the impact of the crisis, which
the PPP projects or were participating therein (The is the priority of the Europe 2020 strategy (European
&HQWUDO )LQDQFH DQG &RQWUDFWLQJ $JHQF\ Ministry &RPPLVVLRQ1RWL¿FDWLRQ:KHQFUHDWLQJDUROHLW
of Finance of the Republic of Latvia; Joint-stock is essential to know the processes of PPP management.
companyÄ&$7$´/WGÄ:HVHPDQQ´HWF The processes of PPP management are complex,
The study is based on the laws and regulations of the and several authors’ theoretical works, for example
Republic of Latvia, statistical data, Latvian and foreign Geddes R.R. &KULVWHQVHQ 7 <RQJ . +
VFLHQWL¿F ZRUNV SXEOLFDWLRQV LQ VFLHQWL¿F FRPSLODWLRQV FRQ¿UPHGWKDW
and periodicals, online materials available as well as
unpublished business and conference materials. For the Research results and discussion
study, 143 sources were referred to in total. The data 7KH GLVFXVVHG VRXUFHV SURYLGH VHYHUDO GH¿QLWLRQV RI
during the period 2010 - 2012 was used in the study. WKHPDQDJHPHQWRI333SURFHVVWKDWJHQHUDOO\HPSKDVL]H
the importance of process management per se, diverse
Public and private partnership procedure, and all partners’ responsibilities for the process
The 21st century will hold far-reaching changes in management (Dewulf G., 2012). The management
socioeconomics. The government is introducing reforms of a process involves achieving of the result, control
to improve the economic situation thus ensuring the mechanisms, and each partner’s personal responsibility
sustainability of the national economy development. IRUWKHDFKLHYLQJRIWKHUHVXOW7KHUHDUHDOVRGH¿QLWLRQV
State resources for the implementation of major public that do not repeat in other sources. The authors give their
EHQH¿W SURMHFWV DUH LQVXI¿FLHQW WKXV WKH QHFHVVLW\ IRU GH¿QLWLRQRIWKH333SURFHVVPDQDJHPHQWPDQDJHPHQW
additional funding has increased. This is one of the of PPP process is based on the cooperation between the
main reasons why the government is turning to private public and private sectors, which provides an effective
sector partners to develop the social dialogue. A long- result by carrying out a number of related events or
term cooperation is being built between the public and activities with the beginning and end. It is a management
private sectors that implement PPP projects. Among tool where the knowledge, skills, tools, techniques, and
European countries, the importance of PPP projects is V\VWHPVRISDUWLFLSDQWDUHXVHGLQWKHSURFHVVWRGH¿QH
increasing. To understand the situation and its process, the measures, control mechanisms, and processes with
it is essential to be aware of the legislative, institutional, the aim to meet the requirements of the partners and
and management aspects that characterise PPP projects. the society.
Theoretical aspects are studied through the content The projects - prior to implementation and upon
analysis. The authors analysed 22 literature sources that completion thereof - are being evaluated basing
were published between 2010 and 2012. The authors on different criteria. The authors of the study have
KDYHJDWKHUHGWKHVLPLODULWLHVRI333DQGWKHGH¿QLWLRQRI VXPPDUL]HG WKH PRVW FRPPRQO\ XVHG HYDOXDWLRQ
the PPP process and partner role in a result of the study, criteria of the results of management of PPP
KDYH HVWDEOLVKHG 333 SDUWQHU EHQH¿WV DQG VXPPDU\ RI processes (Robertson S., 2010; O’Donovan D., 2010;
evaluation criteria of process management results. Longa R. D., 2011; Barrera F. 2009; Robinson J.W.,
7KH H[DPLQHG 333 GH¿QLWLRQV VKRZ WKDW WKHUH LV &UX] & 2 ZKLFK ZRXOG VXJJHVW WKDW WKH
QR VLQJOH GH¿QLWLRQ IRU 333 FRPSULVLQJ LWV ZLGH UDQJH following aspects should be taken into account when
of economic activities. The authors suggest using T. HYDOXDWLQJ 333 SURFHVVHV HI¿FLHQF\ LQYHVWPHQW RI WKH
&HOOXFFL¶VGH¿QLWLRQWKDWWKHSULYDWHDQGSXEOLFSDUWQHUVKLS partners, cooperation period, the result, compliance with
is an agreement between the government agency national, regional and local development objectives,
(federal, state, or local) and the private sector. With this partners’ experience, control mechanisms, and value for
agreement, the skills and resources between the sectors money.
(public and private) are shared, providing services or The authors suggest assessing the results of the
facilities available for the public use. Each party agrees management process of PPP projects according to the
to distribution of the additional resources when delivering IROORZLQJ FULWHULD HI¿FLHQF\ FROODERUDWLRQ WLPH FRQWURO
services or equipment. mechanisms, and the results. Experts recommend
In PPP processes, the partners have several roles evaluating the achieved PPP project results and informing
depending on the project: buyer or service provider, the society and private partners about it. To select
regulatory role of entrepreneurship (Grossman S.A., these criteria, analysis of the literature and normative
2008), social or institutional role. While successfully documentation was conducted including works of foreign
entering into the roles and cooperating between the VFKRODUVSXEOLFDWLRQVLQFROOHFWLRQVRIVFLHQWL¿FDUWLFOHVDQG
PPP projects, the partners are creating a product or periodicals, and materials available online. The evaluation
service that meets the needs of society (Organisation criteria of the results of PPP process’ management were
for Economic…, 2012). The proper choice of the role and selected from the sources of the criteria depending on
good management of the process provide the opportunity WKHSUHVHQWHGIUHTXHQF\VLJQL¿FDQFHDQGPHDVXUDELOLW\
RI DFKLHYLQJ VLJQL¿FDQW UHVXOWV WKDW DUH EHQH¿FLDO WR thereof.
both parties (Robinson H., 2010). In such a way, the The authors included the importance of the criteria in
available resources are being combined thus providing the expert interviews, to check the theoretical knowledge
higher returns together rather than each party working in the practice of Latvia. The expert interviews indicate
LQGLYLGXDOO\6XFKFRRSHUDWLRQLVDQHIIHFWLYHWRROWR¿JKW that the biggest obstacles for implementation of PPP are
against the disadvantaged economic and social impact high proportion of shadow economy, poor normative

ISSN 1691-3078
UHJXODWLRQ DQG WKH VKRUWDJH RI VXI¿FLHQWO\ TXDOL¿HG indirect administration; the board of a company; legal
specialists. entity of private rights.
Until November 2012, in Latvia there have been
1. The experience of the EU and other 59 projects implemented (Ministry of Finance…, 2012),
countries in implementation of public and DUH LQ WKH SURFHVV 7KH &HQWUDO )LQDQFLDO DQG
private partnership &RQWUDFW $JHQF\ DQG 333 SURMHFWV DUH
The majority of the EU Member States are applying still planned (Ministry of Finance…, 2012). In Latvia,
negotiation procedures in the implementation of PPP partnership between the private and public sector has
SURMHFWV DV UHTXLUHG E\ WKH 'LUHFWLYH (& enabled the implementation of a number of important
'LUHFWLYH(&RIWKH(XURSHDQ3DUOLDPHQW projects, e.g. road reconstruction, reconstruction of
DQG RI WKH &RXQFLO RI 0DUFK 7KH SURFHGXUHV heat supply system, construction and management
coordinate the procedure of rights conferment for state of four pre-school educational institutions, housing
contract conclusion for construction works, supply construction, renovation and management of art school,
and service, in addition to traditional procurement introduction of photo camera, the Southern Bridge
procedures - for open and restricted competition. There FRQVWUXFWLRQ DQG //& /XUVRIW VHUYLFHV 7KHVH SURMHFWV
are many examples of successful implementation of SRVVLEO\ZRXOGQRWKDYHEHHQUHDOL]HGDWDOORUIXQGLQJ
PPP projects applying the negotiation procedure. The thereof would have been a long time waiting.
following major PPP projects exceed 500 million euro. 7KH&HQWUDO)LQDQFHDQG&RQWUDFWLQJ$JHQF\WRJHWKHU
— High-speed rail in France (Mohamed A.M.I., with the Ministry of Finance indicates that one contract
2011) – one of the largest rail projects in Europe RXWRIWKUHHSURMHFWVLVUHDOL]HGWKHFRQVWUXFWLRQRISUH
has been developed within the project. Project school educational institution in Marupe, Kekava, and
costs range from 1.2 to 3.4 billion euro. Within the Tukums. The RE (The Register of Enterprises) indicates
PPP project, the railway was extended, access was that the contract on the supply of catering services has
improved, and travel time between Paris and Rennes been implemented after the adoption of the law.
was reduced for 37 minutes and between Paris and The PPP development policy in Latvia was transferred
1DQWHV±IRUDERXWPLQXWHV&RQFHVVLRQFRQWUDFWLV to the Ministry of Economics and the Ministry of Finance.
Since 2009, with the adoption of the PPP Law, the Ministry
concluded among the partners.
RI)LQDQFHDQGLWVVXERUGLQDWHERG\7KH&HQWUDO)LQDQFH
— Road tax project in France (Jacob B., 2010) - this
DQG &RQWUDFWLQJ $JHQF\ KDYH EHFRPH WKH UHVSRQVLEOH
project is a part of Ecotaxe project based on the taxes
authority for the PPP projects. Since the update of the
for cargo vehicles. All cars heavier than 3.5 tons will
PPP, an ambitious work on establishment of appropriate
have to pay tax for use of the national road, starting
OHJLVODWLRQ KDV EHHQ ODXQFKHG LQ /DWYLD &XUUHQWO\
from time when project will be put into operation – in
WKH OHJDO IUDPHZRUN IRU 333 GH¿QHV 3XEOLF DQG 3ULYDWH
2013. The toll for road use will be collected by GPS
Partnership Law adopted in June 2009 (Public and Private
satellite system 170 GPS.
Partnership Law, 2009). The work on the development
— Bordeaux high-speed rail in France (Morrison R.,
of the law has already been launched in 2004, and it
2012) – it is the largest European PPP project. Its costs
was carried out in several stages, reviewed in various
are 7.8 billion euros, and the concession agreement
HGLWRULDO RI¿FHV WKHUHIRUH WKH GHYHORSPHQW RI WKH ODZ
has been signed between both the partners for
was prolonged.
50 years. In total, 340 km and 17 connecting lines
The issues related to the PPP in Latvia are governed
were built within 4-year period.
by the PPP law and other normative documents: Public
,QSURMHFWVUHDFKHGWKHLU¿QDOVWDJHZLWKD
Procurement Law (Public Procurement Law, 2006), State
total value of nearly 18 billion euro in Europe.
Administration Structure Law (State Administration
Both, academic and professional studies are united by
6WUXFWXUH/DZ³2Q6WDWHDQG/RFDO*RYHUQPHQW
WKHREVWDFOHWKDWFULWLFDOIDFWRUVZKLFKVLJQL¿FDQWO\DIIHFW
6KDUHV DQG &DSLWDO &RPSDQLHV´ 2Q 6WDWH DQG /RFDO
or may affect the functioning of the social partnership are
*RYHUQPHQW« DQG WKH &RQFHVVLRQV /DZ
LGHQWL¿HGGXULQJWKHVWXGLHV0DLQO\IRUWKHHQWUHSUHQHXUV
&RQFHVVLRQ/DZ
and civil society, this is a commonplace, which is also
In 2009, amendments to the PPP Law were made,
FDOOHG³VPDUWSKLODQWKURS\´
DQG D QHZ FRQFHSW RI ³FRPSHWLWLYH GLDORJXH´ ZDV
introduced. It differs from the traditional open and
2. Normative regulation of public and private FORVHG WHQGHU SURFHGXUHV HQVXULQJ QHFHVVDU\ ÀH[LELOLW\
partnership in Latvia for the state and private partnerships. According to the
In Latvia, the law on PPP (Public and Private tender procedures, the public partner has to decide what
Partnership Law, 2009) states that partners can be: a infrastructure object to build or what kind of services to
public partner and a private partner. A public partner can provide, and the private partner only has to implement
be a state as a legal entity of initial public rights or legal intention of the public sector’s partner.
entity of secondary public rights, for example, a capital
company, a municipality. A private partner is an applicant
or single-purpose company, or joint company that has Conclusions, proposals,
entered into the public and private partnership contract. recommendations
The Ministry of Finance has determined that, on In Latvia, there is not a clear stand for the PPP; the
behalf of the public partner, the representative of the law of the PPP is not being applied. Having evaluated
public partner can do the necessary actions in the PPP PPP project models, the authors conclude that concession
project. A representative of the public partner (Ministry agreements are a form that is most frequently
of Finance…, 2012) can be: direct management body; implemented in Latvia. The second most used PPP model

ISSN 1691-3078
is establishing of a joint venture. A consequent lack 2. &DUWOLGJH ' 1HZ $VSHFWV RI 4XDQWLW\
of national policy implementation according to PPP and Surveying Practice. Routledge. p.288.
a high proportion of shadow economy can explain the 3. &HOOXFFL$7$*XLGHWR,QQRYDWLYH3XEOLF
UHDVRQIRUVORZLPSOHPHQWDWLRQRI333SURMHFWV2I¿FLDO 3ULYDWH 3DUWQHUVKLSV 8WLOL]LQJ WKH 5HVRXUFHV RI WKH
institutions of Latvia government cannot provide a single Private Sector for the Public Good. UK: Government
answer on the number of projects implemented after Institutes. p. 442.
adoption of the PPP Law. Basing on the experts’ replies, 4. &KULVWHQVHQ T., Lægreid, P. (2011). The Ashgate
the biggest obstacles observed in PPP projects are the 5HVHDUFK &RPSDQLRQ WR 1HZ 3XEOLF 0DQDJHPHQW
high proportion of shadow economy, weak regulations, USA: Ashgate Publishing Limited, p. 276.
ODFNRISUR¿FLHQF\LQOHJLVODWLRQODFNRITXDOL¿HGKXPDQ 5. &RRPEV : 7 +ROODGD\ 6 - 0DQDJLQJ
UHVRXUFHVDQGLQVXI¿FLHQWNQRZOHGJHLQWKH¿HOGRI333 &RUSRUDWH 6RFLDO 5HVSRQVLELOLW\ $ &RPPXQLFDWLRQ
legislation. The authors conclude that the PPP is being $SSURDFK´:LOH\%ODFNZHOOS
LGHQWL¿HG DV D SRWHQWLDO ZD\ WR DFKLHYH VXVWDLQDEOH 6. &XWWDUHH 9 0DQGUL 3HUURWW & 3XEOLF
development and a positive impact on the national 3ULYDWH 3DUWQHUVKLSV LQ (XURSH DQG &HQWUDO $VLD
economy. 'HVLJQLQJ &ULVLV5HVLOLHQW 6WUDWHJLHV DQG %DQNDEOH
The government has to improve the legislation and Projects. Washington: The World Bank. p.124.
KDV WR GH¿QH LQ WKH 5HJXODWLRQV LVVXHG E\ WKH &DELQHW 7. 'HYHORSLQJ&RXQWULHV:DVKLQJWRQ7KH,QWHUQDWLRQDO
which state or local government bodies as well as their Bank for Reconstruction and Development. p.192.
FDSLWDO FRPSDQLHV PD\ LPSOHPHQW 333 7KH &DELQHW 8. Dewulf, G., Blanken, A., Spiering, M. B. (2012).
WKH 0LQLVWU\ RI )LQDQFH DQG WKH &HQWUDO )LQDQFH DQG Strategic Issues in Public-Private Partnerships.
&RQWUDFWLQJ $JHQF\ VKRXOG KROG D PXWXDO GLVFXVVLRQ Wiley-Blackwell. p. 186.
DQG JDWKHU LQIRUPDWLRQ RQ DOO RI 333 SURMHFWV IUR]HQ 9. 'LUHFWLYH (& RI WKH (XURSHDQ 3DUOLDPHQW
and, in cooperation with the project submitters, have to DQG RI WKH &RXQFLO RI 0DUFK RQ WKH
assess the usefulness of the project implementation in &RRUGLQDWLRQ RI 3URFHGXUHV IRU WKH $ZDUG RI 3XEOLF
the future. Public partner, performing purchase for the :RUNV&RQWUDFWV3XEOLF6XSSO\&RQWUDFWVDQG3XEOLF
PPP project needs, has to adapt the competitive dialogue 6HUYLFH&RQWUDFWV
procedure before each PPP project in order to improve 10. Education: New Actors and Modes of Governance
the PPP process. The municipalities of Marupe, Kekava, LQ D *OREDOL]LQJ :RUOG 8. (GZDUG (OJDU 3XE
and Tukums, which have successfully implemented p. 299.
PPP projects, should inform society and any potential 11. (XURSHDQ &RPPLVVLRQ ,QWHULP $VVHVVPHQW
stakeholders about the process and management of the of the Future Internet Public-Private Partnership.
PPP project. /X[HPERXUJ 3XEOLFDWLRQV 2I¿FH RI WKH (XURSHDQ
Union. p. 52.
12. (XURSHDQ &RPPLVVLRQ 1HZ SXEOLFSULYDWH
Bibliography partnerships for research in the manufacturing,
Journals article with author(s) construction and automotive sectors European PPP
1. Benn, S. (2010). Social Partnerships for research supports economic recovery Progress
Governance and Learning towards Sustainability. 5HSRUW-XO\/X[HPERXUJ3XEOLFDWLRQV2I¿FH
ARIES Working Paper, 01. Retrieved: of the European Union. p. 16.
http://aries.mq.edu.au/publications/aries/Working_ 13. )DUTXKDUVRQ ( 7RUUHV GH 0lVWOH & <HVFRPEH
Papers/Social_Partnerships_for_Gov_&_Learning. E. R., Encinas, J. (2011). How to Engage with the
pdf. Private Sector in Public-Private Partnerships in
2. &RPPLVVLRQ RI WKH 6WUDWHJLF $QDO\VLV Emergins Markets. Washington: The International
Education for the Knowledge Society Development Bank for Reconstruction and Development.
LQ/DWYLDVFLHQWL¿FUHVHDUFKDUWLFOHV1R p. 178.
Riga: Zinatne. p. 41. 14. Geddes, R.R. (2011). The Road to Renewal: Private
3. &RQFHVVLRQV XQGHU &RPPXQLW\ /DZ &RPPLVVLRQ Investment in the U.S. Transportation Infrastructure.
interpretative communication on concession under AEI Press. p. 120.
&RPPXQLW\ ODZ 2I¿FLDO -RXUQDO RI WKH 15. *UHHQ&-3HQWHFRVW(-:H\PDQ-RQHV7*
(XURSHDQ&RPPXQLWLHV& 7KH )LQDQFLDO &ULVLV DQG WKH 5HJXODWLRQ RI
4. &UX] &2 0DUTXHV 5& Ä5HYLVLWLQJ Finance. UK: Edward Elgar Pub. p. 296.
the Portuguese Experience with Public Private 16. Grossman, S.A. (2008). The Role of Entrepreneurship
3DUWQHUVKLSV´ $FDGHPLF -RXUQDOV $IULFDQ -RXUQDO RI LQ3XEOLFSULYDWH3DUWQHUVKLSV7KH&DVHRI%XVLQHVV
Business Management No.5, pp.4023-4032. Improvement Districts. Newark:NJ. p. 32.
5. Developing Public Private Partnerships in Local 17. Longa, R. D. (2011). Urban Models and Public-
Infrastructure and Development Projects (2012). Private Partnership London: Springer-Verlag Berlin
³$ 333 0DQXDO IRU /*8V 9ROXPH 8QGHUVWDQGLQJ Heidelberg. p. 270.
333 &RQFHSWV DQG )UDPHZRUN´ 4XH]RQ &LW\ 333 18. Marin, P. (2009). Public-Private Partnerships for
&HQWHUS Urban Water Utilities; A Review of Experiences in
'HYHORSLQJ&RXQWULHV:DVKington: The International
Books Bank for Reconstruction and Development. p.192.
1. Barrera, F., Guaqueta, J., Patrinos, H.A. (2009). The 19. 0'* *DS 7DVN )RUFH 5HSRUW ³0LOOHQQLXP
Role and Impact of Public- Private Partnerships in Development Goal 8: The Global Partnership for
(GXFDWLRQ´ :DVKLQJWRQ :RUOG %DQN 3XEOLFDWLRQV 'HYHORSPHQW 7LPH WR 'HOLYHU´ 1HZ <RUN 8QLWHG
p. 144. Nations. p. 80.

ISSN 1691-3078
20. 0RKDPHG $0, *OREDOL]DWLRQ DQG 1HZ Internet sources:

International Public Works Agreements in Developing 1. (UPVRQH ' /WG Ä''9´ /WG Ä&RPSHULR´
&RXQWULHV $Q DQDO\WLFDO 3HUVSHFWLYH $VKJDWH Employer’s guide. Retrieved: http://www.lm.gov.lv/
Publishing Limited. p. 295. upload/darba_devejiem/darb_dev_rok.pdf
21. 0RUULVRQ 5 Ä 7KH 3ULQFLSOHV RI 3URMHFW 2. (XURSHDQ 333 ([SHUWLVH &HQWUH 5HYLHZ RI
)LQDQFH´*RZHU3XE&RS the European PPP Market 2011 Retrieved: http://
22. National Regulatory Law (2003). Law of the Republic www.eib.org/epec/resources/epec_market_
of Latvia. update_2011_en_web.pdf
23. O’Donovan D. (2010). Public-Private Partnerships for 3. Jacob, B., Quoy, O.(2011). France national heavy good
Innovation and Export Development: The Irish Model vehicle eco tax. Retrieved: http://hvttconference.
RI 'HYHORSPHQW &RPHUFLR ,QW 8QLWHG 1DWLRQV com/hvtt11/proceedings/papers/5a2/5a2%20Paper.
Publications. p. 96. pdf
24. 2UJDQLVDWLRQ IRU (FRQRPLF &RRSHUDWLRQ DQG 4. 0LQLVWU\RI)LQDQFHRIWKH5HSXEOLFRI/DWYLDÄ333´
'HYHORSPHQW ³'HGLFDWHG 3XEOLF3ULYDWH Ä333 FRQWUDFWV´ PPP contracts, information about
Partnership Units: a Survey of Institutional planned public-private partnership (PPP) projects.
DQG *RYHUQDQFH 6WUXFWXUHV´ 2(&' 3XEOLVKLQJ Retrieved: http://www.fm.gov.lv/
p. 119. 5. Retrieved: http://www.likumi.lv/doc.php?id=63545
25. 2UJDQLVDWLRQ IRU (FRQRPLF &RRSHUDWLRQ DQG 6. Public Procurement Law (2006). Law of the Republic
Development. (2012). Urban Policy Reviews, Korea of Latvia. Retrieved: http://www.likumi.lv/doc.
2UJDQL]DWLRQIRU(FRQRPLFS php?id=133536
26. Robinson, J.W., Green, G.P. (2010). Introduction 7. Public and Private Partnership Law (2009). Law
WR &RPPXQLW\ 'HYHORSPHQW 7KHRU\ 3UDFWLFH DQG of the Republic of Latvia. Retrieved: http://www.
Service-Learning. Sage Publications. p. 328. likumi.lv/
27. 5RELQVRQ + &DUULOOR 3 $QXPED &- 3DWHO 0 8. State Administration Structure (2003). Law of the
(2010). Governance and Knowledge Management Republic of Latvia. Retrieved: http://www.likumi.lv/
for Public-Private Partnerships. Wiley-Blackwell. doc.php?id=63545
p. 264. 9. 7KH FHQWUDO ¿QDQFLDO DQG FRQWUDFW DJHQF\
28. Robertson, S., Mundy, K., Verger, A., Menashy, F. 2011). Financial and economic calculation
(2012). Public Private Partnerships in Education: preparation. Retrieved: KWWSZZZFÀDJRYOY
1HZ$FWRUVDQG0RGHVRI*RYHUQDQFHLQD*OREDOL]LQJ lv/publiska-un-privata-partneriba/finansu-un-
World. UK: Edward Elgar Pub. p. 299. ekonomisko-aprekinu-sagatavosanas-lemumi
29. Urio, P. (2010). Public-Private Partnerships: Success 10. 7KH 1DWLRQDO &RXQFLO IRU 3XEOLF 3ULYDWH 3DUWQHUVKLSV
and Failure Factors for In-Transition. University (2012). How PPPs works. Retrieved: http://www.
Press of America. p. 480. QFSSSRUJKRZSDUWLQGH[VKWPOGH¿QH
30. Yong, H. K. (2010).Public-Private Partnerships 11. The State and Local Government capital shares
Policy and Practice: A Reference Guide. London: and capital (2002). Law of the Republic of Latvia.
&RPPRQZHDOWK6HFUHWDULDWS Retrieved: http://www.likumi.lv/doc.php?id=67363

ISSN 1691-3078
H. Pondel European Union Funds in The Pro-Environmental Development of Polish Rural Areas
EUROPEAN UNION FUNDS IN THE PRO-ENVIRONMENTAL

DEVELOPMENT OF POLISH RURAL AREAS
Hanna Pondel 1, 'URHF3R]QDQ8QLYHUVLW\RI(FRQRPLFV
Abstract. This study presents selected possibilities of supplementing pro-environmental actions in Polish rural areas
with the European Union funds, the scale of funds Poland has received within selected examples of the EU programmes,
and the opinion of rural commune local governments on the subject of their involvement in the acquisition and use
RIWKH(8IXQGVRQSURHQYLURQPHQWDOJRDOV,QWKHSDVWGHFDGH3RODQGUHFHLYHGVLJQL¿FDQW¿QDQFLDOVXSSRUWIURP
the European Union and the funds allocated towards the development of rural areas arouse the interest of potential
EHQH¿FLDULHV7KHDOORFDWLRQRIIXQGVWRZDUGVSURHQYLURQPHQWDOGHYHORSPHQWRIVXFKDUHDVGHSHQGVODUJHO\RQORFDO
governments which are the most capable of assessing the needs of the local community in this respect. The EU funds
in rural areas were and still are mostly appropriated to improvements in water and sewage infrastructure which is an
evidence of still existing requirements in this area; however, there is an increasing amount of projects associated with
carrying out contemporary rural area functions (especially in the delivery of free goods).
Key words: EU funds, pro-environmental development, rural areas.
Introduction examples of the EU programmes and the opinion of

The policy of the European Union and its member rural commune local governments on the subject of their
states, including Poland prescribes numerous tools which involvement in the process of acquisition and allocation
are essential for carrying out the concept of sustainable of the EU funds on pro-environmental goals.
GHYHORSPHQWRIUXUDODUHDV7KH(8&RPPRQ$JULFXOWXUDO
Policy evolves in the direction of multifunctional Natural environment of rural areas in the
rural development with a consistent and sustainable
development of agriculture and rural economy,
EU programmes
Environmental protection in rural areas is an
social progress, and positive impact on the natural
H[FHSWLRQDOO\VLJQL¿FDQWHOHPHQWRIWKH(8SURJUDPPHV
environment (Kolyska J., 2009).
The quality of the natural environment is one of the carried out in the pre-accession period – an example
PRVW LPSRUWDQW DQG DW WKH VDPH WLPH PRVW GLI¿FXOW of which is SAPARD (Special Accession Programme for
challenges for rural commune local governments. Despite Agriculture and Rural Development) - as well as during
WKHIDFWWKDWHQYLURQPHQWDOLVVXHVDUH¿UVWLVVXHVRQWKH Poland’s membership in the European Union. In the
list of communes tasks included in the Commune Local programming period of 2004-2006, Poland experienced
Government Act (Act, 2001), the degree of introducing the completion of investments carried out as part
investments aimed at sustaining or improving the of the SAPARD programme and the initiation of new
condition of the environment is mostly determined by programmes supporting pro-environmental activities
WKH DYDLODEOH ¿QDQFLDO UHVRXUFHV 7KH (XURSHDQ 8QLRQ in rural areas such as 6HFWRUDO 2SHUDWLRQDO
VXEVLGLHV ZKRVH EHQH¿FLDULHV DUH FRPPXQHV DV ZHOO Programme Restructuring and Modernisation of the
as other entities operating in such areas like farmers, Food Sector and Rural Development (SOP RMFRD),
HQWUHSUHQHXUV RWKHU LQKDELWDQWV HWF DUH D VLJQL¿FDQW Rural Development Plan for the years 2004-2006
source of support for rural communes. The diversity (RDP), or ,QWHJUDWHG 5HJLRQDO 2SHUDWLRQDO 3URJUDPPH
of programmes, activities and possible goals makes it (IROP). The RDP allows improvement of environmental
possible to involve all of the above mentioned groups in qualities of rural areas mainly through actions carried
the process of shaping and protecting the environment. out in agriculture, e.g. development of environment-
However, the involvement of the communes local friendly farming, maintaining the landscape qualities of
governments is an essential condition which shall be rural areas and ensuring sustainability of agricultural
met to improve the competitiveness of rural areas and land use, promotion of agricultural production
the quality of life of their inhabitants. This important systems conducted in accordance with environment
role of local governments is primarily a result of their protection requirements, forestation of farmlands with
VSHFL¿F GHFLVLRQ PDNLQJ DXWKRULVDWLRQ DQG DFFHVV WR low agricultural utility, adjustment of farms to the
YDULRXV¿QDQFLDODGPLQLVWUDWLYHSODQQLQJDQGHGXFDWLRQ EU standards in the area of environment protection,
instruments which allow coordinated operations initiated public health, and health and well-being of animals
by different entities. (RDP, 2004). The SOP allows carrying out projects in
The aim of this study is the presentation of selected the area of countryside restoration, preservation and
possibilities of supporting pro-environmental activities protection of cultural heritage, protection of natural
in Polish rural areas with the European Union funds, the resources in rural areas, and development of agriculture
scale of funds allocated to Poland as part of selected GLYHUVL¿FDWLRQ RI LWV RSHUDWLRQ LQYHVWPHQWV LQFUHDVLQJ
___________________________
&RUUHVSRQGLQJDXWKRUTel.: +48 61 854 30 22. E-mail address: hanna.pondel@ue.poznan.pl
1

ISSN 1691-3078
food safety, investments towards environment Financial support of actions in favour of

protection, improvement of the conditions and well-
environment protection in rural areas
being of animals, and increasing hygiene standards
As part of the SAPARD Programme there were
of farming production (SOP RMFRD, 2004). In the
22 775 projects carried out with a total amount
FDVH RI ,523 WZR VSHFL¿F DFWLRQV ZHUH VLJQL¿FDQW WR
of reimbursement of approx. PLN 4.5 billion
the Polish countryside: 1) Environment protection
(including PLN 3.4 billion from the EU)2 by the end
infrastructure ± ZKRVH XOWLPDWH EHQH¿FLDULHV FRXOG EH
of 2006. It allowed carrying out projects in the following
local governments, among others, and the subsidies
areas:
could be allocated towards projects related with
— Disposal and treatment of municipal sewage – the
water and sewage treatment requirements, waste
EU co-funding in the amount of PLN 723.5 million -
PDQDJHPHQWDLUTXDOLW\LPSURYHPHQWÀRRGSUHYHQWLRQ
6 198 km of water conduits, 189 collective sewage
environment protection management support, and
treatment plants, and 2 403 farm sewage treatment
renewable energy resource use; 2) Rural areas –
plants were built within this action;Municipal waste
the main goal of which was preventing the social and
management ± SURMHFWV FR¿QDQFHG E\ WKH (8 LQ
economic marginalisation of rural areas and small
the amount of PLN 13.89 million enabled creating,
towns of up to 20 000 inhabitants, through, e.g.
among other things, 23 solid waste disposal sites;
projects in the area of disposal and treatment of sewage,
Energy supply using renewable energy sources –
water supply and consumption, use of renewable energy
completed projects with PLN 5.15 million of the EU
sources, air quality improvement, waste management, or
FR¿QDQFLQJPRVWRIZKLFKZHUHDVVRFLDWHGZLWKWKH
ÀRRGSUHYHQWLRQ,523
use of local, renewable energy sources (Ministry of
In the years 2007-2013, the cohesion policy in
Agriculture and Rural Development, 2007).
the area of protection and improvement of the state
During the course of the SOP RMFRD Programme over
of environment is carried out primarily thanks to the
50 thousand contracts for nearly EUR 1.2 billion were
European Regional Development Fund (ERDF) – thanks
VLJQHG ZLWK EHQH¿FLDULHV WKH (XURSHDQ &RPPLVVLRQ
to which rural areas are able to carry out projects,
reimbursed EUR 942.2 million). The largest number of
e.g. as part of Regional Operational Programmes and
projects was carried out as part of the Investments in
&RKHVLRQ)XQGV&)±ZKLFKFDQEHXVHGWRFR¿QDQFH
agricultural farms Action (48.2% of the total projects
large investment projects in the area of environment
carried out) – the average project value was approx. PLN
protection undertaken by local government units,
100 000. The projects were primarily associated with
commune associations, or other entities like municipal
improvements in production organisation – about half of
enterprises owned by the commune (Ministry of Regional
WKH SURMHFWV LQ WRWDO DQG KDOI RI WKH TXDOL¿HG FRVWV ,Q
Development, 2008).
total, 94% of the projects carried out regarded farms of
In the current programming period, however, the
most important EU programme which enables multi- DQHFRQRPLFVL]HRYHU(683 (Ministry of Agriculture and
directional investments in rural areas and farming is the Rural Development, 2010). Apart from projects directly
Rural Development Programme for 2007-2013 (RDP). related with agriculture, the SOP RMFRD allowed to carry
Improvement of the natural environment and rural out, among others, the following projects:
areas is one of the priority axes of the EU’s policy for the — related with rural restoration, and preservation
development of these areas, the so-called environmental and protection of cultural heritage – completed
axis - besides improvements in the competitiveness of implementation of over 2 000 projects, for which
the agricultural and forest sector (the so-called economic WKH DPRXQW RI FR¿QDQFLQJ IURP WKH ($*D*)
axis), improvement of the quality of life in rural areas, reached PLN 395.6 million (with tangible effects
DQGGLYHUVL¿FDWLRQRIUXUDOHFRQRP\WKHVRFDOOHGVRFLDO such as construction or reconstruction of elements
axis) and the Leader axis (RDP, 2011). Activities aimed of small touristic and recreational infrastructure,
at protecting the natural environment and improving the development of village centres, parks, green areas
quality of life of rural area inhabitants may be carried and other leisure locations);
out via projects directed towards restoration of the — in the area of diversifying agricultural activity and
countryside and improvement of the state of cultural protection of natural resources in rural areas –
and natural heritage, undertaking non-agricultural completion of over 4 000 projects with the EU co-
economic operations in rural areas, creating local action ¿QDQFLQJLQWKHDPRXQWRI3/1PLOOLRQDQGWKH
groups (LAG) or international partnership. Regional investments (associated with, e.g. minor services to
Operational Programmes also include priorities and the inhabitants, services to agriculture, production of
activities which allow improvements to the state of energy materials and biomass) allowed maintaining
the natural environment in rural areas, e.g. Priority III or creating nearly 9 thousand workplaces (SOP
of the :LHONRSROVND 5HJLRQDO 2SHUDWLRQDO 3URJUDPPH RMFRD, 2004; Ministry of Agriculture and Rural
2007-2013 titled Natural Environment prescribes Development, 2010).
carrying out projects aimed at providing rural areas with 7KH DPRXQW RI IXQGV DOORFDWHG WR EHQH¿FLDULHV RI
sanitary and waterworks infrastructure, regulating waste the RDP 2004-2006 activities reached PLN 14.2 billion
management, restoring degraded natural habitats, and out of which PLN 11.3 billion were funds from the
introducing and promoting protected areas, including EAGaGF. Support given as part of the four actions within
NATURA 2000 (WROP, 2011). Priority B, Sustainable Development of Rural Areas,
___________________________
2
2XWRIWKHJHQHUDOQXPEHURI3URMHFWVSURMHFWVZHUHFR¿QDQFHGIURPWKH5XUDO'HYHORSPHQW3ODQ¶V
EXGJHWPRYHGZLWKDSSURYDOIURPWKH(XURSHDQ&RPPLVVLRQZKLOHSDUWRIWKHSURMHFWZDV¿QDQFHGIURP
SAPARD as well as the RDP funds (Ministry of Agriculture and Rural Development, 2007)
3
$XQLWSUHVHQWLQJWKHHFRQRPLFVL]HRIDQDJULFXOWXUDOIDUPFDOFXODWHGEDVHGRQWKHVWDQGDUGGLUHFWVXUSOXV

ISSN 1691-3078
Source: author’s study based on the Ministry of Agriculture and Rural Development, 2009
Fig. 1.6WUXFWXUHRIUHVRXUFHVVSHQWRQVSHFL¿FDFWLRQVZLWKLQ3ULRULW\%RI
the RDP for the years 2004-2006 Sustainable Development of Rural Areas
KDG WKH PRVW VLJQL¿FDQFH WR WKH VWDWH RI WKH QDWXUDO nearly PLN 30 billion, over half of which served actions
HQYLURQPHQW)XQGVDOORFDWHGIRUFR¿QDQFLQJSURMHFWVLQ within Axis 1 Improvement of Competitiveness of the
the area of this Priority constituted nearly 52% of the total Farming and Forest Sector, nearly 40% went towards
resources available in the RDP, while their distribution actions within Axis 2 Improvement of the Natural
DPRQJVSHFL¿FDFWLRQVLVSUHVHQWHGLQ)LJXUH Environment and Rural Areas, 10% went to the projects
7KH VLJQL¿FDQFH RI WKH (8 ¿QDQFLDO VXSSRUW WR UXUDO carried out within Axis 3 Quality of Life in Rural Areas
areas within the IROP can be shown by presenting DQG 'LYHUVL¿FDWLRQ RI 5XUDO (FRQRP\ DQG ¿QDOO\
the tangible effects (pro-environmental projects) for towards Axis 4 Leader (Ministry of Agriculture and Rural
Action 3.1. Rural Areas. Since the beginning of the Development, 2012b).
Programme’s implementation in rural and small town The environmental axis in the European Union
areas, a total of 2 thousand km of water conduits used by received 44% of the EAFDRA resources, while Poland
over 120 thousand inhabitants, and 70 sewage treatment intends to spend 32.21% of public funds allocated within
plants were built and modernised, in addition to carrying the RDP 2007-2013 for the implementation of actions in
out 13 projects in the area of selective waste disposal and this area - the share differs in Europe: from 23% for
recycling, and municipal waste management. Romania to 81.36% for Finland (Scianski P., 2010).
There were no projects carried out as part of this By the end of 2011, Poland spent slightly over
Action related with building electric power plants using PLN 11 billion on actions within Axis 2. The distribution
renewable energy sources. There were, however, of these resources between different actions is
projects whose range included the use of RES, e.g. presented in Figure 2.
related with the modernisation and redevelopment The amount of payments disbursed by the end
RI KHDWLQJ V\VWHPV RI WKH VFKRROV RU FRPPXQH RI¿FHV of 2011 constituted 65.6% of the planned EAFDRA
to those using biomass or biogas (Ministry of Regional budget in case of the Action titled Support of Farming
Development, 2010). in Mountain Areas and Other Areas with Unfavourable
The Rural Development Programme for 2007-2013 $JULFXOWXUDO&RQGLWLRQV7KLVSHUFHQWDJHLQUHODWLRQZLWK
is the main source of support for the development the Action Agricultural and Environmental Programme
of Polish rural areas in the programming period was 43.6%, in case of the Action Restoring the
,W LV ¿QDQFHG IURP WKH (8 EXGJHW Potential of Forest Production - 9.6%, and for the
(European Agricultural Fund for the Development of Action Forestation of Farmlands and Non-farm Lands -
Rural Areas – EAFDRA) and domestic public funds. 28.7% (Ministry of Agriculture and Rural Development,
Despite the fact that the expected total sum of 2012b).
co-funding for rural areas in the programming period
2007-2013 would be EUR 17.2 billion (including over
Rural communes in the process of applying
EUR 13,.2 billion from the EU budget), the actual funds
at disposal are about EUR 14 billion – the remaining and using the EU resources supporting
amount constitutes undertakings from the years 2004- pro-environmental investments
2006 entered into as part of the RDP 2004-2006 $V LW ZDV PHQWLRQHG HDUOLHU VLJQL¿FDQW ¿QDQFLDO
(Jablonska-Urbaniak T., 2009). resources from the European Union budget were
By the end of 2011 the Agency for Restructuring expected for Polish rural areas as part of many different
and Modernisation of Agriculture carried out payments of programmes in every programming period. What is

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Source: author’s study based on the Ministry of Agriculture and Rural Development, 2012b
Fig. 1.6WUXFWXUHRIUHVRXUFHVVSHQWRQVSHFL¿FDFWLRQVZLWKLQ$[LVRIWKH5'3IRUWKH\HDUV
Improvement of the Natural Environment and Rural Areas
interesting, however, is how rural communes – the acquired from the European Union, as the VFEPWM
SRWHQWLDO EHQH¿FLDULHV RI PDQ\ VXFK DFWLRQV SHUFHLYH SURYLGHV ¿QDQFLDO VXSSRUW RQ SURHQYLURQPHQWDO DFWLRQV
the programmes and funds provided for this group within national as well as the EU funds (as an intermediary
of recipients and how they take advantage of the or implementing institution).
resources available to them. Therefore, rural communes &RPPXQHV KDYH VKRZQ VLJQL¿FDQW LQWHUHVW LQ WKH
in the Wielkopolskie region participated in a survey. SRVVLELOLW\ RI DFTXLULQJ ¿QDQFLDO UHVRXUFHV IURP WKH
A questionnaire was sent to 117 respondents (exhaustive Rural Development Fund for the years 2007-2013 – a
study), and the response rate was 42%. Two out of the ¿IWK RI WKH DSSOLFDWLRQV ZHUH VXEPLWWHG WR FRPSHWLWLRQV
49 received questionnaires were discarded due to formal announced as part of that Programme.
and substantive reasons. 0RVW RIWHQ WKH DFTXLUHG ¿QDQFLDO UHVRXUFHV ZHUH
$VWKHVWXG\VKRZVDSSO\LQJIRU¿QDQFLDOVXSSRUWIURP allocated to building (developing) sewage systems –
the EU is the most common way for local governments such purpose was declared by nearly 60% of communes.
of the Wielkopolskie region’s rural commune to acquire Slightly above 17% of the surveyed communes invested
additional funds for investments in the area of environment the acquired funds into waterworks systems, and
protection – 39 out of the 47 respondents (83% of the nearly 15% - in sewage treatment plants. Some rural
surveyed population) have made such attempts in the communes submitting their applications for support of
years 2004-2009. Despite this being a high percentage pro-environmental actions in their area indicated several
of the surveyed communes, approximately half of them activities which can be carried out as part of a certain
LQGLFDWHG GLI¿FXOWLHV LQ DFTXLULQJ WKH VXSSRUW /LNHO\ project, e.g. building (development, modernisation) of
reasons for this problem being highlighted so often can waterworks, sewage systems and sewage treatment
be found in the relation between the amount of positive plants, building (development, modernisation) of
GHFLVLRQV WR JUDQW FRPPXQHV ¿QDQFLDO VXSSRUW DQG WKH waterworks systems and water treatment plant, or the
amount of applications submitted by the respondents development of sewage networks and building backyard
(approximately 3/4 in the years 2004-2009). sewage treatment plants4.
As much as 1/3 of submitted applications were such As much as 58 (84%) out of 69 projects, in which
that the communes forwarded to the Voivodship Fund the responding communes indicated sanitary sewage
for Environment Protection and Water Management systems as the subject of investment, were carried out
7DEOH ,W LV KRZHYHU GLI¿FXOW WR DVVHVV KRZ as part of three EU programmes: SAPARD, IROP and RDP
VLJQL¿FDQW SDUW RI WKHVH DSSOLFDWLRQV UHODWHG ZLWK IXQGV for the years 2007-2013. The needs of the surveyed rural
___________________________
4
In terms of investment targets entered into as part of projects carried out with the European Union support,
:LHONRSROVNDGRHVQRWGLIIHUIURPRWKHUUHJLRQVRIWKHFRXQWU\%DVHGRQVWXGLHVFRQGXFWHGLQ¿IWHHQFRPPXQHVRI
WKH:DUPLQVNR0D]XUVNLHUHJLRQ02OLQVNLVKRZHGWKDWWKHODUJHVWYDOXHVKDUHLQHQYLURQPHQWDOSURWHFWLRQ
investments in the years 2004-2006 was held by projects associated with sewage networks and sewage treatment
plants (nearly 93% of all analysed investments). For the years 2007-2013, the surveyed communes also primarily
included such projects in their development plans. I. Otola (2009), on the contrary, showed in her studies covering
the Slaskie region’s communes that the largest number of projects (nearly half) carried out in the years 2004-2007
using the EU funds related with the natural environment. Most of them included construction of sanitary sewage
networks.

ISSN 1691-3078
Table 1
3URJUDPPHVDQGLQVWLWXWLRQVRIIHULQJ¿QDQFLDOVXSSRUWIRUSURHQYLURQPHQWDODFWLRQVXVHGE\WKH
surveyed communes in the years 2002-2009
Item Number of applications Percentage (all submitted

applications = 100% )
SAPARD 24 10.4
Sectoral Operational Programme Restructuring
and Modernisation of the Food Sector and Rural 5 2.2
Development 2004-2006 (SOP RMFSRD)
Integrated Regional Operational Programme (IROP) 40 17.3
EOG Financial Mechanism and Norwegian Financial 2 0.9
Mechanism
Rural Development Programme for the years 2007- 47 20.3
2013
Infrastructure and Environment Operational 2 0.9
Programme
Wielkopolska Regional Operational Programme for 23 9.9
the years 2007-2013
Voivodship Fund for Environment Protection and 77 33.3
Water Management (VFEPWM)
Other Special funds* 8 3.5
Other programmes and institutions** 3 1.3
Total 231 100.0
* Other special funds include the European Fund for the Development of Polish Rural Areas, National Fund for
Environment Protection and Water Management, Farmland Protection Fund
2WKHUSURJUDPPHVDQGLQVWLWXWLRQV&RKHVLRQ)XQG0DUVKDO2I¿FH9RLYRGVKLS&RQWUDFW
Source: author’s study based on survey responses
communes in the area of basic environment protection support value – nearly PLN 180 million. The average
infrastructure are visible from the beginning of the value of a single project was PLN 2.5 million and the
analysed period, i.e. the years 2002-2003, during which DYHUDJHYDOXHRIFR¿QDQFLQJDOORFDWHGWRRQHSURMHFW±
the communes commenced spending the resources 3/1 PLOOLRQ :LWKLQ WKH VSHFL¿F SURJUDPPHV
allocated to Poland within pre-accession funds. WKH DYHUDJH FR¿QDQFLQJ OHYHO ZDV YDULHG LW ZDV
The surveyed communes acquired resources for the PLN 7.6 million for the Wielkopolski Regional
construction (development) of sewage systems primarily Operational Programme, it reached PLN 2.1 million for
from the SAPARD and RDP for the years 2007-2013 the RDP 2007-2013, it was PLN 1.4 million in the case
(43% of the projects prepared with that aim). A similar of the IROP, and the value reached PLN 550 thousand
situation was recorded in regards to water treatment for the SAPARD.
stations. The IROP funds were most prominent in the In rural communes one can observe certain tendencies
improvement of sewage management, i.e. building in the use of EU funds. Over the years during which the EU
(development or modernisation) of sewage treatment support was available, the funds were increasingly often
plants and increasing the length of sewage systems in DOORFDWHG WR WKH VRFDOOHG ³VRIW SURMHFWV´ ZKLFK UHVXOWHG
the communes. LQ D GHFUHDVLQJ VKDUH RI ¿QDQFLDO LQYHVWPHQWV IURP WKH
The large interest of rural communes in funds from the EU in the investment expenses; in 2008, this percentage
current programming period for investments in water and was nearly 5% in rural communes. In the years 2002-
sewage infrastructure is evidence of the respondents’ still 2008, the share of investment expenses in projects
existing needs in this area. The programmes functioning ¿QDQFHG IURP IRUHLJQ VRXUFHV V\VWHPDWLFDOO\ GHFUHDVHG
in the programming period 2007-2013 provide an in rural communes from 99.2% in 2002 to 65.5%
opportunity to carry out also other environmental goals in 2008.
than the primary ones, thus, to a very small degree
but still, the communes prepare and carry out projects
aimed at improving the inhabitants’ quality of life and Conclusions
increasing the communes’ capabilities to provide different 3RODQGKDVUHFHLYHGVLJQL¿FDQW¿QDQFLDOVXSSRUWIURP
environmental services. the EU within the past decade. The funds allocated for
As it can be concluded from the information the development of rural areas invoke large interest of
submitted by the surveyed communes, the total value SRWHQWLDO EHQH¿FLDULHV ZKLFK LV HYLGHQFHG E\ LQGLFDWRUV
RI SURMHFWV FR¿QDQFHG IURP WKH (8 IXQGV LQ WKH \HDUV related with the RDP for the years 2007-2013; over 77%
H[FHHGHG3/1PLOOLRQZKLOHWKH¿QDQFLDO of the budget for that programme was already contracted

ISSN 1691-3078
by 15 June 2012 (Ministry of Agriculture and Rural 5. Ministry of Agriculture and Rural Development
Development, 2012a). (2007). Raport koncowy z realizacji Programu
The use of funds for the development of rural areas SAPARD w Polsce w latach 2000-2006, Ministerstwo
mainly depends on local government entities which 5ROQLFWZD L 5R]ZRMX :VL (Final Report on the
should decide on the directions of local economic Implementation of the SAPARD Program in Poland
development. The current programming period ensures in the Years 2000-2006), Ministerstwo Rolnictwa
a chance to acquire funds for diverse actions which L 5R]ZRMX :VL 0LQLVWU\ RI $JULFXOWXUH DQG 5XUDO
serve environmental protection purposes and allow rural Development) :DUV]DZD 5HWULHYHG http://bip.
communes to carry out more modern functions beside minrol.gov.pl. Access: 31 March 2011.
their most important but not the only one, which is 6. Ministry of Agriculture and Rural Development
DJULFXOWXUDOSURGXFWLRQ,WLVKRZHYHUGLI¿FXOWWRH[SHFW (2009). Sprawozdanie roczne z realizacji Planu
FRPPXQHVLQGLFDWLQJGH¿FLHQFLHVLQWKHOHQJWKRIVHZDJH 5R]ZRMX 2EV]DURZ :LHMVNLFK QD ODWD ]D
networks or amount of sewage treatment plants to direct rok 2008 (Annual Report on the Implementation
their interest towards other pro-environmental actions. of the Rural Development Plan for the Years 2004-
One has to hope that as rural areas become saturated 2006 for 2008) 0LQLVWHUVWZR 5ROQLFWZD L 5R]ZRMX
with the basic environmental protection infrastructure, :VL :DUV]DZD 5HWULHYHGhttp://www.minrol.gov.
such aspects as the broadly understood rural restoration, pl. Access: 11 April 2011.
improvement of the state of cultural and natural 7. Ministry of Agriculture and Rural Development
heritage, landscape and spatial order, or increased use (2010). Sprawozdanie z realizacji Sektorowego
of renewable energy sources in rural areas will become 3URJUDPX 2SHUDF\MQHJR 5HVWUXNWXU\]DFMD
a more common subject of commune local governments’ i modernizacja sektora zywnosciowego oraz
applications for the EU funding. rozwoj obszarow wiejskich 2004-2006 (Report on
Poland has had many barriers associated with the WKH ,PSOHPHQWDWLRQ RI WKH 6HFWRUDO 2SHUDWLRQDO
introduction of the EU programmes such as frequently Programme for Restructuring and Modernisation of
changing guidelines and procedure, problems associated the Food Sector and Rural Development 2004-2006),
with reporting and applying for co-funding, issues 0LQLVWHUVWZR 5ROQLFWZD L 5R]ZRMX :VL :DUV]DZD
related with control, irregularities in terms of public Retrieved: http://www.minrol.gov.pl. Access: 7 April
procurement law, or imperfections in introducing the 2011.
,QIRUPDWLRQ 0RQLWRULQJ DQG &RQWURO 6\VWHP ,0&6 8. Ministry of Agriculture and Rural Development
However, the current programming period shows that (2012a). ,QIRUPDFMD QD WHPDW UHDOL]DFML 352:
PDQ\ RI WKHVH GH¿FLHQFLHV KDYH EHHQ HOLPLQDWHG 7KH 2007-2013 (Information on the Implementation of
EHQH¿FLDULHVDFTXLUHGH[SHULHQFHDOVRPDNHVWKHSURFHVV the Rural Development Programme 2007-2013),
of application and uptaking of the EU funds easier for 0LQLVWHUVWZR 5ROQLFWZD L 5R]ZRMX :VL :DUV]DZD
subsequent programmes. Retrieved: http://www.minrol.gov.pl. Access:
15 December 2012.
9. Ministry of Agriculture and Rural Development
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gminnym']8]UQUSR](Act
on the Implementation of the Rural Development
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L 5R]ZRMX :VL :DUV]DZD 5HWULHYHG http://www.
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3URJUDPX 2SHUDF\MQHJR 5R]ZRMX UHJLRQDOQHJR 10. Ministry of Regional Development (2008). Na czym
2004-2006 WHNVW MHGQROLW\ XZ]JOHGQLDMDF\ ]PLDQ\ polega polityka spojnosci Unii Europejskiej (What Is
SU]\MHWH SU]H] .RPLWHW 0RQLWRUXMDF\ =3255 Z the European Union’s Cohesion Policy), Ministerstwo
dniu 17 VW\F]QLD U (Supplemented Integrated 5R]ZRMX5HJLRQDOQHJR:DUV]DZD5HWULHYHGhttp://
5HJLRQDO 'HYHORSPHQW 2SHUDWLRQDO 3URJUDPPH IRU ZZZIXQGXV]HHXURSHMVNLHJRYSO. Access: 7 June
2004-2006, consolidated text incorporating the 2011.
DPHQGPHQWVDGRSWHGE\WKH0RQLWRULQJ&RPPLWWHH 11. Ministry of Regional Development (2010). Koncowy
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ZZZ]SRUUJRYSO. Access: 6 June 2011. (Final Report on the Progress of Implementation of
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gospodarka zywnosciowa w Polsce (Agriculture and Programme 2004-2006), Departament Koordynacji
Food Economy in Poland), Ministerstwo Rolnictwa L :GUD]DQLD 3URJUDPRZ 5HJLRQDOQ\FK 0LQLVWHUVWZR
i 5R]ZRMX:VL:DUV]DZD 5R]ZRMX 5HJLRQDOQHJR :DUV]DZD 5HWULHYHG
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strukturalnych w latach 2004-2008 (Support for na wydatki na infrastrukture ochrony srodowiska
Sustainable Agriculture and Rural Development with w wybranych gminach Warmii i Mazur, (Impact of
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Polityki Europejskie, Finanse i Marketing =HV]\W\ Infrastructure in Selected Municipalities of Warmia
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aspekty zrownowazonego rozwoju regionalnego Restructuring and Modernisation of the Food Sector
i lokalnego :\GDZQLFWZR :\]V]HM 6]NRO\ and Rural Development 2004-2006, Appendix to
(NRQRPLF]QHMZ Bialymstoku, Bialystok. the Regulation of the Minister of Agriculture an
13. Otola, I. (2009). Zdolnosc inwestycyjna gmin Rural Development dated 3 September 2004 on the
w aspekcie absorpcji funduszy unijnych, w: adoption of the Programme), Polish Journal of Laws
Ekonomiczne i organizacyjne instrumenty wspierania ']8RI1RLWHP)QUSR]
rozwoju lokalnego i regionalnego (Investment 2032.
Capacity of Municipalities in Terms of Absorption of 17. Scianski, P. (2010). Przeglad unijnych programow
European Union’s Funds) W ,, =HV]\W\ 1DXNRZH rozwoju obszarow wiejskich na lata 2007-2013
8QLZHUV\WHWX6]F]HFLQVNLHJR1U6]F]HFLQ (Review of the EU Rural Development Programmes
14. RDP (2004). 3ODQ 5R]ZRMX 2EV]DURZ :LHMVNLFK QD for 2007-2013) 0LQLVWHUVWZR 5ROQLFWZD L 5R]ZRMX
lata 2004-2006(Rural Development Plan for 2004- Wsi (Ministry of Agriculture and Rural Development),
2006), Ministerstwo Rolnictwa i 5R]ZRMX :VL Ministerstwo Rolnictwa i 5R]ZRMX :VL :DUV]DZD
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2004-2006, 6HFWRUDO 2SHUDWLRQDO 3URJUDPPH 7 December 2012.

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R. Kinderis, G. Jucevicius Cluster as Harmonious Cooperation of the Business
Models of Wellness Tourism Members
CLUSTER AS HARMONIOUS COOPERATION OF THE BUSINESS MODELS

OF WELLNESS TOURISM MEMBERS
Remigijus Kinderis1, PhD student; Giedrius Jucevicius, PhD, prof.

Kaunas University of Technology, Lithuania
Abstract. 7KHDUWLFOHSUHVHQWVWKHWKHRUHWLFDODQDO\VLVRIFOXVWHUDQGWRXULVPFOXVWHUGH¿QLWLRQDVZHOODVWKHDQDO\VLV
of cluster members; and furthermore it highlights the particular features of cluster. The cluster concepts have been
revealed indicating their characteristics and relationship between them. Presumptions for the cluster formation and
EHQH¿W IRU EXVLQHVV DUH HPSKDVLVHG LQ WKH UHVHDUFK 7KH DUWLFOH IRFXVHVRQ WKH DQDO\VLV RI FOXVWHU VWUXFWXUH LQ WKH
tourism industry highlighting the basic components and indicating the tourism cluster forms. The model of wellness
tourism cluster possible to implement in the Western Lithuanian region and the theoretical insights acquired using
systemic analysis for the formation of tourism cluster using cooperation of business models are presented at the end
of the article.
Key words: tourism cluster, business model, interorganisational formations, wellness tourism.
JEL code: M1.
Introduction 4) to evaluate opportunities for wellness tourism cluster

7RXULVP LQÀXHQFH RQ UHJLRQDO HFRQRP\ ULVHV formation in the seaside region of Lithuania.
gradually and the rise of the global economic value is Methods: V\VWHPLFDQDO\VLVRIWKHVFLHQWL¿FOLWHUDWXUH
implicated at the same time. Regional economic system, comparison, and generalisation.
its enhancement and increasing are based on the cluster
principle where the essence is creating of higher value ([SODQDWLRQRIWKHWRXULVPFOXVWHUGH¿QLWLRQ
LQ WKH QHWZRUN RI XQL¿HG HQWHUSULVHV )RUPDWLRQ RI WKH &OXVWHULVRIWHQFRQVLGHUHGDVWKHEXVLQHVVPRGHOW\SH
tourism clusters in the particular region provides a of the 21st FHQWXU\%XVLQHVVPRGHOLVGH¿QHGDVDSURFHVV
competitive advantage for the enterprises in that region RIYDOXHFUHDWLQJEXVLQHVVGHVLJQQHWZRUNLQJDQGSUR¿W
against the enterprises that do not belong to cluster JHQHUDWLRQORJLF&RRSHUDWLRQRIEXVLQHVVPRGHOVPDNHV
(Porter M., 2000; Rocha O., 2004; Engelstoft S., 2006); presumptions for cluster formation that ensures effective
and this situation is a very important goal for enterprises, knowledge transformation into increasing economic value
government and other organisations. Initiative of cluster and at the same time it increases competitiveness not of
formation indicates new guidelines for the economic only one enterprise but the whole system, concentrates
policy that are based on macroeconomic stabilisation, complex competency, and it is considered as a possibility
privatisation, and markets liberalisation in the modern (unifying enterprises) to compete on the domestic and
FRXQWULHV&OXVWHUSKHQRPHQRQKDVEHFRPHWKHUHVHDUFK international market (Kinderis R., 2012). Generally,
object for various scientists in production, services, and clusters are perceived as the interorganisational
other sectors (Dwyer L., 2000; Jackson J., Murphy P., IRUPDWLRQVRUDFFXPXODWLRQRIHQWHUSULVHVVFLHQWL¿FDQG
%UHGD = &DSRQH ) Jucevicius R., governmental institutions in the particular geographical
2006, 2009; Flowers J., Easterling K., 2006; Hunt M., region. Gulati R., Sytch M (2007) and Pesämaa O.,
&URPSWRQ-)HUHLUD-(VWHYDR& Hair J. (2008) note that interorganisational business
&OXVWHU IRUPDWLRQ DQG GHYHORSPHQW KDYH EHHQ relationships and formations, such as clusters, have
DQDO\VHG ZLGHO\ LQ VFLHQWL¿F OLWHUDWXUH EXW RFFXUUHQFH been formed due to creation of high value added and
of business models complementarities and their cooperation effectiveness through the performance of
LQÀXHQFH RQ WRXULVP DUH QRW DQDO\VHG VR ZLGHO\ 7KHUH the interorganisational obligations that are imposed by
LVQRGHWDLOHGGH¿QLWLRQRIFOXVWHUVDQGWRXULVPFOXVWHUV PXWXDOWUXVWDQGLQGLYLGXDOEHQH¿W
explanation of characteristics, analysis of structure, and The concept of tourism cluster is related with the
in-depth analysis of tourism clusters as business models VSHFL¿F FKDUDFWHULVWLFV RI WRXULVP DFWLYLWLHV DQG WRXULVP
complementarities. product. Tourism product comprises physical environment
Research object – tourism cluster. and members of social environment (some enterprises),
Research aim – to reveal the aspects of cluster because it is one of the conditions for its formation and
formation as harmonious cooperation of the business performance. Tourism product is like a set of services
models of wellness tourism members. and goods sold in the particular region in order to satisfy
Research tasks: tourists’ needs. Tourism activities may be characterised
1) to present explanation of cluster and tourism cluster as cluster as well: complementarities and mutual
GH¿QLWLRQVIHDWXUHVDQGPDUJLQV dependence among tourism subjects in the particular
2) to reveal the forms of tourism cluster, formation region; and cultural, natural, and social resources. There
SUHVXPSWLRQVDQGEHQH¿WIRUEXVLQHVV LVQRGHWHUPLQHGFRQFHSWRIFOXVWHUDQGLWVGH¿QLWLRQ$
3) to discuss the structure and models of cluster; research on explanations of tourism clusters analysing
___________________________
1
&RUUHVSRQGLQJDXWKRU7HOHPDLOUNLQGHULV#JPDLOFRP

ISSN 1691-3078
tourism cluster concepts provided by the scientists was ‘Soft’ social infrastructure includes such members as
carried out in order to present detail essence of the professional schools, higher education schools, institutes,
WRXULVPFOXVWHU&DSRQH)1RYHOOL0HWDO professional associations, trade unions, municipality
The following characteristics of tourism cluster dominate structures, non-governmental organisations etc.
in the analysed concepts mentioned by the scientists: a ‘Hard‘ physical infrastructure includes all ‘material’
group of enterprises creating a tourism product; natural, elements of infrastructure such as roads, ports, public
cultural and social resources of the particular region; and telecommunication connections; without them it is
LQIUDVWUXFWXUH RI WKH SDUWLFXODU UHJLRQ VSHFL¿F DFWLYLWLHV GLI¿FXOWWRLPDJLQHHI¿FLHQWEXVLQHVV
of tourism sector; attractiveness of geographical region 7KH EHVW ZD\ WR JHW IDPLOLDU ZLWK FOXVWHU LV WR ¿QG
as well as competitiveness, stable economy and culture, RXW LWV PRVW LPSRUWDQW DQG JHQHUDO IHDWXUHV &OXVWHU LV
life quality and systemic relations among them. However, a quite wide concept, so it is necessary to distinguish
the scientists (Brown K. and Geddes R., 2007) note some basic features that allow recognising it. The
that perception of the tourism cluster and its formation most important cluster features include geographical
requires wider attitude and bigger number of members FRQFHQWUDWLRQ &OXVWHUV DUH PDGH RI WKH FRPSHWLWLYHO\
as usual. According to them, the state’s government has successful business entities and organisations; clusters
to support the programmes for the private investments include rather big number of enterprises/organisations;
ÀRZ LQWR FUHDWLRQ RI WKH WRXULVP LQIUDVWUXFWXUH RI WKH similar clusters in different countries have similar features
particular region, to promote that region and to ensure but they are not the same; clusters have margins that
its competitiveness. Relationships among enterprises and DUHFOHDUO\EXWQRWVRHDVLO\LGHQWL¿HGFOXVWHUVUDUHO\¿W
institutions inside the cluster are frequently mentioned LQWR VWDQGDUG FODVVL¿FDWLRQ V\VWHPV FOXVWHUV DUH VHOI
in the explanation of the above-mentioned concepts organising formations; and clusters stimulate cooperation
provided by the scientists, and these relationships may of enterprises.
be perceived in two ways (Rodrigues A., 2001):
1) KRUL]RQWDOUHODWLRQVKLSV±HVWDEOLVKLQJRIWKHVWUDWHJLF )RUPDWLRQDQGEHQH¿WRIWRXULVPFOXVWHU
alliance, when it is possible to have the agreements Costa R. (2005) relates the tourism cluster with
of two types: a) an agreement among enterprises tourism product and tourism destination and notes that
with the same basic activity (accommodation, its development includes the following components:
entertainment, catering); and b) an agreement ¿[HG HOHPHQWV DFFRPPRGDWLRQ DQG FDWHULQJ PRELOH
among enterprises that satisfy the same needs of elements (services of tour operators: transportation
customers but offer different products (tourism of passengers; car rent etc.); and dynamic elements
services); (services of leisure organisation, cultural and sports
2) vertical relationships – creation of the strategic events). This scientist distinguishes the tourism cluster
networks when relationships among the partners origin presumptions: competitiveness of tourism
have been created in order to develop a particular businesses; favourable geographical location; necessary
product or provide service for the others under their natural and cultural resources; hospitality; partners’
interim agreement and payment. accessibility; variety of partners; and formal and non-
The above-mentioned relationships show inner formal relationships among partners. While clusters have
FRQ¿JXUDWLRQ RI HQWHUSULVHV DQG LQVWLWXWLRQV WKDW been developed, it is worth to pay attention at important
include: a) tourist destinations not for local people; VSHFL¿FVWDWLVWLFDOFULWHULDDQGIDFWRUV:
b) concentration of tourist enterprises: restaurants, — turnover of the tourism sector in a region, comparing
accommodation businesses, transportation services, turnover of the region on the national level;
travel agencies etc., c) sectors supporting tourism — number of workers in the tourism sector;
services; d) reasonable and not expensive infrastructure — higher than the average growth in the tourism sector
(roads, energetic, health services etc.); e) enterprises (annual data);
and institutions that provide specialised information, — JURZWKRIVPDOOVL]HVWDUWXSV
¿QDQFLDO VXSSRUW RU HGXFDWLRQ I ORFDO EXVLQHVV — focusing on business units, which have business
DJHQWV DQG J JRYHUQPHQWDO LQVWLWXWLRQV WKDW LQÀXHQFH development competences in the particular region;
agglomerations of tourism industry. — physical proximity (geographical concentration).
According to Jucevicius R. (2009), considering As Iordache C. et al. (2010) have noted clusters
the margins of cluster it is important to perceive the usually occur in the tourism sector in the following
structural composition of cluster. It is not universal but it forms:
is possible to distinguish the elements that form cluster — geo cluster – spatial cluster of economic activity
and tourism cluster as well: core with supporting activities (starting with local, e.g. mountain tourism cluster,
and infrastructure necessary for its functionality, utilities; coast tourism cluster up to global, e.g. cosmic
‘soft infrastructure’; and ‘hard infrastructure’. tourism cluster type);
&RUHLVXVXDOO\PDGHRIHVVHQWLDOFOXVWHUHQWHUSULVHV — KRUL]RQWDOFOXVWHUIRUPVZKHQWKHSDUWLFXODULQGXVWU\
and income; and welfare of the cluster members basically or sector might be included into cluster, which is a
depends on them. These enterprises create total and member of other clusters (e.g. hotel chains might
main tourism product. be included into the airlines chain business model);
Supporting (utility) activities (B2B) – all activities, — vertical cluster – connection of various stages of
directly or indirectly supporting activities inside the different tourism services providing process into one
cluster. These activities might include providing of common process;
specialised equipment, components, raw materials, and — side cluster forms when different business sectors
other services. are connected with the existing cluster, in this

ISSN 1691-3078
way the conglomerate has been formed (common Dimension 2 – clusters and innovations. The cluster‘s
economic effect appears); ability to stimulate innovative activities among cluster
— technological cluster forms when cluster is formed members and increase their competitive advantage on the
using the same technology (e.g. cluster of tourism market is considered as the basic reason for attractiveness
services reservation systems); and popularity. Innovations form an integral part in
— concentrated cluster – cluster when its enterprises the tourism sector but they are more complicated to
concentrate on own cooperation into the main UHFRJQLVHDQGRI¿FLDOO\HVWDEOLVKWKDQLQFDVHRIFODVVLFDO
cluster‘s enterprise (science or technology production. Besides that, in any case, clusters stimulate
enterprise). development and spread of innovations, help implement
The above-mentioned components, criteria, and innovations faster, and offer wider communication
particular presumptions might help form optimal SRVVLELOLWLHV IRU RZQ PHPEHUV FUHDWLQJ RI¿FLDO DQG QRQ
cooperation, trust, and competitive relation among RI¿FLDOLQIRUPDWLRQWUDQVIHUFKDQQHOV
various business branches and clusters of their business Dimension 3 – clusters and entrepreneurship (new
models. Navickas V. and Malakauskaite A. (2009) note businesses). &OXVWHUV VWLPXODWH HVWDEOLVKLQJ RI QHZ
that interorganisational tourism sector formations operate enterprises and expansion of new business ideas. People
through the synergy principle, i.e. their generated value working in cluster enterprises have better opportunities to
added obviously is higher compared with the value added identify gaps in enterprise activity or new niche markets;
created by individual enterprises of tourism sector. It although, enterprises have better conditions for business
allows presumption that loss of one member would ¿QDQFLQJ DQG H[SDQVLRQ )XUWKHUPRUH WKH H[LVWLQJ
UHVXOW LQ D VLJQL¿FDQW GHFUHDVH RI WRXULVP SURGXFWV DQG clusters stimulate the establishing of new businesses in
services supply; furthermore, the rest enterprises and that geographical location (Nadaban M., Berde A., 2009).
RUJDQLVDWLRQVZRXOGIDFHGLI¿FXOWLHVVDWLVI\LQJFXVWRPHUV¶
expectations. 3. Models of tourism cluster
&RPSOHPHQWDULWLHV RI SURGXFWLRQ DQG JHRJUDSKLFDO Development of tourism business depends not just
proximity stimulate formation of tourism clusters, on the attractiveness of basic tourism destinations and
this process commonly uses the implementation services provided there like accommodation, catering,
RI LQQRYDWLRQV +XQW 0 DQG &URPSWRQ - transport, information, comfort etc. Unfortunately, not
distinguish two types of the tourist objects attractiveness all regions are appropriately prepared to expand tourism
using visitors (tourists) aspect: similarity and services and increase competitiveness. Adequately
FRPSOHPHQWDULWLHV ZLWKRXW VSHFL¿FDWLRQ ZKLFK PHDQV prepared regions have attractive cultural, natural, and
similarity among similar attractions). According to them, social resources for tourists; infrastructure is convenient
the complementary objects attract more visitors due to for exploitation of the mentioned resources in order
competitive pricing, possibility to choose object groups, to ensure high quality and sustainable services. The
visiting forms and so on compared with similar objects. reliable marketing strategy has to be established and
+XQW 0 DQG &URPSWRQ - VWDWH WKDW FRPSOHPHQWDULWLHV implemented; it could help sell attractive, unique, and
of tourist objects attractiveness mean matching of the competitive tourism products in that region.
different objects and mutual supplementing. &XQKD6HWDOSUHVHQWWKHPRGHORIWRXULVP
3RUWHU 0 QRWHV WKDW FOXVWHU LQÀXHQFHV cluster focused on a tourism product. It is comprised of
tourism business sector and its competitiveness in three the set of basic and additional services (accommodation,
dimensions: productivity, innovations, and starting new catering, information providing, trip organising,
businesses (entrepreneurship). and other services and goods (usually souvenirs)).
Dimension 1 – clusters and productivity. Productivity That set might be formed when the mentioned
of cluster enterprises is higher than for the enterprises services and goods interact and there are additional
that are not included into cluster, because the cluster EXVLQHVV DVVRFLDWLRQV VFLHQFH DQG ¿QDQFH LQVWLWXWLRQV
enterprises are able to: government institutions, and tourists.
— PDQDJHWKHVSHFL¿FLQIRUPDWLRQXVLQJOHVVH[SHQVHV The model of tourism cluster might be found in the
this information might give competitive advantage in *OREDO 5HSRUW RQ &RPSHWLWLYHQHVV LQ :RUOG
activity; Economic Forum, 2006); its structure was similar to
— DFWLQDPRUHSUR¿WDEOHZD\WKDQRWKHUHQWHUSULVHV WKH PRGHO SUHSDUHG E\ &XQKD 6 HW DO 7KH GLIIHUHQFH
because they have more opportunities to invest into is that the tourism services additionally may be divided
equipment, modernisation of work environment etc.; into services and goods, which directly and indirectly are
— DFTXLUH EHWWHU DFFHVV WR VSHFLDOLVHG DQG TXDOL¿HG related with the tourism product.
labour force; Navickas V. and Malakauskaite A. (2009) present
— use public services and infrastructure, which cannot the cluster model of tourism business sector, this model
be easily used by other enterprises; is focused on the tourism destination that includes
— HQWHUIDVWHUDQGPRUHVXFFHVVIXOO\LQWRVSHFL¿FQHZ enterprises providing tourist services (accommodation,
markets, because their reaction is faster comparing catering and special services providing enterprises); other
with enterprises that operate separately; services providing enterprises and enterprises selling
— supplement each other, because they belong to the goods (transport, links, shops); tourism infrastructure;
same value creating network; academic world, government institutions; travel agencies
— liaise with each other through complementary goods and tour operators; associated organisations, and
or services and common marketing; recreation and health institutions.
— negotiate more powerfully when entering into supply Generalising the above mentioned tourism cluster
agreements than independently acting enterprises. models, it is possible to note that their structure has the

ISSN 1691-3078
Source: authors’ construction based on Cunha S., 2005; Navickas V., Malakauskaite A., 2009; World Economic Forum,
2006
Fig. 1. Model of the tourism cluster
Source: authors’ construction
Fig. 2. Lithuanian seaside wellness tourism cluster
basic margins of the cluster structure and includes the tourism services of very high quality. The basic cluster
basic members, while at the same time, they highlight activities could be: research of natural (treatment)
elements typical for this sector (tourism resources, resources; research on resources impact on human’s
tourism enterprises and tourists) (Figure 1). health; training of the wellness specialists and
The possible Lithuanian seaside wellness cluster may LPSURYLQJ RI WKHLU TXDOL¿FDWLRQ LQIRUPDWLRQ JDWKHULQJ
be based on the structure of prepared tourism cluster; (data bases, websites); implementing of the services
WKLV FOXVWHU KDV JHR DQG KRUL]RQWDO FOXVWHU IHDWXUHV quality standards; marketing to attract new members
This cluster has to be oriented to increasing of wellness (enterprises of accommodation, catering, transport,
services competitiveness on the international scale. tourism information, trip organising, training, sports
It is suggested to unify enterprises providing wellness etc.); and organisation of conferences, seminars and
and tourism services using this cluster because they H[KLELWLRQV &OXVWHU VKRXOG LQFOXGH HQWHUSULVHV WKDW XVH
are related by economic interests, i.e. attraction of and research natural (treatment) resources in their
ELJJHU LQWHUQDWLRQDO WRXULVWV¶ ÀRZ SURYLGLQJ ZHOOQHVV DFWLYLW\ DW OHDVW ¿YH ZHOOQHVV HQWHUSULVHV HQWHUSULVHV

ISSN 1691-3078
that extract and research recreational resources; higher 3. The tourism cluster structure comprises the following
education institutions or professional training schools components: static elements (accommodation
preparing medical and tourism specialists; wellness, SPA, and catering); mobile elements (services of tour
hotel and restaurants associations; tour operators and operators: carriage of passengers; car rent etc.);
agencies; sports and physical activities enterprises, and and dynamic elements (leisure organisation
public sector (Municipalities of Palanga town, Klaipeda services, cultural and sport events). The structure
region, Kretinga region, Lithuania ) (Figure 2). of the tourism cluster models maintain the basic
Using that wellness services cluster, it is suggested cluster margins and include the basic members but it
to unify wellness and tourism enterprises in the highlights elements typical for that sector: tourism,
seaside region of Lithuania because they are related by recreational resources, tourism enterprises, and
economic interests, i.e. more intensive attraction of the tourists.
international tourists developing new and qualitative &OXVWHULQJ SURFHVVHV HQVXUH PRUH KDUPRQLRXV
services of the wellness tourism. More real possibilities to development of the wellness tourism sector,
initiate projects for dealing with the problems in wellness matching quality of new activities with lower price
VHFWRUZRXOGRFFXUIRUHI¿FLHQWXVDJHRIPLQHUDOVSULQJV and innovation. Successful example of wellness
establishing of new infrastructure objects of wellness WRXULVP FOXVWHU FRXOG KHOS HYDOXDWH EHQH¿W RI
WRXULVPGHDOLQJZLWKVKRUWDJHRIWKHTXDOL¿HGVSHFLDOLVWV that cooperation and form guidelines of wellness
etc.) with the existence of this cluster. market members’ business models and create a
chain of the Lithuanian seaside tourism product
production and distribution attracting foreign
Conclusions, proposals,
tourists.
recommendations
1. Universal and complete perception of the cluster
concept is not provided by any author. The analysis Bibliography
of cluster concept shows that cluster always 1. %UHGD = &RVWD 5 &RVWD & 'R
includes geographical unit, relationships among &OXVWHUVDQG1HWZRUNV0DNH6PDOO3ODFHV%HDXWLIXO"
enterprises, institutions, and organisations, and 7KH &DVH RI &DUDPXOR 3RUWXJDO ,Q / /D]]HUHWWL
UHÀHFWV WKHLU LQWHUDFWLRQ DQG KLJKOLJKWV LPSRUWDQFH DQG & 3HWULOOR (GV Tourism Local Systems and
of competitiveness and cooperation; moreover, it Networking, the Netherlands: Elsevier.
LQGLFDWHV LPSRUWDQFH DQG EHQH¿W RI VSHFLDOLVDWLRQ 2. %URZQ. *HGGHV55HVRUWV&XOWXUHDQG
uniqueness and innovation. 0XVLF 7KH &DSH %UHWRQ 7RXULVP &OXVWHU Tourism
Elements, which form cluster, have been extracted Economics, Volume 13, Issue 1, pp. 129-141.
like core with supporting activities and infrastructure 3. &DSRQH ) 5HJLRQDO &RPSHWLWLYHQHVV LQ
important for its existence; utility activities; ‘soft Tourist Local Systems. 44th European Congress of
infrastructure’, and ‘hard infrastructure’. the European Regional Science Association (ERSA)
&OXVWHUV PLJKW EH FKDUDFWHULVHG E\ SDUWLFXODU “Regions and Fiscal Federalism”. University of Porto,
features: geographical concentration, unifying Portugal.
of different enterprises, each cluster is unique 4. &RVWD 5 Avaliacao do crescimento
and it increases competitiveness and stimulates potential of the e Desenvolvimento das Empresasdo
FRRSHUDWLRQ FOXVWHUV PLJKW EH GLI¿FXOW WR FODVVLI\ Sector Micro pequenas e do Turismo. Theoretical
and they are considered as self-regulating business and Applied Economics, Volume XVII (2010),
formations. Actually, the following cluster members Issue 5(546), pp. 99-112.
are distinguished: enterprises that include suppliers, 5. &XQKD6.&XQKD.&6RX]D$&XQKD-&
EXVLQHVV VHUYLFHV DQG ¿QDO SURGXFW VFLHQFH DQG (2004). Grau de clusterizacao da industria den
education, which are oriented to preparation of the paineis de madeira da regiao de Palmas - PR..
VSHFLDOLVWV ¿QDQFLDO LQVWLWXWLRQV DQG QDWLRQDO DQG In: Simposio de Gestao da Inovacao Tecnologica.
local government. 7HFQRORJLDH'HVHQYROYLPHQWR'HVD¿RVH&DPLQKRV
2. Tourism cluster is referred to as a group of enterprises 3DUD8PD1RYD6RFLHGDGHSS&XULWLED
DQGLQVWLWXWLRQVWKDWLQÀXHQFHWKHGHYHORSPHQWRID PGT/USP.
tourism product. Such enterprises and institutions are 6. Dwyer, L., Forsyth, P. & Rao, R. (2000). The Price
concentrated in the particular geographical territory &RPSHWLWLYHQHVVRI7UDYHODQG7RXULVP&RPSDULVRQ
and they are related by vertical (chain of tourism of 19 Destinations. Tourism Management,
SURGXFWSURGXFWLRQDQGKRUL]RQWDOLQYROYLQJIDFWRUV Volume 21, Issue 1, pp. 9-22.
jurisdiction and information exchange) relationships. 7. (QJHOVWRI 6 -HQVHQ%XWOHU & 6PLWK ,
It is possible to distinguish presumptions for the :LQWKHU/,QGXVWULDO&OXVWHUVLQ'HQPDUN
tourism cluster development: competitiveness Theory and Empirical Evidence. Papers in Regional
of tourism enterprises; convenient geographical Science, Volume 85, Issue 1, pp. 73-97.
location; natural and cultural resources; hospitality; 8. )HUHLUD - (VWHYDR & 5HJLRQDO
concentration of the basic partners and their variety; &RPSHWLWLYHQHVV RI 7RXULVP &OXVWHU D &RQFHSWXDO
existing of formal and non-formal relationships Model Proposal. MPRA Paper Volume 14853.
among cluster partners. Retrieved: http://mpra.ub.uni-uenchen.de/14853.
The tourism cluster appears in the forms typical Access: 16.10.2012.
IRUDFOXVWHUJHRFOXVWHUKRUL]RQWDOFOXVWHUYHUWLFDO 9. Flowers, J., Easterling, K. (2006). Growing South
cluster, side cluster, technological cluster, and &DUROLQD¶V 7RXULVP &OXVWHU Business and Economic
concentrated cluster. Review, Volume 52, Issue 3, pp. 15-20.

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Issue 1, pp. 36-52. DQG &RPPLWPHQW 7KHRU\ ZLWK 2QH .H\ 0HGLDWLQJ
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,QFUHDVH &RPSHWLWLYHQHVV 6XSSRUW Theoretical Volume 14, Issue 1, pp. 1–10.
and Applied Economics, Volume XVII (2010), 22. Rocha, O. (2004). Entrepreneurship and
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ir pespektyvos, Volume 1, Issue 25, pp. 17-27. como Factor de Desenvolvimento Regional:
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'H¿QLWLRQ 7\SRORJ\ DQG &KDUDFWHULVWLFV RI 6RPH Desenvolvimento Regional, Actas do IX Encontro
&OXVWHUV LQ WKH (V]DN$OI|OG 5HJLRQ &DVH 6WXG\ Nacional da APDR, Volume 1, pp. 671-692.

ISSN 1691-3078
A. Mickiewicz, P. Mickiewicz Characteristics of Measures Undertaken within the Framework of Axis 2 “Improving
the Environment and the Countryside” Under the RDP 2007-2013
CHARACTERISTICS OF MEASURES UNDERTAKEN WITHIN THE

FRAMEWORK OF AXIS 2 “IMPROVING THE ENVIRONMENT AND THE
COUNTRYSIDE” UNDER THE RDP 2007-2013
Antoni Mickiewicz1, PhD, professor

)DFXOW\RI(FRQRPLFV:HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQ
Pawel Mickiewicz2, PhD, professor
Faculty of Management, University of Social Sciences
Abstract. 7KH SDSHU SUHVHQWV GLIIHUHQW NLQGV RI VXSSRUW LQVWUXPHQWV LQ IUDPHV RI WKH &RPPRQ $JULFXOWXUDO
3ROLF\ ¿QDQFLDO DQG PDWHULDO ZKLFK ZDV XQGHUWDNHQ E\ 3RODQG LQ 5XUDO $UHDV 'HYHORSPHQW 3URJUDPPH
LQ 7KH FKDUDFWHULVWLF RI DFWLRQV XQGHUWDNHQ LQ $[LV ³6XSSRUW RI )DUPV LQ 0RXQWDLQV $UHDV DQG
2WKHU /HVV )DYRXUHG $UHDV /)$´ DJULHQYLURQPHQWDO SURJUDPPH LQFOXGH IRUHVWDWLRQ RI DJULFXOWXUDO
and non-agricultural land. The paper also pointed a problem related with renewing of forest production
destroyed by various catastrophes and implementation of preventive instruments in the RDP 2007-
2013.
Key words: area payments, additional payments, agri-environmental programme, natural environment
protection.
JEL code: Q18
Introduction Supporting land management in

Direct payments are one of the key instruments for mountain areas and other less favoured
LPSOHPHQWLQJ WKH &RPPRQ $JULFXOWXUDO 3ROLF\ ZKLFK
areas (LFA) under the RDP 2007-2013
is responsible for providing support and stability to
The measure related with supporting land
agricultural income, reducing production costs, and
management in mountain areas and other less favoured
maintaining farming activity in less favoured areas,
DUHDV /)$ ZDV UDQNHG ¿UVW RQ $[LV ,, ³,PSURYLQJ
ZKLFKDUHGLI¿FXOWWRIDUP
WKH (QYLURQPHQW DQG WKH &RXQWU\VLGH´ ZLWK WKH DLG
7KH VLJQL¿FDQFH RI FRXQWU\VLGH VKRXOG EH
amounting to EUR 2.5 billion. The objective of Axis II
analysed with reference to its characteristics, which
is to maintain sustainable rural growth, which entails
indicate that rural areas take up more than 93% of
improving the environment, appropriate farming
Poland’s area and they are inhabited by approx.
systems, and protecting unique natural resources in
38.8% of the total population. There are more
rural areas. The LFA scheme aims to ensure continued
than 1.7 million farms exceeding 1 ha of utilised
ODQG PDQDJHPHQW WKURXJK ¿QDQFLDO VXSSRUW WR IDUPHUV
DJULFXOWXUDO DUHD ZKLFK DUH LQYROYHG LQ DQG EHQH¿W
in areas where agricultural production or activity is
from subsidies under the programmes supporting
PRUH GLI¿FXOW 7KH DLG LV JUDQWHG LQ WKH IRUP RI DQQXDO
their development.
compensatory allowance. Pursuant to the RDP, to join
Agri-environmental programmes are some of
WKH VFKHPH D EHQH¿FLDU\ VKDOO KROG D IDUP RI DW OHDVW
the major undertakings aiming to improve the
1 ha, located in a LFA, and undertake to farm the LFA
standard of living in the countryside, by protecting
IRU¿YH\HDUV
the quality of the natural environment.
The Minister for Agriculture and Rural Development
(MA&RD) issued an ordinance of 11 April 2007 on
Aim and scope of the paper GHWDLOHG FRQGLWLRQV DQG SURFHGXUH IRU JUDQWLQJ ¿QDQFLDO
The fundamental research purpose was to aid to support farming activity in less favoured areas.
conduct a comparative analysis of the utilisation The payment is granted to support this activity up
of the EU funds within the framework of the RDP to the limit, which is the PLN equivalent of the euro
³,PSURYLQJ WKH (QYLURQPHQW DQG WKH &RXQWU\VLGH´ DQG DPRXQW VSHFL¿HG LQ WKH 3URJUDPPH 7KH FRPELQHG
measures related with supporting agri-environmental area of plots, where agricultural activity is conducted,
undertakings and agricultural land. shall be at least 1 ha (Journal of Laws No 68,
The research spanned a period between Item 448). Financial support for operating in LFA was
2007 and 2013, focusing on the number of given to farmers whose farms lay fully or partly in LFA,
applications submitted and amounts of payments and the area of utilised agricultural land was no less
made in individual voivodeships. The chief source than 1 ha. Subsidies applied to arable land as well as
of data was the ARMA Management Information orchards, permanent pastures and meadows amounting
System. to EUR 38 (PLN 179) per 1 ha in lowlands (Zone I),
___________________________
1
$XWKRU7HOID[(PDLODGGUHVV$QWRQL0LFNLHZLF]#]XWHGXSO
2
$XWKRU7HOID[(PDLODGGUHVV3DZHO0LFNLHZLF]#]XWHGXSO

ISSN 1691-3078
EUR 56 (PLN 264) in Zone II and EUR 68 (PLN 320) per growth and due to the need to counteract the so-called
1 ha in mountain areas. A degressive payment system overcompensation in individual farms. Support under
was applied due to the nature of the RDP, whose the LFA schemes is closely linked with direct
fundamental goal was to maintain sustainable rural payments, seen as declarations made on a single,
Table 1
Number of applications for the LFA support submitted under the RDP 2007-2013
Number of applications submitted

Voivodeship
2007 2008 2009 2010
Dolnoslaskie (Lower Silesian) 21481 21321 21238 20867
Kujawsko-Pomorskie (Kuyavian-Pomeranian) 31549 31286 31068 30969
Lubelskie (Lublin) 68446 68531 67891 67080
/XEXVNLH/XEXV] 16931 16858 16786 16691
/RG]NLH/RG] 77805 77643 77351 76075
Malopolskie (Lesser Poland) 57110 56268 55130 51716
0D]RZLHFNLH0DVRYLDQ 144079 144252 143459 141569
Opolskie (Opole) 7203 7160 7141 7055
Podkarpackie (Subcarpathian) 45916 46423 46527 43607
Podlaskie 70759 71163 71334 71116
Pomorskie (Pomeranian) 24128 24398 24322 24239
Slaskie (Silesian) 20083 20715 20422 19548
6ZLHWRNU]\VNLH 40851 40354 39522 37483
:DUPLQVNR0D]XUVNLH:DUPLDQ0DVXULDQ 31875 31558 31572 31678
Wielkopolskie (Greater Poland) 78994 78801 78645 78337
Zachodniopomorskie (West Pomeranian) 19125 18853 18793 18707
Total 756335 755584 751201 736737
Source: ARMA Management Information System
Table 2
Amounts of the LFA payments made under RDP 2007-2013 (in thousand PLN)
Amounts of payments made Total amounts of payments

Voivodeship
in 2007 in 2007-2009
Dolnoslaskie (Lower Silesian) 51254.6 149364.4
Kujawsko-Pomorskie (Kuyavian-Pomeranian) 102070.2 209388.5
Lubelskie (Lublin) 91517.3 272889.1
/XEXVNLH/XEXV] 50093.3 126057.7
/RG]NLH/RG] 106756.4 308734.9
Malopolskie (Lesser Poland) 63928.2 160027.7
0D]RZLHFNLH0DVRYLDQ 260651.1 757185.5
Opolskie (Opole) 11911.3 36055.5
Podkarpackie (Subcarpathian) 45079.6 135798.4
Podlaskie 185686.9 542990.2
Pomorskie (Pomeranian) 72337.8 198668.2
Slaskie (Silesian) 22695.4 69141.2
6ZLHWRNU]\VNLH 40480.9 119253.6
:DUPLQVNR0D]XUVNLH:DUPLDQ0DVXULDQ 100910.6 290078.4
Wielkopolskie (Greater Poland) 188514.7 504429.5
Zachodniopomorskie (West Pomeranian) 65311.5 182209.9
Total 1459199.8 4062272.7

ISSN 1691-3078
common application form. The receipt of applications year and then withheld altogether (Journal of Laws
VWDUWHG RQ 0DUFK LQ WKH ¿UVW \HDU RI WKH No 68, Item 448). Financial aid is granted in the form
current programming period, and on a similar date RI DQQXDO ÀDWUDWH SD\PHQWV NQRZQ DV FRPSHQVDWRU\
(15 March 2008) in the second year of implementing allowance granted per hectare of utilised agricultural
WKH &RPPRQ $JULFXOWXUDO 3ROLF\ 7KH QXPEHU RI DUHDFODVVL¿HGDV/)$$GPLQLVWUDWLYHGHFLVLRQVDUHLVVXHG
submitted applications was related with the area within 6 months of submitting the application, and 30
FODVVL¿HGDVOHVVIDYRXUHGLQDSDUWLFXODUWHUULWRULDOXQLW days later the farmer receives its payment. Moreover,
,Q DEVROXWH ¿JXUHV WKH ELJJHVW QXPEHU RI DSSOLFDWLRQV the farmer is obliged to keep records for 5 years back
ZDV VXEPLWWHG HYHU\ \HDU LQ 0D]RZLHFNLH . of documents such as proofs of purchase of fertilisers or
:LHONRSROVNLH . /RG]NLH . 3RGODVNLH FURS SURWHFWLRQ SURGXFWVWUDFWRU VSUD\HUFHUWL¿FDWHVRU
(70.7 K), and Lubelskie (68.4 K). In turn, if the issue completing environmental protection training.
is to be perceived relative to the overall number
of farms in a certain voivodeship, then the most
applications were submitted in Podlaskie (76.7%),
Agri-environmental programme (agri-
:DUPLQVNR0D]XUVNLH :LHONRSROVNLH environmental payments) within the
and Lubuskie (52.5%) compared with 40.1% nationwide. RDP 2007-2013
$FFRUGLQJ WR WKH GH¿QLWLRQ RI /HVV )DYRXUHG $UHDV In the programming period 2007-2013, measures
support may be applied to the part of utilised agricultural ZLWKLQ WKH IUDPHZRUN RI WKH 5'3 DUH ¿QDQFHG YLD WKH
area, which is located in such an area, and not always to European Agricultural Fund for Rural Development.
the farm as a whole. Hence, the number of applications Agri-environmental payments were ranked second
was not the same as the utilised agricultural area covered RQ $[LV ³,PSURYLQJ WKH (QYLURQPHQW DQG WKH
by the LFA schemes. &RXQWU\VLGH´ 7KH REMHFWLYH RI $[LV ,, LV WR PDLQWDLQ
The percentage of approved applications in the VXVWDLQDEOH UXUDO JURZWK ZKLFK HQWDLOV ¿UVW DQG
overall number submitted was generally high and foremost improving the environment, appropriate
amounted to 97.5% in 2007, which went up to 98.7% farming systems, and protecting the unique natural
in 2010. resources in rural areas. Some of the measures in Axis 2
In 2007, the amount of payments made under are compensatory in nature due to the restrictions on
the LFA schemes amounted to PLN 1459.6 million. agricultural production in protected areas (NATURA 2000
On average, the amount of aid per single application sites). The agri-environmental programme, in turn,
was PLN 1929, whereas the highest averages were aims to improve the natural environment in rural areas
found in Zachodniopomorskie (PLN 3414), Kujawsko-
by preserving valuable habitats, promoting sustainable
3RPRUVNLH 3/1 DQG :DUPLQVNR0D]XUVNLH
farming systems, developing landscape structures, and
(PLN 3165). In turn, the voivodeships with the lowest
protection of local breeds of livestock. Initially, agri-
average aid per application included Podkarpackie
environmental programmes included 9 packages. Each
3/1 DQG 6ZLHWRNU]\VNLH3/1 ,Q
package contains variants, which contain obligations
WKH WRWDO DPRXQW RI ¿QDQFLDO DLG DPRXQWHG WR
WR LPSOHPHQW FHUWDLQ GHWDLOHG WDVNV VSHFL¿HG LQ
PLN 4062.2 million, and the voivodeship totals were
the ordinance of the Minister for Agriculture and Rural
WKH KLJKHVW LQ 0D]RZLHFNLH 3/1 PLOOLRQ
Development of 28 February 2008.
Podlaskie (PLN 542.9 million), and Wielkopolskie
,QVHYHUDOVLJQL¿FDQWFKDQJHVZHUHLQWURGXFHG
(PLN 504.4 million).
7KH IDUPHU UHFHLYLQJ ¿QDQFLDO DLG XQGHU WKH /)$ to the agri-environmental programme, which altered its
scheme was obliged to comply with certain obligations functioning, including:
resulting from the applicable regulations, which make 1) SDFNDJH1RÉXIIHU]RQHV´ZDVUHPRYHGIURPWKH
this scheme clearly different from area payments. While list;
GLUHFW SD\PHQWV DUH QRW VXEMHFW WR ¿QDQFLDO UHVWULFWLRQV 2) an obligation was introduced to register the agri-
providing for the repayment of aid should certain HQYLURQPHQWDO DFWLYLW\ SODQ LQ WKH ,&7 V\VWHP
conditions fail to be met, in the case of LFA, aid rigorous DGPLQLVWUDWHGE\WKH$JULFXOWXUDO$GYLVRU\&HQWUHLQ
adherence to the principles of good agricultural practice Brwinow;
is a basic criterion. In the ordinance of the MA&RD, it 3) the scope of records kept by farmers on their
LV VWLSXODWHG WKDW WKH ¿UVW WLPH WKH IDUPHU LV IRXQG QRW agri-environmental activities was expanded, by
to comply with these rules, s/he is only cautioned and introducing the obligation to record activities for the
the non-compliance is noted in the inspection minutes. entire holding with regard to all the used fertilisers.
If, in the course of a subsequent inspection, s/he is &RPSDULVRQ RI DJULHQYLURQPHQWDO SDFNDJHV
found to continue to fail to comply with the principles, implemented in 2004-2006 and those implemented in
then the payments are reduced by 7% in the particular 2007-2013, as listed in the RDP, can be found below:
2004-2006 2007-2013
1. Sustainable farming 1. Sustainable farming
2. Organic farming 2. Organic farming
3. Maintaining extensive meadows 3. Extensive permanent grasslands
4. Maintaining extensive pastures 4. Protection of birds and natural habitats outside Natura 2000
5. Protection of soil and water 5. Protection of birds and natural habitats within Natura 2000
%XIIHU]RQHV 6. Preservation of plant genetic resources
7. Preservation of local animal breeds 7. Protection of soil and water
%XIIHU]RQHV

ISSN 1691-3078
According to the comparison, the new packages outside Natura 2000 sites as well as in Natura 2000
introduced under the RDP 2007-2013 were the protection sites. The packages come in 41 variants, with the
of endangered birds species and natural habitats biggest number (12) in the organic farming package.
Table 3
Number of applications submitted within the framework of agri-environmental
programmes under the RDP 2007-2013

Voivodeship
2007 2009 2010
Dolnoslaskie (Lower Silesian) 851 1422 2361
/XEXVNLH/XEXV] 529 864 1741
/RG]NLH/RG] 906 1422 2535
Opolskie (Opole) 227 433 1187
Podkarpackie (Subcarpathian) 1606 2855 4954
Podlaskie 1 686 3120 5242
Slaskie (Silesian) 282 473 795
6ZLHWRNU]\VNLH 1 886 3097 4482
TOTAL 21 711 37360 64938
Table 4
Amounts of aid disbursed in agri-environmental programmes under
the RDP 2007-2009 (in thousand PLN)
Voivodeship Amounts of payments made in 2007-2009

Dolnoslaskie (Lower Silesian) 27489.6
Kujawsko-Pomorskie (Kuyavian-Pomeranian) 55049.8
Lubelskie (Lublin) 40651.1
/XEXVNLH/XEXV] 21283.2
/RG]NLH/RG] 9621.6
Malopolskie (Lesser Poland) 24398.6
0D]RZLHFNLH0DVRYLDQ 43999.7
Opolskie (Opole) 6486.4
Podkarpackie (Subcarpathian) 27151.9
Podlaskie 40156.6
Pomorskie (Pomeranian) 39652.3
Slaskie (Silesian) 5408.6
6ZLHWRNU]\VNLH 19520.5
:DUPLQVNR0D]XUVNLH:DUPLDQ0DVXULDQ 57919.9
Wielkopolskie (Greater Poland) 42865.7
Zachodniopomorskie (West Pomeranian) 53301.4
TOTAL 514956.9

ISSN 1691-3078
A farm may implement any number of packages, Agri-environmental payments are paid out according
except that the organic farming and sustainable WRÀDWUDWHVDQGWKH\DUHPHDQWWRFRQVWLWXWHFRPSHQVDWLRQ
farming packages shall not be combined. According for lost income and additional costs. They are granted to
to the data of the RDP 2007-2013, the amount of farmers who volunteer to undertake tasks stipulated in
EUR 2303.7 million was allocated for these measures. the agri-environmental packages. It is a form of long-
More than 124 thousand applications were submitted WHUP DLG GLVEXUVHG DQQXDOO\ DIWHU D VSHFL¿F VHW RI
in 2007- 2010. tasks listed in a certain variant is completed. Payments
In 2007-2009, the payments within the framework of are calculated per hectare of area, head of livestock or
agri-environmental programmes amounted to PLN 514.9 running metre of linear element. Agri-environmental
million, and the highest amounts of aid were paid out payments are granted to farmland utilised as arable land,
LQ :DUPLQVNR0D]XUVNLH 3/1 PLOOLRQ .XMDZVNR meadows, pastures, and orchards.
Pomorskie (PLN 55.0 million), Zachodniopomorskie Amounts in individual agri-environmental packages
3/1PLOOLRQDQG0D]RZLHFNLH3/1PLOOLRQ can be found below:
Type of package Payment rates

- sustainable farming 360 PLN/ha
- organic farming 280-1800 PLN/ha
- extensive permanent grasslands 500 PLN/ha
- protection of endangered birds outside Natura 2000 550-1200 PLN/ha
- protection of endangered birds in Natura 2000 550-1390 PLN/ha
- preservation of genetically endangered plants 570-4700 PLN/ha
- preservation of genetically endangered animals 320-1500 PLN/head
- protection of soil and water 330-420 PLN/ha
EXIIHU]RQHV 40-110 PLN/100rm.
)ROORZLQJWKHUHIRUPRIWKH&RPPRQ$JULFXOWXUDO a farmer could implement 3 packages, they could not

Policy, the approach with regard to the EU support for be any packages of choice but had to be closely linked
WKHDJULFXOWXUDOVHFWRUZDVPRGL¿HGVRWKDWLWVSULQFLSOHV ZLWKRWKHUSDFNDJHVRURQO\LQSULRULW\]RQHVZKLFKPDGH
were more closely linked with area payments. Direct LWGLI¿FXOWWRFKRRVHDQDSSURSULDWHYDULDQWIRUDFHUWDLQ
payments became contingent upon farmers meeting site.
a series of requirements, known as cross-compliance The new RDP 2007-2013 had to take into account the
requirements. FRVWVRI¿QDQFLDODLGXQGHUPHDVXUHVIURPWKHSUHYLRXV
Generally speaking, advisory support should be edition of RDP 2004-2006, as contracts were concluded
provided in 22 measures included in the RDP 2007-2013, for 5 years, and the rural development programme
HVSHFLDOO\LQIRXUPHDVXUHVLQ$[LVLH³8VHRI$GYLVRU\ covered a period of 3 years. With regard to the agri-
6HUYLFHV E\ )DUPHUV DQG )RUHVW +ROGHUV´ $[LV ³$JUL environmental packages, the Minister for Agriculture and
HQYLURQPHQWDO3URJUDPPHV´Ä6XSSRUWIRU)DUPHUVLQ/)$´ 5XUDO'HYHORSPHQWLVVXHGWZRRUGLQDQFHVDQGWKH&RXQFLO
DQGÄ$IIRUHVWDWLRQRI$JULFXOWXUDO/DQG´,QWXUQ³&URVV of Ministers one, to correct the initial arrangements.
FRPSOLDQFH´ D YHU\ LPSRUWDQW SURJUDPPH DSSOLFDEOH LQ &KDQJHVZHUHDLPHGDWOLPLWLQJWKHQXPEHURISDFNDJHV
Poland as of 1 January 2009 and in the EU from 2005, EXIIHU]RQHVSURORQJLQJWKHGHDGOLQHIRUWKH$JHQF\WR
puts an obligation on the state to provide effective issue a decision on granting agri-environmental payments
advisory support to all farmers receiving area payments. DQGLQWURGXFLQJWKH,&7V\VWHP
Assessments of whether farmers comply with the cross-
compliance instruments will cover 1% of holdings every
Afforestation of agricultural land and
year. This means that 15 thousand farms will be subject
to such an assessment. The RDP 2007-2013 provides for non-agricultural land within the RDP
support under agri-environmental programmes to 200 2007-2013
thousand holdings, the LFA schemes to 750 thousand At present, the situation in agriculture is such that with
farmers and 52 thousand forest holders. WKH PDUNHG LQFUHDVH LQ SURGXFWLYLW\ DQG LQWHQVL¿FDWLRQ
$JULHQYLURQPHQWDOPHDVXUHVZHUHGH¿QLWHO\VRPHRI of land management, one could easily do without the
WKH PRUH GLI¿FXOW XQGHUWDNLQJV LQ ERWK 5'3V 3UREOHPV several thousand hectares of marginal and degraded
resulted from the large number of packages, numerous land that can be found in Poland. Moreover, in terms of
YDULDQWV DQG WDVNV VLJQL¿FDQW WHUULWRULDO UHVWULFWLRQV WR food security, Poland is a part of a broad coalition of the
SULRULW\]RQHVLQWKH¿UVW5'3DQGVSHFLDO Member States and socio-economic community.
IRFXVRQHQYLURQPHQWDOSURWHFWLRQ7KHGHJUHHRIGLI¿FXOW\ The above-mentioned measure was ranked third in
is illustrated by the fact that advisory support may be $[LV³,PSURYLQJWKH(QYLURQPHQWDQGWKH&RXQWU\VLGH´
provided solely by a holder of an agri-environmental ,Q 3RODQG D VLJQL¿FDQW SHUFHQWDJH RI VRLOV XVHG DV
DGYLVRU FHUWL¿FDWH LVVXHG E\ WKH $JULFXOWXUDO $GYLVRU\ DJULFXOWXUDO ODQG FDQ EH FODVVL¿HG DV ORZ TXDOLW\
&HQWUH LQ %UZLQRZ ,Q WKH 5'3 DPRQJ WKH Afforestation of such land would increase its value as
7 packages included in the programme, three could be well improve the statistical indicators related with the
LPSOHPHQWHG RQO\ LQ SULRULW\ ]RQHV ZKLFK VLJQL¿FDQWO\ area of forests in the country. The proposed solutions
limited the number of eligible farmers. Moreover, while with regard to the manner of cultivation, its composition,

ISSN 1691-3078
Table 5
Number of applications submitted for the afforestation of
agricultural land under the RDP 2007-2013, Scheme I

Voivodeship
2007 2008 2009 2010
/XEXVNLH/XEXV] 63 32 34 57
/RG]NLH/RG] 222 170 204 249
Opolskie (Opole) 36 31 28 26
Podlaskie 117 109 171 165
6ZLHWRNU]\VNLH 250 189 229 263
Total 2677 1844 2424 2603
DQG XVH RI H[LVWLQJ VHOIVHHGLQJV ZLOO KDYH D EHQH¿FLDO and Scheme II – afforestation of non-agricultural land
effect on maintaining biodiversity and the condition of (Journal of Laws No. 114, Item 786).
forest plantations. The objective of the measure is to In 2007, applications were collected for the
expand forest areas through afforestation, to maintain afforestation of agricultural land. In turn, from 1 August
and to enhance the ecological stability of forest areas to 30 September 2008, one could apply for aid under
by reducing the fragmentation of forest complexes and the afforestation on non-agricultural land scheme. The
establishing ecological corridors as well as to increase the number of applications for the afforestation of agricultural
role of forests in the global carbon balance and to reduce land is presented in the table below.
climate change (RDP, 2007). The number of applications submitted annually
The ordinance of the Minister for Agriculture and remains high, ranging from 1844 to 2677. Overall, in
5XUDO 'HYHORSPHQW RI -XQH VSHFL¿HV LQ GHWDLO 2007-2010, the highest number of applications were
WKHFRQGLWLRQVIRUDSSO\LQJIRUWKH¿QDQFLDODLG7KHDLGLV VXEPLWWHGLQ0D]RZLHFNLH3RGNDUSDFNLH
JUDQWHGWRIDUPHUVZLWKLQWKHPHDQLQJRIWKH&RXQFLO(& DQG6ZLHWRNU]\VNLH
regulations, establishing common principles for direct The number of applications submitted annually for
VXSSRUW VFKHPHV ZLWKLQ WKH IUDPHZRUN RI WKH &RPPRQ the afforestation on non-agricultural land amounted to
Agricultural Policy. approximately 400 on average.
The aid is granted to the following individuals and Afforestation of agricultural and non-agricultural
business entities: land incurred spending of PLN 1467 million in the period
1) farmers; under analysis. Relative to the number of applications
2) groups of farmers (at least 3 individuals), with submitted, the highest amounts of aid were granted to
bordering holdings with a total area amounting to no WKH EHQH¿FLDULHV IURP 0D]RZLHFNLH 3/1 PLOOLRQ
less than 2 ha; :DUPLQVNR0D]XUVNLH3/1PLOOLRQDQG3RGNDUSDFNLH
3) local government units or organisational units of (PLN 11 million).
gminas, poviats and voivodeships.
To receive support, a farmer shall hold land ranging
Restoring forestry potential after natural
from 0.5 ha to 20.0 ha and of adequate width (20 m).
Afforestation aid is divided into: disasters and introducing prevention
1) afforestation grant; schemes within the RDP 2007-2013
2) maintenance premium; The fundamental objective of this measure is to
3) forest premium. restore and maintain tree stands destroyed by biotic and
Afforestation can proceed under one of the two abiotic factors, and to introduce mechanisms preventing
schemes: Scheme I – afforestation of agricultural land QDWXUDOGLVDVWHUVHVSHFLDOO\¿UH7KHDLGLVSURYLGHGEDVHG

ISSN 1691-3078
Table 6
Number of applications submitted for the afforestation of
non-agricultural land under the RDP 2007-2013, Scheme II

Voivodeship
2008 2009 2010
Dolnoslaskie (Lower Silesian) 23 9 4
Kujawsko-Pomorskie (Kuyavian-Pomeranian) 16 12 13
Lubelskie (Lublin) 57 74 42
/XEXVNLH/XEXV] 10 3 3
/RG]NLH/RG] 12 16 8
Malopolskie (Lesser Poland) 14 14 13
0D]RZLHFNLH0DVRYLDQ 62 67 54
Opolskie (Opole) 12 3 5
Podkarpackie (Subcarpathian) 89 77 98
Podlaskie 23 7 9
Pomorskie (Pomeranian) 11 8 6
Slaskie (Silesian) 6 7 5
6ZLHWRNU]\VNLH 16 30 20
:DUPLQVNR0D]XUVNLH:DUPLDQ0DVXULDQ 31 35 24
Wielkopolskie (Greater Poland) 16 15 5
Zachodniopomorskie (West Pomeranian) 14 16 11
Total 412 393 320
Table 7
Amounts of payments disbursed for afforestation of agricultural land and non-agricultural land
under the RDP 2007-2013 (in thousand PLN)
Voivodeship Amounts of payments made

Dolnoslaskie (Lower Silesian) 8436
Kujawsko-Pomorskie (Kuyavian-Pomeranian) 6443
Lubelskie (Lublin) 10694
/XEXVNLH/XEXV] 3787
/RG]NLH/RG] 7437
Malopolskie (Lesser Poland) 2421
0D]RZLHFNLH0DVRYLDQ 28425
Opolskie (Opole) 2134
Podkarpackie (Subcarpathian) 10810
Podlaskie 6727
Pomorskie (Pomeranian) 10401
Slaskie (Silesian) 2379
6ZLHWRNU]\VNLH 7567
:DUPLQVNR0D]XUVNLH:DUPLDQ0DVXULDQ 22549
Wielkopolskie (Greater Poland) 8953
Zachodniopomorskie (West Pomeranian). 7574
Total 146737

ISSN 1691-3078
Table 8
Number of applications submitted and amounts of aid for restoring forestry potential
under the RDP 2007-2013 (in thousand PLN)
Number of Applications following Number of

5HTXHVWHG
Voivodeship applications economic and technical contracts
amount of aid
submitted assessment concluded
Kujawsko-Pomorskie (Kuyavian-
10 5 5 10327
Pomeranian)
/XEXVNLH/XEXV] 9 2 2 17078
/RG]NLH/RG] 14 8 7 27356
Opolskie (Opole) 6 2 2 19788
Podlaskie 12 3 3 17222
6ZLHWRNU]\VNLH 10 7 7 10169
:DUPLQVNR0D]XUVNLH:DUPLDQ
22 18 16 61076
Masurian)
Zachodniopomorskie (West
6 3 3 12621
Pomeranian)
Total 169 83 77 369998
on comprehensive forest projects. It is assumed that the — Scheme II – introduction of preventive measures
objectives are met by clearing damaged forest areas, LQ DUHDV UDQNHG LQ WKH WRS WZR FDWHJRULHV RI ¿UH
preparing forest planting material, gradual restoration KD]DUG %HQH¿FLDULHV VKDOO LQFOXGH XQLQFRUSRUDWHG
of destroyed tree stands including maintenance and organisational units of the State Forests National
protection of established cultivations, maintenance and Forest Holding. Aid shall be granted under a contract
protection of damaged tree stands in all age classes and and shall involve reimbursement of incurred costs.
valuable forest landmarks, opening forests to the public Out of 169 submitted applications, 83 applications
by building and upgrading forest tourist and educational (49.1%) were approved in the course of economic and
LQIUDVWUXFWXUH DQG UHLQIRUFLQJ IRUHVW ¿UH SURWHFWLRQ technical assessment. The total requested amount of aid
systems. reached PLN 370 million. Following the amendment to the
Aid granted under the above measure will be MA&RD ordinance, changes were introduced to update
available in the event of natural disaster (wind, snow, the list of forest divisions eligible for aid under Scheme I.
ÀRRG DYDODQFKH ODQGVOLGH KDUPIXO ELRWLF IDFWRUV RU The scheme applies to areas affected by natural disasters
¿UH LQ IRUHVW DUHDV DQ\ZKHUH LQ WKH WHUULWRU\ RI WKH or cataclysms. These areas were chosen based on reports
Republic of Poland, irrespective of the form of ownership. to the minister responsible for environmental matters.
Support within the framework of the measure may Moreover, the MA&RD ordinance aimed to introduce
be given to projects related with preparing forest changes simplifying the implementation process,
reproductive material for the purposes of restoring including:
destroyed forests, clearing damaged forest area or forest — waiver of obligatory compliance of the operation with
restoration including maintenance and protection of the forest management plan, if the forest division
established nurseries. Moreover, the aid can be granted has a plan drawn up pursuant to the Fire Protection
for the maintenance and protection of damaged tree Act;
stands and valuable natural monuments, and making — making the terms of support independent of
forest areas accessible for their social functions. commencing public tendering proceedings within a
The measure is implemented under two schemes, VSHFL¿FGHDGOLQH
including: — HQVXULQJ EHQH¿FLDULHV¶ FRPSOLDQFH ZLWK WKH (8
— Scheme I – support for areas affected by a natural requirements regarding separate accounting
disaster or cataclysm; systems;

ISSN 1691-3078
— providing an option for the applicants to make a one- There is a lack of compliance with the rules-compliance
RIIPRGL¿FDWLRQLQWKHLUDSSOLFDWLRQZLWKUHJDUGWRWKH risk reduction in direct aid payments, and ultimately the
¿QDQFLDO SODQ RI WKH RSHUDWLRQ 0$ 5' RUGLQDQFH world.
2010). The second area analysis the study concerned was the
evolution of Pillar II in rural areas. Actions implemented
LQWKHIUDPHZRUNRI3LOODU,,RIWKH&$3ZHUHDGGUHVVHG
Conclusions
to 91% of the areas referred to as rural areas, which
7KH UHVHDUFK VKRZV WKDW WKH &RPPRQ $JULFXOWXUDO
encompass more than 56% of the EU population. Rural
3ROLF\GXULQJWKHLQWHJUDWLRQZHQWWKURXJKVLJQL¿FDQWDQG
development policy is essential in terms of land use and
systematic evolution and change directions in support of
PDQDJHPHQWRIQDWXUDOUHVRXUFHV,WLVWKHGLYHUVL¿FDWLRQ
agriculture. First of all, in consideration of the policy and
of rural economic-agricultural economic departments
due to transparency and public opinion, it was found that
allowing to establish non-agricultural economy
SXEOLF VSHQGLQJ RQ DJULFXOWXUH VKDOO EH PRUH MXVWL¿HG
departments.
beyond the purpose of which it was to raise farmers’
income. Farmers should to a greater extent provide high
quality food, fair treatment of animals, the protection Bibliography
RI WKH HQYLURQPHQW DQG WKH ODQGVFDSH 7KH &RXQFLO 1. 0LFNLHZLF]$Przebieg i realizacja dzialan w
UHJXODWLRQV(&LQWURGXFHJUDGXDOFKDQJHVWKDW ramach I i II Filara Wspolnej Polityki Rolnej (analiza)
1) remove the link between production and direct (History and Implementation of Activities in Frames
payments; RI3LOODUV,DQG,,RIWKH&RPPRQ$JULFXOWXUDO3ROLF\
2) state the dependence of payments to meet the $QDO\VLV=87Z6]F]HFLQLH
standards for the protection of the environment; 2. 5R]SRU]DG]HQLH 0LQLVWUD 5ROQLFWZD L 5R]ZRMX :VL ]
3) VLJQL¿FDQWO\LQFUHDVHVXSSRUWIRUWKHGHYHORSPHQWRI UZVSUDZLHSRG]LDOXVURGNRZ3URJUDPX
rural areas, by modifying the aid with the exception 5R]ZRMX 2EV]DURZ :LHMVNLFK QD ODWD
of those for the small farmers; (Regulation of Ministry for Agriculture and Rural
4) introduce new rural development measures, in order Development of 18 March 2009 on Allotment of
to improve the quality of production and food safety. Means in Programme of Rural Development for
7KHVH FKDQJHV DUH VSHFL¿F OHJDO VWDQGDUG ZKLFK 2007-2013).
governs the behaviour of farmers in agricultural 3. 5R]SRU]DG]HQLH 0LQLVWUD 5ROQLFWZD L 5R]ZRMX :VL ]
production and the environment. This action is closely U]PLHQLDMąFHUR]SRU]DG]HQLHZVSUDZLH
DVVRFLDWHGZLWKWKHH[LVWLQJLQVWUXPHQWVRIWKH&RPPRQ SRG]LDOX VURGNRZ ] 3URJUDPX 5R]ZRMX 2EV]DURZ
Agricultural Policy. Initially, the cross-compliance rules Wiejskich na lata 2007-2013 (Regulation of Ministry
related with direct payments, after the amendment of for Agriculture and Rural Development of 10 August
WKH\H[WHQGHGWKHPHFKDQLVPRIDFWLRQVSHFL¿HGLQ &KDQJLQJ5HJXODWLRQRQ$OORWPHQWRI0HDQVLQ
Axis 2 of the Rural Development Programme 2007-2013. Programme o Rural Development for 2007-2013).

ISSN 1691-3078
D. K. Zuzek Business Activity of Small and Medium Enterprises in Poland in
Light of The Concept of Sustainable Development
BUSINESS ACTIVITY OF SMALL AND MEDIUM ENTERPRISES IN

POLAND IN LIGHT OF THE CONCEPT OF SUSTAINABLE DEVELOPMENT
Dagmara K. Zuzek1, PhD

$JULFXOWXUDO8QLYHUVLW\LQ&UDFRZ)DFXOW\RI(FRQRPLFV
Abstract. The idea of sustainable development arouse from the need to alleviate and prevent unfavourable external
results of dynamic development of capitalist economy during the previous century. Developing of the theory
and implementation of the concept in practice is an ongoing process. This continuous process requires constant
balancing of its three dimensions, i.e. economic, ecological and social dimension. Weakening or strengthening any
of these elements at the cost of the others may lead to crisis in all the three dimensions. Therefore, this kind
RI GHYHORSPHQW ZLOO XQGHUJR WKH LQÀXHQFH RI XQNQRZQ DQG LPSRVVLEOH WR SUHGLFW FKDQJHV RI H[WHUQDO DQG LQWHUQDO
conditions.
Key words:VXVWDLQDEOHGHYHORSPHQWVPDOODQGPHGLXPVL]HGHQWHUSULVHVEDUULHUV
JEL code: Q18
Introduction Results and discussion

The idea of sustainable development emerged 1. Concepts and principles of sustainable
from the need to attenuate and prevent unfavourable development
external effects of dynamic growth of capitalist economy 7KHFRQFHSWRIVXVWDLQDEOHGHYHORSPHQWZDVGH¿QHG
in the course of last century. The theory is still being in the Environment Protection and Management Act
built and implemented. It is a continuous process, of 31 January 1980 (Journal of Laws 94.49.196),
whose fundamental condition is constant compensation ZKLFK VWDWHV WKDW ³VXVWDLQDEOH GHYHORSPHQW LV
of its three dimensions, i.e. economic, ecologic and such a type of social and economic development in
social. Weakening or strengthening of any of these which the process of integrating political,
elements at the expense of others may eventually economic and social activities occurs with the
lead to crises in all three dimensions. Hence, aim of balancing opportunities of access to the
it appears that this type of development will be environment to individual societies or their
subject to unknown and presently unforeseeable FLWL]HQV ± ERWK FRQWHPSRUDU\ DQG IXWXUH JHQHUDWLRQV ±
FKDQJHV RI H[WHUQDO DQG LQWHUQDO FRQGLWLRQV =X]HN ' while maintaining natural balance and stability of
2010). IXQGDPHQWDOQDWXUDOSURFHVVHV´
7KH UHDOL]DWLRQ RI WKH VXVWDLQDEOH GHYHORSPHQW Wide-ranging understanding of stable and
FRQFHSW GHSHQGV RQ VSHFL¿F GHYHORSPHQW FRQGLWLRQV VXVWDLQDEOH GHYHORSPHQW HQDEOHV WR GH¿QH LW DV D
and factors, the degree of achieved development and set of determinants (spheres or planes), a set of
the development objectives set. Because the principle characteristics, and a set of principles or as a more or
is of multi-disciplinary character, its interpretation less integrated order (Borys T., 1999).
depends to a certain degree on whether it is ecologists, Initially, the focus was only on two aspects –
economists or representatives of natural sciences who HFRQRPLF DQG HFRORJLFDO EHWZHHQ ZKLFK VSHFL¿F
make it. relationships occur. In the ecological dimension, the
$OO WKH DFWLRQV PLQLPL]LQJ DGYHUVH LPSDFW RQ WKH focus was on maintaining adequate quality of natural
natural environment undertaken by an enterprise environment and rational use of resources. Whereas
FDQ EH GHHPHG DV D GHPRQVWUDWLRQ RI WKH IXO¿OPHQW the social dimension was not considered too
of the sustainable development concept. In this way, important, yet it has appeared that it is connected with
companies contribute to preserving adequate the improvement of people’s living conditions, access
quantity and quality of natural capital, which serves to infrastructure and smooth operation of economic
DV WKH EDVLV IRU WKH IXO¿OPHQW RI FXUUHQW DQG IXWXUH systems.
generations’ needs as well as adapting the scale There are many references to a three-dimensional
of the economy to ecosystems based on which it model of sustainable development in literature.
operates. More and more frequently, an institutional aspect
The objective of the article is to present the main is also added, and at times spatial, moral and
principles of sustainable development considering the awareness aspects as well (Dresler E., 2006).
enterprises operating according to those principles. The concept of sustainable development as a set of
,QWHUQDO DQG H[WHUQDO EHQH¿WV UHVXOWLQJ IURP SUR objectives may be linked with the three-dimensional
ecological operation of small and medium enterprises PRGHO7KHGLPHQVLRQVVSHFL¿HGDERYHFDQEHWUHDWHGDV
were indicated along with major barriers enabling their planes for detailing particular ecological, economic and
operation. social objectives.
___________________________
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ISSN 1691-3078
Source: Author’s compilation based on J. Adamczyk, 2001
Fig.1 Transformation of the concept of sustainable development to enterprise level
2. An enterprise in the concept of sustainable Environmental Management System – EMS, which is

development a part of a general management system in an enterprise
Understanding of the principles of sustainable DQG FRQFHUQV ¿WWLQJ RI HQYLURQPHQWDO DVSHFWV LQWR
development ought to be obligatory, especially for economic processes, may play a special role in the
HQWHUSULVHV VLQFH HQWHUSULVHV KDYH D VLJQL¿FDQW LPSDFW implementation of sustainable development concept by
on the environment. an enterprise.
7KH UHDOL]DWLRQ RI VXVWDLQDEOH GHYHORSPHQW LGHD RQ ³, (FRORJLFDO 3ROLF\ RI WKH 6WDWH´ GHOLQHDWHV DFWLRQV
a global scale will not be possible if is not implemented to be taken in respect of industrial policy for the
at a microeconomic level (Figure 1). In the practice of implementation of the sustainable development model
enterprise operation, limiting and preventing pollutant (Act of the Seym, 1991):
emissions created during production processes is of 1) more extensive introduction of a technology that
JUHDWHVWVLJQL¿FDQFHIURPWKHSRLQWRIYLHZRIHQYLURQPHQW generates little or no waste, closed water cycles,
conservation. production hermetisation, resulting in decreasing the
In practice, the implementation of sustainable amount of pollution generated and discharged;
development concept requires that enterprises take the 2) reducing the production that is high on energy,
IROORZLQJDFWLRQV.R]ORZVNL6 material and water consumption;
— limiting dependency on non-renewable energy raw 3) adequate operation of pollution reduction equipment
materials; by properly trained services of environment
— limiting emissions of coal, sulphur, and nitrogen into protection in an enterprise.
the atmosphere; It seems legitimate that implementation of an
— reducing existing and counteracting new emission of environment management systems requires raising
toxic pollutants into soil and water. ecological awareness of managers and employees so that

ISSN 1691-3078
Source: Author’s compilation
Fig. 2.([WHUQDODQGLQWHUQDOEHQH¿WVIURPFRQGXFWLQJSURHFRORJLFDODFWLYLWLHs
environment protection becomes a part of the company’s 7KHUHDUHWZRW\SHVRIIDFWRUVWKDWLQÀXHQFHFRPSDQ\

RUJDQL]DWLRQDOFXOWXUH,WLVH[WUHPHO\LPSRUWDQWDVQRW dynamics at different time and in different manner:
all aspects of enterprise operation and its links to the a moment of entry, when an idea undergoes a phase
natural environment can be regulated with economic RI UHDOL]DWLRQ DQG D PRPHQW LQ ZKLFK D FRPSDQ\
or legal instruments. Therefore, if business entities undergoes a phase of growth, or it starts to decline. Both
implement an environment management system, they at the moment of entry and at later stages, companies
analyse all aspects of their activities and undertake such encounter entry and development barriers. Entry barriers
DFWLRQV ZKLFK KDYH D VLJQL¿FDQW LPSDFW RQ VXVWDLQDEOH occur at a moment of starting up a business activity, and
production. WKH\ FRQFHUQ SUREOHPV UHODWHG WR D FRPSDQ\¶V ¿QGLQJ
7KH EHQH¿WV UHVXOWLQJ IURP WKH HQYLURQPHQW LWV SODFH RQ WKH PDUNHW 7\SLFDOO\ WKHUH DUH GLI¿FXOWLHV
management system include a decrease of enterprise linked with vagueness of legal regulations, unfavourable
operation costs (Figure 2). Their reduction oftentimes business climate, and high costs of investments,
DULVHV IURP UDWLRQDOL]DWLRQ RI HQHUJ\ ZDWHU DQG UDZ SDWHQWV FRUUXSWLRQ DQG LQFRPSHWHQFH RI VWDWH RI¿FLDOV
materials consumption. Pro-ecological actions also Development barriers concern companies already
concern reducing harmful amounts of waste and sewage operating on the market, and they occur at a critical point
generated in production processes. Participation of a of survival, when a company moves to a stage of growth
company in pro-ecological activities also contributes RUGHFOLQH7KHLULQÀXHQFHRQDFRPSDQ\¶VGHYHORSPHQW
to its positive image in the external environment, varies.
which may translate into competitiveness growth Apart from various barriers hindering enterprise
or strengthening such a company’s position on the growth at every phase of their life cycle, there are also
market. universal barriers limiting growth, independent from the
stage of enterprise life. They occur all over the world,
LUUHVSHFWLYHO\IURPWKHVSHFL¿FLW\RIWKH60(VHFWRULQD
,GHQWL¿FDWLRQ RI EDUULHUV WR VXVWDLQDEOH given country and typically, they are considered in three
development of small and medium enterprises areas (Storey D. J., 1995):
In order to analyse barriers to the growth of small — PDQDJHPHQW EDUULHUV ± UHVXOWLQJ IURP LQVXI¿FLHQW
DQG PHGLXP HQWHUSULVHV WKHLU FODVVL¿FDWLRQ LV UHTXLUHG managerial skills of entrepreneurs who rarely have
in respect of the time of their occurrence in the course of SUHSDUDWLRQLQWKH¿HOGRIPDQDJHPHQW
company’s operations. Literature on the subjects divides — ¿QDQFLDOEDUULHUVUHODWHGWR¿QDQFLQJRIEXVLQHVV
WKHEDUULHUVLQWR'DV]NLHZLF]1 activity. In the start-up phase, small and medium
— entry barriers; HQWHUSULVHV ¿QDQFH WKHLU RSHUDWLRQV IURP RZQ
— development barriers. resources, family and friends’ resources, but as a

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Table 1
Selected barriers limiting the operation of small and medium enterprises in Poland
TYPE OF BARRIER CHARACTERISTICS

1. Instability and vagueness of legal regulations
2. /DFNRIKDUPRQL]DWLRQRIWKHODZZLWKWKH(8OHJDORUGHU
Legal
3. Prolonged nature of court litigations
4. &RPSOLFDWHGSURFHGXUHVRIVWDUWLQJXSDQGFRQGXFWLQJEXVLQHVVDFWLYLW\
1. 'LI¿FXOWDFFHVVWRH[WHUQDOVRXUFHVRI¿QDQFLQJ
2. 'LI¿FXOWLHVWKDW60(VHQFRXQWHULQREWDLQLQJJXDUDQWHHVIRUEDQNORDQV
&DSLWDO
3. Limited access to public tenders
4. )RUHLJQFXUUHQF\H[FKDQJHUDWHÀXFWXDWLRQV
1. Growing competitiveness
Market
2. Limited demand
1. Unfavourable government policy
2. ([FHVVLYH¿VFDOLVP
Resulting from the policy
3. &RPSOLFDWHGWD[V\VWHP
regarding SMEs
4. Vagueness of tax regulations
5. Limited public aid
1. Limited access to information
Informational 2. Lack of economic information
3. Lack of information on the activities of public authorities
Infrastructural 1. 'LI¿FXOWLHVDQGKLJKFRVWVRIDFFHVVWRLQIUDVWUXFWXUH
1. Low mobility of the labour market
Social
2. Lack of acceptance for self-employment
Source: author’s compilation on the grounds of G. Michalczuk (ed.), Factors and tools of SME development, 2009
FRPSDQ\ GHYHORSV LWV ¿QDQFLDO VWUXFWXUH FKDQJHV 2WKHUOHJDODQGRUJDQL]DWLRQDOOLPLWDWLRQVLQFOXGH

and the need for loan capital rises. — ineffectiveness of entrepreneurs’ registration
— barriers to demand – which are a natural limitations SURFHGXUH DQG ODFN RI LQVWUXFWLRQV IRU RI¿FLDOV
resulting from the nature of market economy. During regarding inter-institutional co-operation;
an economic upturn such barriers area weakened, — location procedure, featuring a high degree of
whereas at times when economy is at a recession bureaucracy and long delays at every important
stage, barriers of demand hinder SME’s growth more stage.
strongly. Economic barriers to the operation of Polish
)URPWKHSRLQWRI¿QDQFLDOFRQGLWLRQVRIWKH60(VHFWRU HQWHUSULVHVFKLHÀ\UHJDUGODFNRIDFRKHVLYHDQGHIIHFWLYH
the division into operation barriers and development policy of the state towards the SME sector. In Poland, it is
EDUULHUVLQVKRUWDQGORQJWHUPSHUVSHFWLYHLVVLJQL¿FDQW above all a problem of a complex basis, as the state and
Such barriers include: local government authorities have been creating grounds
— in the short-term: lack of production capacity, of infrastructure in this respect for several years. The
PDQDJHULDO SHUVRQQHO RUGHUV TXDOL¿HG HPSOR\HHV scope and effectiveness of actions undertaken for the
RSHUDWLQJ FDSLWDO FRVWV RI RSHUDWLRQ ¿QDQFLQJ WKH EHQH¿WRIWKH60(VHFWRUUHPDLQDQRSHQLVVXHZKHUHDV
EU legal regulations as well as the costs of research entrepreneurs take advantage of them in a rather limited
and development; degree (Jerschina J., 1995). The main reason for not
— in the long-term: management continuity, export applying for public help is lack of basic information on
OLPLWDWLRQV FRVWV RI ¿QDQFLQJ GHYHORSPHQW OLPLWHG where and what type of aid is available. In SMEs, formal
demand on the market, lack of long-term sources of requirements constitute the most discouraging factor
¿QDQFLQJ 1DWLRQDO UHJXODWLRQ RI WKH ODZ LQFOXGLQJ to obtaining funds along with rejections of applications
the ones regarding taxes), the EU legal regulations as of entities applying for public aid. The second biggest
ZHOODVGLI¿FXOWLHVLQJDLQLQJDFFHVVWRQHZPDUNHWV deterrent concerns substantive matters, chief among
Economic practice and the literature on the subject them being the lack of own resources required to apply
of the operation of small and medium enterprises in for aid and too short deadlines for application submission.
Poland enable one to differentiate a variety of barriers 6PDOO DQG PHGLXP HQWHUSULVHV ¿QG WKH FUHGLWLQJ
DQGGLI¿FXOWLHVWKDWWKH60(VHFWRUHQFRXQWHUV7DEOH conditions offered to business entities by banks to be
The barrier that entrepreneurs indicated most D VLJQL¿FDQW GHYHORSPHQW EDUULHU VLQFH WKHLU DFFHVV
frequently is a legal barrier, linked with complicated WR ¿QDQFLQJ WKHLU RSHUDWLRQV WKURXJK FUHGLWLQJ LV PRUH
and constantly changing regulations of the law, lack of GLI¿FXOW GXH WR KLJK UHTXLUHPHQWV EDQNV SRVH LQ WKH
HIIHFWLYHWUDGHPDUNSURWHFWLRQDQGGLI¿FXOWLHVLQHQIRUFLQJ process of granting a credit. Basic barriers occurring in
the law. the process of small and medium enterprises applying

ISSN 1691-3078
for a bank credit involve lack of credit history, which Yet, despite that, enterprises encounter a number of
facilitates an evaluation of enterprise credit worthiness, barriers resulting from the implementation of sustainable
relatively high costs of drawing up a credit application, development patterns. The biggest of them include
and lack of securities a bank requires to grant a credit LQVXI¿FLHQW HFRORJLFDO DZDUHQHVV RI HQWUHSUHQHXUV
3U]HGVLHERUF\ ZKLFK LV OLQNHG ZLWK LQVXI¿FLHQW NQRZOHGJH LQ WKH ¿HOG
Another element of the economic barrier is the state’s of environment protection and the resultant obligations
¿VFDOSROLF\IHDWXULQJKLJKUHVWULFWLYHQHVVDQGKLJKGHJUHH of an entrepreneur as well as the knowledge about the
RIFRPSOLFDWLRQDQGGLI¿FXOW\$FFRUGLQJWRWKHGDWDRIWKH dangers to the environment caused by a conducted
Ministry of Finance, VAT (53% petitions for interpretation) business activity.
generates the biggest number of problems, followed by 'LI¿FXOW DFFHVV WR WKH (8 IXQGV FRQVWLWXWHV DQRWKHU
personal income tax (35% petitions for interpretation) problem to entrepreneur. As many as 39.1% of SMEs
DQG FRUSRUDWH LQFRPH WD[ RI SHWLWLRQV /XF]ND 7 FRQVLGHULWWREHDGLI¿FXOW\LQFRQGXFWLQJDQGGHYHORSLQJ
2005). WKHLUEXVLQHVVDFWLYLW\)RULQVWDQFHWKH\¿QGLWRQHURXV
A demonstration of a management barrier in an SME’s that they are required to submit and archive paper
operation is having limited knowledge in the area of documentation related to project implementation and
PDUNHWLQJDQGPDQDJHPHQWQHFHVVDU\WR¿QGDPDUNHW subsidy application. The requirement means that the
for goods and services. Such an attitude can arise from part of the handling costs is transferred to the applicant.
two reasons. Firstly, entrepreneurs still have limited <HW ULJRURXV DQG IRUPDOL]HG FRQWUROV SXWWLQJ HPSKDVLV
knowledge of marketing and management and they expect RQ WKH IXO¿OPHQW RI SURFHGXUDO UHTXLUHPHQWV DQG QRW
assistance from the state in solving problems related contributing to undertaken actions or achieved results
to functioning of an enterprise in the market economy. constitute another problem. The situation is caused by
Secondly, a vision of the state’s deep intervention in WKHFRQWUROOHUV¶ODFNRIH[SHULHQFHLQWKHUHDOL]DWLRQDQG
the functioning of the market was transplanted from WKH VSHFL¿FLW\ RI SURMHFWV FR¿QDQFHG E\ WKH (XURSHDQ
the centrally planned economy, and that is why some Union as well as lack of uniform standards regarding
company owners are still unable to adapt to the changes ¿QDQFLDOGRFXPHQWDWLRQ
that have been taking place in the Polish economy for
¿IWHHQ \HDUV (GXFDWLRQDO EDUULHU LV FORVHO\ OLQNHG ZLWK
Bibliography
the management barrier: lack of knowledge, skills and
1. $GDPF]\N - Koncepcja zrownowazonego
competences in shaping the competitiveness of national
rozwoju w zarzadzaniu przedsiebiorstwem (The
production factors and the competitiveness of conducting
concept of sustainable development in business
DEXVLQHVVDFWLYLW\0LFNLHZLF]$0LFNLHZLF]%
PDQDJHPHQW :\G $NDGHPLL (NRQRPLF]QHM
Rapidly growing labour costs can be added to the
Krakow. p.31.
barriers described above, which limit the development
2. Borys, T. (red.) (1999). Wskazniki ekorozwoju
of small and medium enterprises in Poland. Although
(Indicators of eco development). Wyd. Ekonomia i
Poland still features relatively low labour costs in
Srodowisko, Bialystok. p. 5.
comparison with the EU, yet the cost structure is highly
3. 'DV]NLHZLF] 1 Bariery wzrostu
unfavourable. Wage costs (net remuneration, income
malych i srednich przedsiebiorstw (Barriers
tax, social security) constitute approximately 70 per cent
to the growth of small and medium
of employment related costs, while costs unrelated to
enterprises) [w:] Przetrwanie i rozwoj malych
employment constitute over 30 per cent.
i srednich przedsiebiorstw (The survival and
Another barrier to SME’s development is an innovation-
development of small and medium enterprises).
WHFKQRORJ\ EDUULHU DQG WKH GLI¿FXOWLHV LQ JDLQLQJ DFFHVV
Praca pod red. Blawata F., Gdansk. pp. 61-70.
to new technologies, management – related mostly to
4. Dresler, E. (2006). Rola organizacji pozarzadowych
D ZLGH VFRSH RI GXWLHV DQG ORZ GHJUHH RI VSHFLDOL]DWLRQ
oraz grupowych form dzialalnosci mieszkancow
of managerial personnel. A special role is reserved to an
w zrownowazonym rozwoju obszarow wiejskich
entrepreneur in the development of small and medium
(na przykladzie wojewodztwa Lubelskiego) (The
HQWHUSULVHV EHLQJ WKH SHUVRQ ZKR RUJDQL]HV PDUNHW
UROH RI QRQJRYHUQPHQWDO RUJDQL]DWLRQV DQG JURXS
undertakings and manages their accomplishment, taking
activities in the sustainable development of the
a risk in hope of achieving success.
inhabitants of rural areas (example of the Lubelski
UHJLRQ 3UDFD GRNWRUVND 6**: :DUV]DZD
Conclusions p.26.
It is presently believed that an enterprise, apart 5. Jerschina, J. (red.) (2005). System pomocy publicznej
from its production functions and its activity aimed dla MSP w Polsce – zapotrzebowanie malych i srednich
DW JHQHUDWLQJ SUR¿W RU UDLVLQJ FRPSHWLWLYHQHVV DOVR przedsiebiorstw na pomoc publiczna (The system of
ought to strive to maintain adequate state of the public assistance for SME in Poland - request small
natural environment. An enterprise respecting the and medium enterprises for public support). Polska
principles of sustainable development is a socially $JHQFMD 5R]ZRMX 3U]HGVLHELRUF]RVFL :DUV]DZD
UHVSRQVLEOH HQWLW\ DFWLQJ WRZDUGV WKH IXO¿OPHQW RI pp.12-70.
society’s needs – economic and environmental ones. 6. .R]ORZVNL 6 Koncepcja ekorozwoju jako
Responsibility of an enterprise goes beyond the podstawa polityki ekologicznej panstwa (The concept
framework designated by a legal system in which of sustainable development as the basis for national
it operates, and it is evaluated through economic, environmental policy), [w:] B. Poskrobko (red.)
environmental and social factors. Dzialalnosc gospodarcza a ochrona srodowiska

ISSN 1691-3078
przyrodniczego (Activity economic and protection 10. 6NRZURQHN ± 0LHOF]DUHN $ Male i srednie
RIWKHQDWXUDOHQYLURQPHQW%LXUR%DGDQL:GUR]HQ SU]HGVLHELRUVWZD =URGOD ¿QDQVRZDQLD (Small
(NRORJLF]Q\FK%LDO\VWRNSS and medium enterprises. Source of funding).
7. /XF]ND 7 Male i srednie przedsiebiorstwa. :\G&+%HFN:DUV]DZDSS
6]NLFH R ZVSRáF]HVQHM SU]HGVLHELRUF]RVFL (Small 11. Storey, D. J. (1995). Understanding the Small
and medium enterprises. Sketches of contemporary Business Sector. Routledge, London.
HQWHUSULVH :\G 3ROLWHFKQLNL 3R]QDQVNLHM 3R]QDQ 12. 8FKZDOD 6HMPX 53 ] U (A Resolution
pp. 27-46. of the Sejm of the 10.05.1991), Monitor
8. 0LFNLHZLF] $ 0LFNLHZLF] % ). Polish food 3ROVNL]UQUSR]SS
sector in the European Union. W: Economic Science 13. =X]HN'Theoretical aspects of sustainable
for Rural Development, No. 21, Jelgava: LLU. development of farms, Local development – chosen
pp. 45-51. factors of sustainable development of Poland,
9. 3U]HGVLHELRUF\ ZLQLD ELXURNUDWRZ %XVLQHVVHV EODGH Monograph, chapter 3, West Pomeranian University
the bureaucrats). Rzeczpospolita 2006, nr 17. RI 7HFKQRORJ\ LQ 6]F]HFLQ )DFXOW\ RI (FRQRPLFV
pp. 2-3. pp.35– 48.

ISSN 1691-3078
B. Czyzewski 3UR¿WDELOLW\RI/DQG)DFWRURQWKH&RQGLWLRQVRI6XVWDLQDEOH'HYHORSPHQW±
Frames of New Land Rent Theory
PROFITABILITY OF LAND FACTOR ON THE CONDITIONS OF

SUSTAINABLE DEVELOPMENT – FRAMES OF NEW LAND RENT THEORY
Bazyli Czyzewski+, PhD

3R]QDQ8QLYHUVLW\RI(FRQRPLFV
Abstract. Other papers concerning agricultural economics frequently emphasise a problem of low resource productivity.
+RZHYHUWKHPHDVXULQJPHWKRGVDUHFRQWURYHUVLDOEHFDXVHWKH\GRQRWFRQVLGHUDSURJUHVVLYHGHSUHFLDWLRQRI¿[HG
assets in agriculture and the new utilities of land on the conditions of sustainable development. These preconditions
entitle to formulate a hypothesis that a productivity of capital in agriculture in Poland is increasing because of intrinsic
values of agricultural areas. This implies a need of rethinking the neoclassical land rent theories. The empirical objective
of the article is an evaluation of capital productivity in agriculture in Poland in a long period to test a new land rent
WKHRU\7KHEDVLVIRUWKHHPSLULFDOYHUL¿FDWLRQRIWKHK\SRWKHVLVIRUPXODWHGE\WKHDXWKRULVDVHFWRUDOLQSXWRXWSXW
DQDO\VLV'DWDIURPWKHLQSXWRXWSXWWDEOHVZHUHXVHGWRHYDOXDWHFDSLWDOSURGXFWLYLW\FRHI¿FLHQWVLQDJULIRRGVHFWRU
Key words: land rent, capital productivity, agriculture, sustainable development.
JEL code: Q10, Q15, B52
1. Introduction — LQFUHDVLQJPDUNHWHI¿FLHQF\DVDUHVXOWRIHFRQRPLF
The analysis of the development of land rent concepts JOREDOLVDWLRQ³ÀRZVZLWKRXWERUGHUV´);
that occurred in the history of economic thought showed — diminishment of the regulative role of nation states,
the lack of adaptation of their assumptions to the present and as a result, a change in coordination mechanism
realities of the agricultural sector. Generally speaking, from dichotomous state-market system to market-
the Ricardian economics too strongly believes in the price state-economic institutions system1 in which the
mechanism, the absolute rent theory assumes that all the latter successively takes over the role of the state.
values originate from labour; according to the residual The market economy development can be connected
rent theory, land functions come down to the location with different stages of the land rent valorisation. At
factor and the neoclassical theory proves that a rent is a a certain stage of economic development, which is
result of a market failure. associated with the evolution of social consciousness,
The aim of the paper is to deduce and to test the market and/or appropriate institutions valorise
empirically a new land rent concept harmonising intrinsic land utilities serving as public goods and
with the sustainable development paradigm. It JLYH WKHP ¿QDQFLDO FKDUDFWHU 7KHUHIRUH WZR LPSRUWDQW
means verifying the hypothesis that a value of land preconditions for the modern concept of land rent
rent is determined by a positive difference between were derived: occurrence of intrinsic agricultural land
the expected productivity of capital in agriculture utilities on the conditions of sustainable development
and in its market environment. Therefore, a crucial (which in the market economy are transformed into
research task is the analysis of the inputs and capital D ¿QDQFLDO SURGXFW DQG WKH DVVXPSWLRQ DERXW WKH
UHVRXUFH SURGXFWLYLW\ FRHI¿FLHQWV LQ DJULIRRG VHFWRU LQIRUPDWLYH HI¿FLHQF\ RI WKH DJULFXOWXUDO ODQG PDUNHW
7KRVH FRHI¿FLHQWV DUH LPSRUWDQW IRU WKH IRUPXODWLRQ RI (which allows for correct valorisation of the utilities in the
recommendations for the EU agricultural policy, which is market land prices).
currently in the transition period.
The modern land rent concept should be addressed,
in particular, to the highly developed market economies 2. A new land rent concept
since it is obvious where the processes not included in the The above assumptions entitle to adopt the following
existing rent theories are cumulated. Summing up, the hypothesis: the reason for the land rent to occur
three following phenomena are at issue: is intrinsic land utilities, which in the commodity
— consumption models shift to more pro-ecological money economy cause the expected productivity of
ones, which enable the land factor to create capital factor in agriculture to be higher than in its
new utilities such as the environmental market environment. Therefore, the value of land
values - landscape, biodiversity, leisure, cultural rent is determined by a positive difference between
inheritance, a guarantee of food supply, food safety the expected productivity of capital in agriculture
6DSDDUXUDOOLIHVSHFL¿FLW\LHVHWWOHPHQW and in its market environment.
models, culture and tradition, local activities The agricultural land market realises in prices the
9DWQ)DáNRZVNL expectations concerning the surplus productivity of
___________________________
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&RUUHVSRQGLQJDXWKRUWHOID[H-mail addressEF]\]HZVNL#XHSR]QDQSO
The article is written within the project funded by the National Science Centre in Poland allocated on the basis of
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1
(FRQRPLFLQVWLWXWLRQVDUHGH¿QHGDFFRUGLQJWRWKH1HZ,QVWLWXWLRQDO(FRQRPLFVDSSURDFKDVV\VWHPVRIFRQWUDFWXDO
relations between economic entities, coordinating the process of concluding transactions

ISSN 1691-3078
capital in agriculture. During the valuation process, (provided that the land factor intrinsic utilities are its
however, the farmer’s own labour factor is disregarded source). Therefore, the land prices are determined by the
since it has no market value. For that reason, the rents surplus productivity of capital in agriculture.
obtained in incomes by individual farms do not coincide The proposed heuristic model of creating the land
with the values resulting from the land price. It should rent is positive in nature. It should be proven by empirical
be stressed that higher capital productivity is proven YHUL¿FDWLRQLQWKHQH[WSDUWRIWKHKHUHE\SDSHU0RUHRYHU
not by unpaid part of the worker’s labour but by the also normative preconditions advocate for it from the
occurrence of intrinsic land utilities on the conditions of point of view of the sustainable development. If a part
sustainable development, which are valorised and create of the agricultural surplus is a land rent connected with
DQDGGLWLRQDO¿QDQFLDOSURGXFW0RUHRYHUE\DSSO\LQJWKH higher productivity of capital, and the remaining part
FDWHJRU\ RI ³WKH H[SHFWHG SURGXFWLYLW\´ WKH QHZ ODQG UHPXQHUDWHVWKHRZQODERXURIDIDUPHUD³IXQGÍRUWKH
rent concept translates to the modern mechanisms of development of agrarian structures is generated. That
price development based on the expected rate of return. development means land concentration and rehabilitation
Therefore, the mechanism for creating land rents becomes of the well-being of natural environment and rural areas.
a part of the main economic trend and assimilates ,Q RWKHU ZRUGV ¿QDQFLDO UHVRXUFHV IRU ³GLVLQWHUHVWHG
with the theory of rational expectations. It facilitates FRQFHUQ IRU ODQG´ DUH DFFXPXODWHG LQ DJULFXOWXUH 2I
LWV HPSLULFDO YHUL¿FDWLRQ DQG RSHUDWLRQDOLVDWLRQ LQ WKH course, provided that a part of the surplus constituting
economic research. Thereby, it does not concern negating WKH UHPXQHUDWLRQ IRU RZQ ODERXU LV IDLU 'RHV ³IDLU´
the assumptions of the mainstream economy paradigm mean guaranteeing parity labour cost regarding average
LQWKHPHDQLQJRI³VFLHQWL¿FUHYROXWLRQ´RI7.XKQ7KH UHPXQHUDWLRQVLQDFRXQWU\",WLVKDUGWRVD\&HUWDLQO\
author of the paper is not denying the hypotheses of the it is a remuneration allowing farmers to take part in
³KDUG FRUH´ RI WKH QHZ FODVVLFDO HFRQRPLFV HVSHFLDOO\ the essential processes of the society development.
the hypothesis of rational expectations, as it is done by If the farmer’s labour remuneration is too low, the
e.g. the Imperfect Knowledge Economics. The attempt farmer also consumes the land rent, thus, limiting the
at deducing the land rent theory refers rather to the possibilities of the sustainable development of the
methodological concepts of I. Lakatos (Wojtyna, 2000). farm.
7KH LQWURGXFHG PRGL¿FDWLRQV FRQFHUQ WKH ³SURWHFWLRQ This is how, in the author’s opinion, the
EHOW´ RI WKH QHRFODVVLFDO SDUDGLJP LQFOXGLQJ DERYH DOO mechanism of creating the land rent substance on
isolating the land factor from the diminishing marginal the macroeconomic level is currently functioning. In
utility theory and introducing institutional limitations of the sustainable development paradigm, land replaces
rationality. capital to a certain extent, and some utilities provided
In the author’s opinion, there exist agricultural land IRU WKH FRQVXPHU KDYH D ]HUR FRVW ,W VKRXOG EH
services valued neither by the market of agricultural stressed that on the microeconomic level, the process
products nor by the prices of production factors. These RI DFFXPXODWLQJ ODQG UHQW LV PRUH FRPSOH[ &UHDWLQJ
are public utilities mentioned before. In the process rent does not always coincides with its realisation, and
WKH ³QHJDWLYH UHVLGXDO LQFRPH´ IURP VFDUFH UHVRXUFHV
of agricultural production, they are complementary
does not mean the lack of rent. It means, however,
to the capital. Therefore, theoretically, they allow for
that the rent has been intercepted by other entities.
obtaining a better ratio of incomes to outlays as well
Nevertheless, it is possible to organise the process
as lower the ratio of an alternative capital cost to the
of agricultural production so that the rents valued
surplus rate obtained in agriculture. Therefore, the
by the market were fully implemented. This is where
productivity of capital (measured in monetary units)
the role of institutions begins.
grows. Hence, the rents connected with this process
FDQ EH FDOOHG ³ODQG UHQWV´ 7KH SURFHVV RI WKH UHQW
FUHDWLRQ LV FRPSRVHG RI WZR VWDJHV LQ WKH ¿UVW VWDJH 3. Research results and discussion
it is possible to retain income in agriculture above 3.1. Methods
average after incurring all the intermediate inputs, and To sum up, the new land rent concept underlines the
in the second stage, the retained income compensates existence of three different production factors – labour,
IRU WKH RZQHG FDSLWDO DQG GHWHUPLQHV LWV SUR¿WDELOLW\ land, and capital (and not only capital and labour as in
against the alternative cost2. The landowner does not the neoclassical approach). The basis for the empirical
incur any outlays to generate intrinsic utilities of land, YHUL¿FDWLRQ RI WKH DERYHIRUPXODWHG K\SRWKHVLV ZLOO
which, on the contrary, increase the value of agricultural be a sectoral input-output analysis applied in the
products (although the market does not valorise the scale input-output tables. In the analysis, surplus is built by
of the increase). In general, these services are related cutting off intermediate consumption, employment
with the natural cycle of vegetation of plants, renewability costs, and net taxes from the global production.
of land resource (not subject to depreciation), and at 7KH SRLQW LV WR FRQ¿UP3 that both the expected
present, with more and more valued well-being of the productivity of inputs and capital resource productivity
natural environment offering, inter alia, public goods. are higher in agriculture in relation with other
Hence, a part of the agricultural production surplus results spheres of food economy. Theoretically, it results from
IURP DERYH DYHUDJH ¿QDQFLDO SURGXFWLYLW\ DQG FUHDWHV the fact that the market mechanism fails to valuate
the rent substance, i.e. the residual income from the some services of land and a farmer’s family labour.
capital employed in agriculture. It should be capitalised In the analysis of the inputs and capital resource
as perpetual rent in the market prices of agricultural land SURGXFWLYLW\ FRHI¿FLHQWV WKH DXWKRU XVHG WKH VDPH
___________________________
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3
Assuming optimal production scale and structure, and their relation with assets. Hence, the thesis can only be
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ISSN 1691-3078
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2(&'
Fig. 1. Dynamics of the capital input productivity in agriculture and its environment in 1995-2009
including subsidies from the CAP (in PLN/1 PLN of input)
surplus calculation equation as in the input-output To prove the formulated hypothesis, the author
sectoral table4. The analysis was conducted on the compared the productivity of capital inputs and capital
sectoral level (according to the sections and divisions resource in all the spheres of food economy. Thereafter,
RI WKH 3ROLVK &ODVVL¿FDWLRQ RI $FWLYLW\ ZLWK WKH XVH RI the author estimated a potential value of the land rent
WKH GDWD IURP WKH &HQWUDO 6WDWLVWLFDO 2I¿FH *86 WKH substance according to the adopted assumptions. An
(8 6WDWLVWLFDO 2I¿FH (XURVWDW DQG VWDWLVWLFV IURP WKH additional test, though decisive for the truth of the
2UJDQLVDWLRQIRU(FRQRPLF&RRSHUDWLRQDQG'HYHORSPHQW SUHVHQWHGFRQFHSWLVYHUL¿FDWLRQZKHWKHUWKHHVWLPDWHG
2(&' 6XEVHTXHQWO\ WZR VWDJHV RI WKH UHQW FUHDWLRQ rent substance is close to the value of the rents capitalised
were distinguished: transformation of capital inputs into LQ WKH PDUNHW SULFHV RI ODQG )XO¿OOLQJ WKLV FRQGLWLRQ
effects and remunerating the capital by the surplus. It ZRXOG QRW RQO\ FRQ¿UP WKH YDOLGLW\ RI WKH DVVXPSWLRQV
results in a methodological distinction between outlays of EXWLWZRXOGDOVRSURYHWKHLQIRUPDWLYHHI¿FLHQF\RIWKH
production factors and resources. The capital inputs were DJULFXOWXUDOODQGPDUNHW&]\]HZVNL
GH¿QHG DV WUXO\ LQFXUUHG FRVWV RI D JOREDO SURGXFWLRQ ,Q OLJKW RI DERYH WZR FRHI¿FLHQWV ZHUH GHYHORSHG
in a particular year (without depreciation). Whereas, &]\]HZVNL
WKH UHVRXUFHV GHWHUPLQH WKH VL]H RI SURGXFWLRQ IDFWRUV
available to the production structures in a particular gross operational surplus
&53LQ3/13/1RIUHVRXUFH = (1)
sector. Therefore, the outlays include intermediate QHW¿[HGDVVHWVFDVK
consumption, employment costs (except own labour),
and net taxes. The capital resource is the value of net $V LQGLFDWHG HDUOLHU WKH &53 &DSLWDO 5HVRXUFH
¿[HGDVVHWVSOXVWKHYDOXHRIFXUUHQWDVVHWVFDVK Productivity) develops on the basis of the relation
$W WKH ¿UVW VWDJH RI FUHDWLQJ WKH UHQW VXEVWDQFH between the global production and inputs, which
the amount of incurred capital inputs is subject to determines the level of the operating surplus. Therefore,
transformation into an effect of the global production. At the primary source of land rent is a relation between the
the second stage, the global production surplus over the global production and the intermediate consumption. It is
incurred inputs pays for the capital and own labour of the H[SUHVVHGE\WKHVHFRQGFRHI¿FLHQW±WKH&DSLWDO,QSXWV
entrepreneur, and determines the surplus rate. 3URGXFWLYLW\FRHI¿FLHQW&,3
global production
&,3LQ3/13/1RILQSXW = (2)
intermediate consumption in the purchaser’s prices + employment costs + net taxes from producers
___________________________
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ISSN 1691-3078
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(XURVWDW2(&'
Fig. 2. Dynamics of the capital resource productivity in agriculture and its environment in
1995-2009 including subsidies from the CAP (in PLN/1 PLN of resource)
The author polemicises with an interpretation that This conclusion remains unchanged if one excludes
the source of higher capital productivity (and economic the subsidies for agricultural producers from the
rents) in agriculture in Poland is mainly the unpaid analysis - the advantage of this sector over the
own labour of a farmer. It was found that the decrease rest of economy diminishes, although, it remains
of the labour input in agriculture did not necessarily VLJQL¿FDQW 3/1 SHU LQSXW XQLW YHUVXV 3/1
have to indicate a fall of capital productivity. Economic in the Sphere I in 2009). As substantiated before, this
rents develop as a result of the market valuation of difference results from the unpaid services of the land
capital and its expected rates of return, and not factor and partly the labour of farmers, although the
as a result of the own labour of a farmer, which is second premise stands on a weaker theoretical ground.
paid residually and not by the market of production :KDW LV SX]]OLQJ WKHVH DUH VLJQL¿FDQW GURSV RI WKH
factors. outlay productivity in the phases of the slump of the
economy (years 1999, 2008) and the increases in better
3.2. Capital inputs productivity HFRQRPLFVLWXDWLRQ,WLVDOVRGLI¿FXOWWRH[SHFWDFKDQJHRI
The literature on the subject presents a well-known the land factor utility, which according to the assumptions
phenomenon of more effective transformation of inputs constitutes a premise of the above productivity.
in the global production in agriculture compared with 7KHUHIRUH WKH IDFWRUV MXVWLI\LQJ WKH ÀXFWXDWLRQ VKDOO EH
WKHRWKHUIRRGHFRQRP\VSKHUHV3RF]WD0URZF]\QVND nominal changes connected with the price mechanisms.
.DPLQVND*U]HODN To put it simply, they convey the process of widening and
$V H[SHFWHG WKH DQDO\VLV RI WKH ¿QDQFLDO RXWOD\V narrowing of the price gap. Anticipating the facts, one
SURGXFWLYLW\ UHSUHVHQWHG E\ WKH &,3 FRHI¿FLHQW can say that its basic cause is interception of rents by the
(TXDWLRQFRQ¿UPVDQDGYDQWDJHRIDJULFXOWXUHZKLFK environment of agriculture in the periods of weak market
in the long term, remains on a similar level of approx. DQGWKHRSSRVLWHÀRZVLQWRDJULFXOWXUHLQWKHSHULRGVRI
20% higher productivity (PLN 1.61 per input unit against its strengthening.
PLN 1.34 in the Sphere II in 2009). However, it is subject
WR F\FOLFDO ÀXFWXDWLRQ FRPSOLDQW ZLWK WKH FRXUVH RI WKH 3.3. Capital resource productivity
EXVLQHVV F\FOH LQ DJULFXOWXUH *RU]HODN =LPQ\ A more effective transformation of inputs into
(Figure 1). effects translated, as expected, into higher productivity

ISSN 1691-3078
of the capital in agriculture (Equation 1). Taking into for agricultural products and services are developed
consideration the fact that the analysis is being conducted globally. Therefore, there is no reason to obey the
in average values (treated as expected values), a large environmental order only locally or regionally, and
and increasing advantage of the agricultural sector invest in it, if one already possesses some comparative
over the rest of food economy in this scope is visible advantages concerning the quality of agricultural
(Figure 2). The surplus productivity of capital amounted SURGXFWV ,W LV QRW VXI¿FLHQW WR SD\ WKH ³EDFNZDUGQHVV
to PLN 0.03 in 1995 and to PLN 0.70 per resource UHQW´ ± LW LV EHWWHU WR FDSLWDOLVH LW 0RUHRYHU RQH
unit in 2009. Therefore, the advantage of productivity needs to remember that sooner or later each rent
increased from 9% to almost 137%. Subtraction vanishes and becomes an element of costs. Therefore,
of subsidies reduces the advantage (difference) to its occurrence should be used to introduce structural
PLN 0.55 in 2009. However, it changes neither the changes.
increasing tendency nor the conclusions.
1RW VR PXFK WKH DEVROXWH VL]H DV VXFK G\QDPLF
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growth of the agriculture advantage over the environment
1. &LDLDQ 3 .DQFV - 6ZLQQHQ )0
LQWHUPVRISUR¿WDELOLW\RIWKHSURGXFWLYHDVVHWVPD\UDLVH
EU Land Markets and the Common Agricultural
a doubt concerning the data credibility. The jump in 2002
Policy%UXVVHOV&HQWUHIRU(XURSHDQ3ROLF\6WXGLHV
(the year of crisis in agriculture in Poland) is particularly
pp. 159-163.
SX]]OLQJ7KHQH[WMXPSLQPD\SDUWO\EHMXVWL¿HG
2. &]\]HZVNL $ 6WHSLHQ 6 &RPPRQ
ZLWK SURHI¿FLHQW FKDQJHV RI VWUXFWXUHV LQ DJULFXOWXUH
Agricultural Policy of the EU after 2013 and the
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Interests of the Polish Agriculture. (.2120,67$,
implementation of the stipulations in the 2000 Agenda
Issue 1, pp. 9-36.
in Poland.
3. &]\]HZVNL % 3URGXNW\ZQRVF ]DVRERZ
In other words, potential utilities of well-being of
w rolnictwie w Polsce wobec paradygmatu
the natural environment were recognised and direct
]URZQRZD]RQHJR UR]ZRMX 6WXGLD (NRQRPLF]QH
payments were introduced, which resulted in dynamic
Issue 2 (LXXIII), pp. 165-188.
increase of land prices. Nota bene, capitalising the
4. &]\]HZVNL % 5HQW\ HNRQRPLF]QH Z
VXEVLGLHVLQODQGSULFHVLVDSKHQRPHQRQVSHFL¿FIRUWKH
JRVSRGDUFH ]\ZQRVFLRZHM Z 3ROVFH :DUV]DZD
FXUUHQW VLPSOL¿HG V\VWHP RI GLUHFW SD\PHQWV LQ 3RODQG
PWE, pp. 76-89.
(SAPS - Single Area Payment Scheme). In the SPS
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sic Prices, Including a Transformation into Purchas-
the old EU-15 Member States, the introduction of area
ers’ Prices 2000-2007. Retrieved: http://epp.euro-
SD\PHQWVKDVDQLQVLJQL¿FDQWLQÀXHQFHRQWKHSULFHVRI
stat.ec.europa.eu/portal/page/portal/esa95_sup-
agricultural land5.
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6. Falkowski, J. (2010). Wielofunkcyjnosc rolnictwa
4. Conclusions jako przedmiot analizy ekonomicznej. In: J. Wilkin
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hypothesis of proposed new land rent concept. To podstawy metodologiczne i implikacje praktyczne.
sum up, capital productivity in agriculture is an :DUV]DZD,QVW\WXW5R]ZRMX:VLL5ROQLFWZD3ROVNLHM
important premise of the realisation of the sustainable Akademii Nauk, pp. 53-58.
development guidelines. However, the assumption that 7. *RU]HODN ( =LPQ\ = .RQLXQNWXUD
³WKHKLJKHUSURGXFWLYLW\WKHEHWWHU´LVDELJVLPSOL¿FDWLRQ Z UROQLFWZLH ,, NZDUWDO ,QVW\WXW 5R]ZRMX
of the issue. Occurrence of the rent of the capital *RVSRGDUF]HJR 6*+ Z :DUV]DZLH 5HWULHYHG
invested in agriculture, which is not connected with http://www.sgh.waw.pl/ instytuty/irg/aktualnosci/
³H[SORLWDWLRQ´ RI WKH ODERXU IDFWRU LQGLFDWHV FKDQJHV rolnictwo. Access: 10.03.2012.
RI FRQVXPHUV¶ SUHIHUHQFHV WRZDUGV WKH ³VXVWDLQDEOH 8. *U]HODN $ =ZLD]NL UROQLFWZD ] U\QNLHP
FRQVXPSWLRQ´ 7KH DQDO\VLV RI LQGH[HV RI FDSLWDO ] SHUVSHNW\Z\ RFHQ\ ELODQVRZ SU]HSO\ZRZ
productivity in agriculture indicates such changes with PLHG]\JDOH]LRZ\FK Roczniki Naukowe SERiA,
reference to food produced (not necessarily consumed) Vol. XIII, Issue 1, pp. 135-139.
LQ 3RODQG VLQFH WKH ³VXVWDLQDELOLW\ RI FRQVXPSWLRQ´ 9. *86 5DFKXQHN SRGD]\ L
depends on the level of the economic development. Z\NRU]\VWDQLDZ\URERZLXV/XJ]DODWD
The surplus productivity of capital in agriculture creates :DUV]DZD
the land rent substance and establishes the prices 10. *86 D 5RF]QLN VWDW\VW\F]Q\
of farmland. It does not, however, remunerate the land UROQLFWZD L REV]DURZ ZLHMVNLFK ]D ODWD
factor on the conditions of disparity in the farmer’s :DUV]DZD
labour cost since it is consumed. Therefore, paradoxically 11. GUS (1996-2010b). Srodki trwale w gospodarce
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the point of view of economic and social order, it sektorow i podsektorow instytucjonalnych (rachunek
seems that accumulation of capital in agriculture is NDSLWDORZ\FGDQH]DODWD
more desired, provided that it does not disrupt the 14. GUS (2000-2009). Bank Danych Lokalnych, Wyna-
EU-wide environmental order. The models of demand JURG]HQLD
___________________________
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15. *86 3U]HFLHWQH PLHVLHF]QH Z\QDJURG]HQLH 18. Sapa, A. (2009). Food Security in the Developing
w gospodarce narodowej w latach 1950-2011. &RXQWULHV ZLWKLQ WKH *OREDOLVDWLRQ 3URFHVV
Retrieved: http://www.stat.gov.pl/gus/5840_1630_ Proceedings of the WK ,QWHUQDWLRQDO 6FLHQWL¿F
PLK_HTML.htm. Conference on Economic Science for Rural
16. 2(&' /DERXU 3URGXFWLYLW\ *URZWK Development. Jelgava, Latvia, pp. 288-293.
in the Total Economy. Hours Worked for Total 19. 9DWQ $ 7UDQVDFWLRQ &RVWV DQG
Employment 1996-2010. Retrieved: http://stats. 0XOWLIXQFWLRQDOLW\ &RQIHUHQFH 'LUHFWRUDWH IRU
oecd.org. Food, Agriculture and Fisheries Workshop on
17. 3RF]WD : 0URZF]\QVND.DPLQVND $ Multifunctionality. Paris, 2-3 July 2001, Retrieved:
7ZRU]HQLH L UR]G\VSRQRZDQLH SURGXNFML UROQHM QD http://www.oecd.org/ dataoecd/27/36/37633999.
WOH ]ZLD]NRZ ] JRVSRGDUND QDURGRZD Roczniki pdf. Access: 13.03.2012.
Nauk Rolniczych, seria G. Ekonomika Rolnictwa, 20. :RMW\QD$(ZROXFMDNH\QHVL]PXDJORZQ\
Volume 90, Issue 2, pp. 121-128. QXUWHNRQRPLL:DUV]DZD3:1SS

ISSN 1691-3078
J. Hernik Szczecin as a Tourist Destination – Use of Accommodation Facilities
and Suggestions for Sustainable Development
SZCZECIN AS A TOURIST DESTINATION – USE OF ACCOMMODATION

FACILITIES AND SUGGESTIONS FOR SUSTAINABLE DEVELOPMENT
Joanna Hernik1, PhD

)DFXOW\RI(FRQRPLFV:HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\LQ6]F]HFLQ3RODQG
Abstract. The sustainable development is usually discussed in the aspect of future life on Earth and next generations’
existence. However, in regards to cities that are also important for local development, the correlations and balance
between culture, economy, and environment should be considered. In this paper, a matter of city functioning as a
WRXULVW GHVWLQDWLRQ LQ DQ DVSHFW RI VWDWH DQG XWLOL]DWLRQ RI WRXULVW LQIUDVWUXFWXUH LV GLVFXVVHG 3UHVHQWHG GLDJQRVLV
VKRZV QRW RQO\ WKH FXUUHQW XWLOL]DWLRQ RI DFFRPPRGDWLRQ LQIUDVWUXFWXUH RI 6]F]HFLQ EXW DOVR LQGLFDWHV SURVSHFWLYH
directions of city tourism development. It was stressed that city authorities should initiate such actions that would
lead to a higher level of development through better use of existing resources. It means a proper usage of existing
LQIUDVWUXFWXUHPRUHFORVHO\FRQQHFWLQJZLWKQDWXUDOUHVRXUFHVDQGVSHFLDOHYHQWVRUJDQL]HGRXWRIWKHKLJKVHDVRQ
0RUHRYHUVXFKDFWLYLWLHVZRXOG¿WLQWRWKHLGHDRIVXVWDLQDEOHGHYHORSPHQW
Key words: cities, development of tourism, local management, needs of visitors, tourism infrastructure.
JEL code: R58, M38
Introduction strengthen the attractiveness of those cities, as the

The currently established idea of sustainable above mentioned document proposes, the transport and
development for the most part is derived from pro- accessibility, admission to services (also cultural), widely
ecological (environmentally friendly) behaviours, the understood infrastructure and natural environment are
state of natural environment, and adequate use of the to be taken into consideration. Therefore, in this article
UHVRXUFHV0LFNLHZLF]7KHGLVFXVVHGEDODQFHWKHQ the author discusses a thesis that a sustainable tourism
is in the aspect of further existence on Earth, considering can enhance development of city tourism using more
IXO¿OOLQJ WKH QHHGV RI WKH KXPDQLW\ LQ D ZD\ WKDW ZLOO effectively existing resources. The supporting theses
not inhibit the ability of future generations’ existence. that are proposed say that 1) cities do not need more
However, it is important to remember that the balanced infrastructure connected with accommodation; 2) there
development is not to be reserved to only farmlands or are existing natural resources that are not used to
countryside. Because of very wide variety of areas where develop tourist attractiveness of the city.
people reside, there is a need to consciously shape the 'LIIHUHQW DWWUDFWLRQV LQÀXHQFH WKH GHYHORSPHQW
relations between the economic development, the state of the given territory- those natural related to climate
RI WKH QDWXUDO HQYLURQPHQW DV ZHOO DV DUWL¿FLDO REMHFWV DQG QDWXUH DV ZHOO DV DUWL¿FLDO RQHV EHLQJ D UHVXOW RI
created by a man, and the quality of life of population human activity. In this paper, a matter of city functioning
OLYLQJLQDUHDVRIGLIIHUHQWQDWXUH*UL]DQV9HJDV as a tourist destination is discussed in the aspect of
For that reason, the role of cities in the development of VWDWH DQG XWLOL]DWLRQ RI WRXULVW LQIUDVWUXFWXUH ZKHUH
particular areas is important to mention; areas leading the infrastructure is understood as a various kinds of
WR WKH HFRQRPLF JURZWK &XUUHQWO\ WKH VXVWDLQDEOH objects and tourist facilities designed to serve guests
development is described in the aspects of integration visiting the given region. Therefore, the tourist facilities,
of ecological, social, economical, spatial, and institutional accommodations with food courts (restaurants), and
order. In regards to the cities, the correlations and cultural objects are to be considered. The main subject
balance between culture, economy, and environment RIWKLVDUWLFOHLVDFFRPPRGDWLRQVDYDLODELOLW\LQ6]F]HFLQ
VKRXOGEHGLVFXVVHG6NRWDUF]DN discussed in the aspect of sustainable development of
tourism.
The regional politics of the European Union initially
Data discussed in the paper were gathered by desk
GLGQRWDSSUHFLDWHWKHVLJQL¿FDQFHRIWKHFLWLHV+RZHYHU
research method along with records obtained from the
in the year 2006, the document titled Politics of Cohesion
0DLQ6WDWLVWLF2I¿FHLQ3RODQG*86WKH6WDWLVWLF2I¿FH
and Cities ZDVLVVXHGZKLFKHPSKDVL]HVWKDWHFRQRPLF
RI 6]F]HFLQ DQG 7RXULVP ,QVWLWXWH 3UHVHQWHG GLDJQRVLV
growth is sustainable, when there are available resources
VKRZVWKHVWDWHDQGXWLOL]DWLRQRIWRXULVWDFFRPPRGDWLRQ
GHVLJQDWHG WR PLQLPL]H SRYHUW\ VRFLDO HOLPLQDWLRQ DQG
LQIUDVWUXFWXUHRI6]F]HFLQEHLQJDSDUWRIDWRXULVPSURGXFW
problems in sphere of environment protection, directed
(Altkorn, 1955), which, in turn, allows for directing ways
both to countryside regions and cities. Those problems are
of sustainable development of city tourism.
closely related to functioning of the cities, where, on the
one hand, the majority of the employment exists, and on
the other hand, there is an imbalance between particular Szczecin as a tourist destination
social groups, or differences in spatial development. 'HHSHFRQRP\FULVLVLQODVW\HDUVLQÀXHQFHGDOVRWKH
Today, certain cities face variety of challenges. To tourism branch. However, according to the data from
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ISSN 1691-3078
6RXUFHDXWKRU¶VHODERUDWLRQEDVHGRQ6WDWLVWLFV2I¿FHRI6]F]HFLQGDWD
Fig. 1. Accommodations provided for tourists visiting Szczecin in years 2006-2011
Table 1
Number of accommodations in Szczecin in respect to the kind of facility (2006-2011)
2006 2007 2008 2009 2010 2011

All facilities 43 46 42 42 51 47
Hotels 17 18 18 19 19 19
Other accommodations 13 15 13 12 14 12
School youth shelters 4 4 4 4 4 2
Educational/recreational centres 0 0 0 0 0 1
Hostels – – – 0 1 1
Tourists cottages centres 1 1 1 1 1 1
&DPSVLWHV 1 1 1 1 1 1
&DPSVLWH¿HOGV 0 0 0 0 0 1
8QFODVVL¿HGDFFRPPRGDWLRQV 7 7 5 5 11 9
6RXUFHDXWKRU¶VHODERUDWLRQEDVHGRQ6WDWLVWLFV2I¿FHLQ6]F]HFLQGDWD
Institute of Tourism, in the years 2011 and 2012, there 6]F]HFLQDVWKHWKLUGLQUHVSHFWWRDUHDDQGVHYHQWKLQ

was an increase in the number of incoming tourists. UHVSHFWWRSRSXODWLRQFLWL]HQVFLW\LQ3RODQGLV
However, comparing the year 2010 and 2011, there is a an economic, tourist, and educational centre of the region.
noticeable 5% increase in the number of accommodations Located 65 km in straight line from the Baltic Sea and
served to tourists (www.mrr.gov.pl). Statistic data also NP IURP %HUOLQ IRU WRXULVWV 6]F]HFLQ LV DVVRFLDWHG
claim that 19% of all tourists visit Poland for tourism with leisure by the seaside, and for international tourists,
purposes, while 18 % are those who come to visit family for example German or Scandinavian, often is perceived
and friends; 25 % - for business reasons, and 10% as as an attractive destination for less expensive shopping
shopping visitors. The average length of foreign tourists and as a business destination. In the year 2011, the
stay in Poland is 4 days; in particular, this trend applies number of tourists was almost as large as the number or
to guests from Germany. The longest stay in our country FLWL]HQVRYHUJXHVWVFDPHIRUWRXULVPSXUSRVHV
is amongst those arriving from overseas, like the USA Wherein it is necessary to clarify that a tourist is a person
or Australia (average 12 days). 2-day stays are more that used at least one night stay, whereas a person that
FKDUDFWHULVWLFIRUFLWL]HQVRIFRXQWULHVOLNH5XVVLD%HODUXV does not stay in hotel or likewise accommodation is
or Ukraine (www. intur.com.pl). referred to as a visitor. According to the GUS data, the
6]F]HFLQLVDQH[DPSOHRIFLW\FRPPXQLW\ZKLFKUHIHUV GLPHQVLRQ RI WRXULVW WUDI¿F WKDW WRRN SODFH LQ 6]F]HFLQ
to a typology of Polish communities as rural communities, in years 2006-2011, was rather unstable (Figure 1).
where no locations with status of a city exist, rural-city In the year 2011, however (after long declines), increase
communities, and city communities. According to this in the overall number of tourists (people staying in
division there are 306 city communities in Poland, that the city at least 1 night) was noticed, which was
is about 12% of all administrative units (Bogdanov). higher than the best in the studied period year 2007

ISSN 1691-3078
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Fig. 2. Places of accommodation in Szczecin in years 2006-2011
6RXUFHHODERUDWLRQEDVHGRQWKHGDWDDFTXLUHGIURP6WDWLVWLFV2I¿FHLQ6]F]HFLQ
Fig. 3. The scale of use of accommodation establishments in Szczecin (in percentage)
(respectively, 376 021 and 375 637 people). After few use. It is worth of noticing that overall indicator of unused
years of decrease, the number of international tourists accommodation comes to 65% (Figure 3).
YLVLWLQJ6]F]HFLQKDVDOVRJURZQ±LQWKH\HDUWKH The evaluation of accommodation use in particular
number came to more than 132 000 people. DUHDVLQDVLJQL¿FDQWDVSHFWWKDWVWLSXODWHVVHDVRQDOLW\RI
In 2011, 19 hotels, 12 other accommodation facilities arrivals. Of course, summer holiday season traditionally is
as well as shelters and campsites were offered at tourists a travel time, but even in that period the accommodation
DUULYLQJWR 6]F]HFLQ GLVSRVDO 7DEOH$PRQJVWKRWHOV potential is in large number unused. The best month
there were objects of category 3-stars mainly (6); also is August (places are used in avg. 47%), the worst –
the origination of a hostel is worth to notice. January (use on the level of avg. 24%).
When analysing the accommodation infrastructure, ,QVXI¿FLHQW H[SORLWDWLRQ RI WRXULVW EDVH FDQ EH
one ought to pay attention not only to the number of explained in part by negative dynamics of foreign tourism
facilities in the above categories, but also to their capacity LQ 6]F]HFLQ LQ SULRU \HDUV ,I UHIHUULQJ WR WKH \HDU
WKHQXPEHURIDYDLODEOHEHGV,QLQ6]F]HFLQWKHUH as a 100%, then up until the year 2010 one notices a
were 6 394 places of accommodation, which accounts drop in the number of international tourists and with
for 98% in comparison with spaces available in the year a slightly better indicator in the year 2011 (Figure 4).
2010 (Figure 2). However, low number of international tourists seems
In the studied period, there is a noticeable drop in the to be compensated by national visitors, hence – as
number of guests in tourist accommodations, which points mentioned – overall dynamics of tourist arrival today do
to conclusion, that on the one hand, there is a growth in not show so pronounced go down tendencies.
the number of tourists, but on the other hand, there is an Interesting tendency here is a variety of tourists
increase in the number of accommodation as well, which DUULYLQJ WR 6]F]HFLQ LQ UHJDUGV WR QDWLRQDOLWLHV ,Q VSLWH
results in disadvantageous tendency of accommodation of observed decrease in the number of visiting tourists

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Fig. 4. Dynamics of overall tourist arrivals and foreign tourist arrivals to

Szczecin in years 2006-2011 (2006=100)
6RXUFHHODERUDWLRQDFTXLUHGIURP6WDWLVWLFV2I¿FHLQ6]F]HFLQ
Fig. 5. Foreign tourists who visited Szczecin in 2011,

divided by a country (as a percentage of all tourists)
in course of prior years, still a prevailing number of numbers corresponding to the length of stay might
of international guests are Germans – in 2011, the EHFDXVHGE\WUHDWLQJ6]F]HFLQDVDWUDQVLWFLW\RQWKH
number was almost 58 thousand, which accounts for on way to Scandinavia or Germany, for example), and for
average 44% of overall international tourists. Second that reason not as a target destination, or also treating
place is taken by guests from Denmark – slightly over 6]F]HFLQDVDVKRSSLQJVSRWDQGWKXVQRWFRQVLGHULQJDV
WKRXVDQG DQG WKH WKLUG VSRW FLWL]HQV RI a place for longer stay.
Sweden in the number of almost 7 thousand (5.26%).
In 2011, clearly noticeable was the increase of tourists Discussion
from Finland, which could have been the result of Tourism occurs when people are voluntarily
(XURSHDQ &KDPSLRQVKLS LQ 6ZLPPLQJ KHOG DW WKDW UHORFDWLQJ ZLWKRXW H[WHUQDO SUHVVXUH LQ VSHFL¿HG
WLPH LQ 6]F]HFLQ LQ 'HFHPEHU )URP /DWYLD WKHUH direction or designation. Therefore, tourism industry is
were 266 guests in 2011. The above topic is illustrated social-economical phenomena manifested by physical,
in Figure 5. periodical, and spatial relocation of visitors from their
In 2011, an average length of stay in registered permanent residence. The basis for those relocations
DFFRPPRGDWLRQIDFLOLWLHVLQ6]F]HFLQZDVRIWKHGD\ inheres in needs, which are the essence of the tourism.
Polish tourists spent 1.94 of the day in the city, whereas Varieties of tourism, together with development of
IRUHLJQWRXULVWV&RPSDULQJWRWKHGDWDXSWRWKH its occurrence, undergo constant transformations,
year 2010, it can be noticed, that the average length for example, increasingly it is said about business,
was affected by minimal decrease, especially duration congressional, motivational or religious relocation, etc.
of the stay by national tourists (from 2.11 in 2010 to Dynamics and development of tourism movement depend
1.94 in 2011) was shortened. An average stay of foreign on many factors and are closely connected with social-
tourists was somewhat on similar level. Dropping values economical changes, together with geographical location

ISSN 1691-3078
and tourist infrastructure, and – as it was mentioned – centres as well as places of accommodation, by spreading
with accommodation facilities and transportation. information about what these city visitors are expecting.
Regardless of the improving situation of the tourism Thanks to this, service providers will be able to change
branch, growth of the prices and moods in Europe may their offer according to consumers’ expectations. Such
hinder the arrivals of international tourists, which are VWXG\ RI WRXULVWV¶ QHHGV UHTXHVWHG E\ WKH &LW\ &RXQFLO
becoming more frugal on the one hand, and on the other was conducted in the second half of the year 2012, and
hand – are expecting better value than before. In case of it is to be expected that the results will be accessible to
guests from Germany, negative impact on arrivals is also LPSURYHWRXULVPGHYHORSPHQW&HUWDLQO\WKRVHWKDWDUH
caused by lack of boarder region development strategy the most interested in this problem, like hotels, should
on Polish side encompassing West Pomerania Region conduct studies on the needs of tourists. That could
and Meklemburg - Vorne-Vorpommern and Brandenburg VKRZIRUH[DPSOHWKDWWKDQNVWRPRGL¿HGRIIHUIRUHLJQ
(poorly developed rail and road infrastructure, lack of tourists, instead of coming only for business purposes,
common diplomatic posts that have been planned for will travel with families and stay longer, because they
many years). Moreover, it ought to be mentioned that found something interesting. It could apply to tourists
Germans are intensively promoting their own internal from west side of Polish border who less often arrive
WRXULVP ± *HUPDQ &HQWUH RI 7RXULVP ODWHO\ FUHDWHG to visit places that before belonged to Germany (prior
a ranking of 100 the best destinations in Germany WR :RUOG :DU ,, 6]F]HFLQ EHORQJHG WR 7KLUG 5HLFK
and made it available as a mobile phone application 1HYHUWKHOHVV *HUPDQ KLVWRU\ RI 6]F]HFLQ FRXOG LQGHHG
(www.germany.travel). Thanks to that, German be highlighted and connected with something for young
tourists and the ones from outside Germany can be Germans, and not only for their grandfathers (Poria,
currently informed about interesting events as well as Airey, Butler, 2001). Based on the data of tourists’
can collect information about tourist attractions. This UHTXLUHPHQWVFKDLQVRIRUJDQL]DWLRQVSURYLGLQJFRPSOH[
FDQ LQÀXHQFH WRXULVW DUULYDOV WR 3RODQG WKHUHIRUH VHUYLFHVFRXOGEHVHWXSOLNHWRXULQJRQSUHZDU6]F]HFLQ
DV ZHOO WR 6]F]HFLQ 7R DWWUDFW WRXULVWV WR 3RODQG LV combined with Polish language course, or local culinary
another issue. Many people travel to the Baltic Sea specialties course. Number of ideas here seems to be
NP IURP 6]F]HFLQ KRZHYHU QRW PDQ\ RI WKHP OLPLWOHVV 3UHVHQ]D &LSROOLQD +RZHYHU MRLQW
decide to stop at the city for couple of days. Situation could actions must be initiated by city authorities, because the
be somewhat improved by more detailed information majority of accommodations are family based operations,
about city attractions, but in the kind of information the same very often applies to gastronomic facilities
that is easily accessible. Perhaps activities of local (Zeher, 2011); that means that they are not prepared
authorities could be connected with existing already to conduct a market study, frequently also they cannot
possibilities, like access to information about the see possibilities in cooperation with different service
REMHFWV LQ WKH FLW\ E\ DQ DSSOLFDWLRQ ŃQRZQ XQNQRZQ´ providers - seemingly – completely unrelated to their
accessible by mobile iPhones and other with Android branch.
SODWIRUP KWWSZVSROSUDFD]QDQHQLH]QDQHSO 7KDQNV It should be noted that a big ailment of the city is its
WR WKDW WKH XVHU FRXOG ¿QG LQIRUPDWLRQ DERXW WRXULVW lack of the spatial order and general aesthetics. That refers
accommodation, gastronomic facilities, or historical as well to the spots like train terminals, bus stops, as to
attractions; book online reservations as well as post areas surrounding tourist objects (like West Pomeranian
reviews about visited locations. 3ULQFHVC &DVWOH 1HJOHFWHG VXUURXQGLQJV ZDVWH DQG
Thus, the question ought to be asked: what a city can not renovated buildings cause repelling impression and
do, to attract tourists and make them stay longer. Seems do not tend to re-arrivals. It appears that such issues
like there is a need to point few major courses of action: cannot be left without intervention, because it is a local
1) more intensive promotion; 2) accommodation government that shapes the development of politics of
offers according to needs; 3) improvement of city their region, encompassing development of tourism
aesthetics. (Malkowski, 2007; Hernik, 2011). It is worth mentioning
%LJ HYHQW LQ 6]F]HFLQ 7DOO 6KLS 5DFHV WKDW WRRN that the support of small business (instead of the large
place in year 2007, attracted about 2 million guests one, interfering in the natural resources) is a part of
ZZZV]F]HFLQSOUHJDW\ \HW WKHUH ZHUH D the policy of sustainable development. For that reason,
few from abroad who decided to stay for a night using the city authority ought to support small and medium
available accommodations. That proves that there is still WRXULVWEXVLQHVVVKRXOGRUJDQL]HLQWHUHVWLQJHYHQWVDQG
LQVXI¿FLHQWSURPRWLRQDOWKRXJKLWFDQQRWEHVDLGWKDWLW deliver adequate information as well as appropriate legal
does not exist. However, the promotion is provided by regulations forcing responsible individuals to maintain
diplomatic posts and often focuses on narrow groups of JRRG FLW\ LPDJH 6RFKHU &HUWDLQO\ WKDW ZLOO
UHFLSLHQWV OLNH WKHDWUH RU &KRSLQ PXVLF HQWKXVLDVWV positively affect the experience of every tourist (Jauhari,
Nevertheless, mass events require mass information. It Sanjeev, 2010).
seems that the fact that from the year 2006 the number In practice, this means, for example, that the hotels
RI *HUPDQ JXHVWV LV GURSSLQJ HYHQ WKRXJK 6]F]HFLQ LV should possess materials about the city not only in
located 15 km from Polish-German border, should be English language, but also in German, Danish, Swedish,
acknowledged as a defeat. or Finnish, since we host that kind of guests. Moreover,
Thanks to modern technologies, tourists have WKH FLW\ VKRXOG RUJDQL]H LQWHUHVWLQJ DWWUDFWLYH HYHQWV
an access to many offers, which of course causes the outside the tourist season, and this could improve the
situation that if they decide to come, they are able to use of accommodations in winter months (as mentioned,
select the best one. Therefore, the city authority should LQ-DQXDU\WKHXVHLV&XUUHQWO\DFFRUGLQJWRZHE
VXSSRUW WRXULVW RUJDQL]DWLRQV FXOWXUH DQG UHFUHDWLRQ SRUWDO ZZZV]F]HFLQHX LQ PRQWKV OLNH 'HFHPEHU RU

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January no event takes place (beside Acustic Festival thesis, that despite the city character, variety of natural
taking place in January). Also in February the only attraction can be used to enrich an offer of a city as tourist
DWWUDFWLQJ KDSSHQLQJ LV &UD]\ 6OLGH ± 6]F]HFLQ 6OLGH RQ GHVWLQDWLRQVHHPVWREHVXI¿FLHQWO\GHPRQVWUDWHG
Anything - event gathering individuals building unusual
snow vehicles. Besides these episodes, there are no
Bibliography
events planned, hence, why tourist would want to travel
1. Altkorn, J. (1995). Marketing in Tourism [Marketing
WR 6]F]HFLQ" &HUWDLQO\ WKH VLWXDWLRQ ORRNV EHWWHU LQ
w turystyce@:DUV]DZD3:1SS
summer months, but it seems that still there is a lack of
2. Bogdanov, D., (2010). The Quality of Public
widely available information about what is happening. It
,QIRUPDWLRQ LQ %XOOHWLQV RI 3ROLVK &RPPXQLWLHV
could also be added, that the tourism offer of the city is
[Jakosc biuletynu informacji publicznej polskich
worth of supporting with the argument that 40% of its
gmin], T. Wawak (red.) [w:] Communication and
surface enclose rivers, a bay and lakes. Owing to that,
quality management [Komunikacja i jakosc w
water sports and beach enthusiasts could be encouraged
zarzadzaniu], Wyd. Uniwersytetu Jagiellonskiego,
to stay in the city that provides more opportunities for
Krakow, pp. 186.
interesting time spending in case of foul weather than
3. *UL]DQV - 9DQDJV - 3HUVSHFWLYHV RI
a stay by the sea. For active tourists, information that
Modelling Latvian Rural – Urban Partnership in the
6]F]HFLQ LV VXUURXQGHG E\ WKUHH VSHFL¿F ZLOG IRUHVWV
&RQWH[W RI 6XVWDLQDEOH 'HYHORSPHQW Economic
FDOOHG :NU]DQVND %XNRZD *ROHQLRZVND ZRXOG EH
Science for Rural Development No. 23, pp. 63 – 69.
interesting as well, yet today none promotional material
4. +HUQLN - 3XEOLF 5HODWLRQV RI WKH &LW\ +DOO
mentions this fact. When proposing courses of action
RQDQ([DPSOHRI&KRFLZHO>3XEOLFUHODWLRQVXU]HGX
for sustainable development of a city tourism, meaning
PLDVWD QD SU]\NODG]LH PLDVWD &KRFLZHO@ Zeszyty
UDWLRQDO XVH RI DUWL¿FLDO PDQPDGH DQG QDWXUDO
Naukowe Uniwersytetu Ekonomicznego w Poznaniu
UHVRXUFHVRQHRXJKWWRHPSKDVL]HWKDWFXUUHQWO\XQXVHG
QU3R]QDQSS±
HOHPHQWVRILQIUDVWUXFWXUHH[LVWZKLFKFRXOGEHXWLOL]HG
5. Jauhari, V., Sanjeev, G.M. (2010). Managing
&RQVHTXHQWO\LWFDQEHVDLGWKDWWRDWWDLQDQHZTXDOLW\
&XVWRPHU ([SHULHQFH IRU 6SLULWXDO DQG &XOWXUDO
OHYHO RI GHYHORSPHQW 6]F]HFLQ FXUUHQWO\ GRHV QRW QHHG
Tourism: an overview, Worldwide Hospitality and
larger number of hotels, museums, or gastronomic
Tourism Themes, Vol. 2 Iss: 5, pp. 467 – 476.
facilities; it seems that the equilibrium between those
6. Malkowski, A. (2007). The Social-Economic
elements has been accomplished. Instead, the city needs
Development of Eastern and Western Polish Frontier
interesting events targeting wide range of visitors and
Regions, Economic Science for Rural Development
consumers; and these events should include green
No 12, pp. 192–196.
and natural areas of the city. Besides, the city needs a
7. 0LFNLHZLF] % 7KH 5ROH RI 6XVWDLQDEOH
UHYLWDOL]DWLRQRIQHJOHFWHGEXLOGLQJVRUHYHQDOOTXDUWHUV
Tourism in the European Union Member States
Above that, it also needs a collaborative, integrated
and the Green Lungs of Poland area [in:] Local
promotion for international tourists that would allow for
development - chosen factors of sustainable
better, more rational use of environmental and non-
development of Poland, West Pomeranian University
natural resources.
RI 7HFKQRORJ\ LQ 6]F]HFLQ )DFXOW\ RI (FRQRPLFV
pp. 49-63.
Conclusions 8. 3RULD<$LUH\'%XWOHU5&KDOOHQJLQJWKH
The article presents an attempt of connection the Present Approach to Heritage Tourism: Is tourism to
XWLOL]DWLRQ RI FLW\ DFFRPPRGDWLRQ LQIUDVWUXFWXUH ZLWK heritage places heritage tourism?, Tourism Review,
assumptions of sustainable development. The objective Vol. 56 Iss: 1/2, pp. 51 – 53.
here is to present the quantitative status as well as the 9. 3UHVHQ]D$&LSROOLQD0$QDO\VLQJ7RXULVP
OHYHORIXWLOL]DWLRQRIDFFRPPRGDWLRQIDFLOLWLHVLQ6]F]HFLQ Stakeholders Networks, Tourism Review, Vol. 65
in the aspect of tourism development and sustainable city Iss: 4, pp. 17 – 30.
growth. The result of conducted analysis highlights that 10. 6NRWDUF]DN 7 6XVWDLQDEOH 'HYHORSPHQW
6]F]HFLQFRPPDQGVXQXWLOL]HGDFFRPPRGDWLRQUHFRXUVHV RQ 8UEDQ $UHDV >5R]ZRM ]URZQRZD]RQ\ Z
the lowest rate of use is noted in January and February. DJORPHUDFMDFK PLHMVNLFK@ >LQ@ 0LFNLHZLF] 3
For that reason, city authorities need to initiate actions 0LFNLHZLF]%UHGSustainable local development.
that would lead to a higher level of development through Terms of regional and local development
better use of accessible recourses. These actions would [Zrownowazony rozwoj lokalny. Warunki rozwoju
inscribe in the idea of sustainable or supporting economic regionalnego i lokalnego@6WRZDU]\V]HQLH1DXNRZH
growth, existence. Therefore, the articles proposes Instytut Gospodarki i Rynku, Zachodniopomorski
SRVVLELOLWLHVKRZWRRUJDQL]HLQWHUHVWLQJHYHQWVLQZLQWHU 8QLZHUV\WHW7HFKQRORJLF]Q\SS
PRQWKVLQWHQVLI\UHYLWDOL]DWLRQRIQHJOHFWHGREMHFWVDQG 11. Socher, K. (2001). What are the Tasks of the State
improvement of city aesthetics as well wider available in Providing the Framework for Tourism?, Tourism
information about opportunities of interesting ways for Review, Vol. 56 Iss: 1/2, pp. 57 – 60.
spending time. The stated in the beginning thesis that a 12. Zehrer, A. (2011). Knowledge Management in
sustainable tourism can enhance the development of city Tourism – the Application of Grant’s Knowledge
tourism appears to be proved. The supporting thesis that Management Model to Austrian Tourism
urban areas do not need more infrastructure connected 2UJDQL]DWLRQV Tourism Review, Vol. 66 Iss: 3,
with accommodation is also substantiated. Finally, the pp. 50 – 64.

ISSN 1691-3078
L. Jankova EU Funds Financing for Member States
EU FUNDS FINANCING FOR MEMBER STATES
Liga Jankova1, Dr.oec.

Riga Teacher Training and Educational Management Academy
Abstract. Facilitation of regional development has been applied in most of the EU Member States since the 50s of the
20th century, and it is based on the regional policy. With the help of regional policy, the EU corrects the free market
to allocate resources from prosperous to poorer territories. The aim of these measures is to enhance underdeveloped
regions and to improve the socio-economic conditions in them. The EU funds are a tool for implementing regional
policy: applying of enhancing investment introduction methods can ensure the growth of particular industries of the
state and its regions.
)URPWKH(80HPEHU6WDWHVXVHVLJQL¿FDQW¿QDQFLDOUHVRXUFHVWKDWKDYHLPSURYHGWKHVRFLRHFRQRPLFLQGLFDWRUV
of the Member States. Economic and social inequality among the Member States has increased due to the expansion
RIWKH(XURSHDQUHJLRQLQEHFDXVHWKHQHZ0HPEHU6WDWHVVLJQL¿FDQWO\ODJEHKLQGWKHOHYHODWWDLQHGLQWKHROG
0HPEHU6WDWHV(FRQRPLFDQGVRFLDOGLIIHUHQFHVLQWKHUHJLRQVDUHVLJQL¿FDQW)RUWKH(8IXQGVWRFUHDWHEHQH¿FLDO
changes in the development of the Member States, an equal distribution of funds among them is necessary. The EU
Member States that accessed to the EU in 2004 and 2007 have not coordinated the development priorities with the
JRDOVGHWHUPLQHGE\WKHXVHRI¿QDQFLQJRIVWUXFWXUDOIXQGVEHFDXVHWKHORQJWHUPFRQWULEXWLRQRIWKHLQYHVWPHQWKDV
not been evaluated, but short-term problems are solved.
7KH JRDO RI WKH UHVHDUFK LV WR FRPSDUH WKH SODQQHG (8 IXQGV ¿QDQFLQJ LQ WKH 0HPEHU 6WDWHV DQG WKHLU JURXSV LQ
GLIIHUHQWSHULRGV7KH(8IXQGV¿QDQFLQJWRWKH0HPEHU6WDWHVVWDUWLQJZLWKZDVDQDO\VHGEHFDXVHWKLVLVWKH
year when a new EU funds acquisition period started.
Key words:IXQGV¿QDQFLQJGLVWULEXWLRQRI¿QDQFLQJWR0HPEHU6WDWHV*'3QXPEHURISRSXODWLRQ
JEL code: O47, O52
Introduction research offer a solution – cooperation. P. Kobus (2010)

According to Eurostat data, at the beginning of has researched grain crops in the EU Member States and
2010 there were 501 mln inhabitants in the region of KDV FRQFOXGHG WKDW WKH (8 IXQGV ¿QDQFLQJ WR 0HPEHU
the EU-27 Member States. Member States receive States has facilitated increase of crops over the period
¿QDQFLDOVXSSRUWDFFRUGLQJWRFRQYHUJHQFHUHTXLUHPHQWV 1961 – 2008. The most favourable changes in the yield
The impact of the EU funds on various development indicators were observed in Ireland, Denmark, Belgium,
indicators of the Member States has been researched France, Germany, the Netherlands, and the United
by theoreticians and practitioners of economics in the .LQJGRP &\SUXV *UHHFH 3RUWXJDO 6SDLQ (VWRQLD
EU states, evaluating the contribution of the funds as Latvia, and Rumania demonstrate the lowest harvests.
well as stating different problems that have appeared P. Kobus relates the favourable changes to the
during the funds acquisition process. dependence of the crops on various factors: better
S. Rynck, P. McAleavey (2001) emphasise not WHFKQRORJ\ QHZ VRUWV KLJK TXDOLW\ IHUWLOL]HU DQG
following the solidarity principle in allocating funds. SURWHFWLRQ PHDQV HWF 7KH GLVWULEXWLRQ RI WKH ¿QDQFLQJ
0HPEHU 6WDWHV WKDW KDYH LQYHVWHG VLJQL¿FDQW DPRXQWV of the EU structural funds between the Member States
of money in the common EU budget are willing to and their impact in different industries have been
receive them back with the help of the funds, not taking researched by I. Vaidere (2010) who has evaluated the
into consideration the convergence principles. When perspectives of the common gricultural policy in Latvia
DQDO\VLQJWKHEHQH¿WVRI3RODQGZKHQDFFHVVLQJWRWKH(8 and the Member States; and I. Haite (2010) who has
DQGXVLQJWKH(8IXQGV$0LFNLHZLF]DQG%0LFNLHZLF] FODUL¿HG WKH RSSRUWXQLWLHV IRU VXVWDLQDEOH GHYHORSPHQW
(2010) conclude that along with the use of the EU funds LQ 5H]HNQH FLW\ RI /DWJDOH UHJLRQ WKURXJK DWWUDFWLQJ
in agriculture, farmers’ income has increased, a positive WKH(8IXQGV¿QDQFLQJ7KHLPSDFWRIWKH(86WUXFWXUDO
impact on the labour market has been observed, creating DQG &RKHVLRQ )XQGV RQ WKH HFRQRPLFV RI /DWYLD KDV
new work places and creating favourable development EHHQ DQDO\VHG E\ 9 7HWHUH EXW 6 &LQJXOH DQG
in the other industries. In the period of 2003 – 2007, I. Latviete (2010) have compared the opportunities
the export of Polish agricultural production increased by offered by the EU in the use of structural funds in Latvia
230%, but the import – by 125%; in 2000 – 2008, the DQG ,UHODQG &RPSDULQJ WKH EHQH¿WV RI ERWK 0HPEHU
revenues in agriculture increased by 90%. The use of States, the authors conclude that a large difference in the
IXQGVKDVFDXVHGDVLJQL¿FDQWÀRZRILQYHVWPHQWZKLFK HFRQRPLFJURZWKRIWKHODUJHVWEHQH¿FLDULHVRIIXQGVFDQ
fastened modernisation of rural farms, yet the small be clearly observed, e.g. the development level of Greece
area rural farms, where the cultivated land is 35 ha, are does not approve the expectations placed on the positive
QRW EHQH¿FLDO IRU SURGXFWLRQ DV D UHVXOW RI ZKLFK WKH role of the EU funds and make to conclude that seemingly
viability of small farms is endangered. The authors of the free of charge money does not automatically provide a
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ISSN 1691-3078
Source: author’s calculations based on Eurostat
Fig.1. Average indicators of the EU Member States groups in 2000, 2004, 2007, 2009, and 2011
IDVWHUHFRQRPLFJURZWK,Q,UHODQGDVLJQL¿FDQWSDUWRI 2007-2011 in the Member States, for the comparison,

WKH(8IXQGV¿QDQFLQJ±DSSUR[LPDWHO\RQHWKLUGZDV the author grouped the Member States by their similar
allocated to human resources development projects. characteristics – the EU 27 (all EU Member States), the
Other countries allocated less than one fourth of the EU 15 (Member States that were in the EU until 2004
funding to this priority, instead emphasising investment RU WKH ³ROG´ 0HPEHU 6WDWHV DQG WKH (8 0HPEHU
in the physical infrastructure. States that accessed to the EU in 2004 and 2007). The
5HVHDUFKHUV KDYH HPSKDVL]HG WKH PRVW LPSRUWDQW average GDP of all the groups was calculated irrespective
problems of the EU Member States that should be solved of the time the Member State accessed to the EU. The
by the EU funds to create favourable changes in the mutual comparison of the average GDP indicators of the
GHYHORSPHQW RI WKH 0HPEHU 6WDWHV $ VLJQL¿FDQW SDUW groups allowed determining the different development
of the problems relate to an equal distribution of funds levels of the Member States. The analysed periods are
among the Member States, to incomplete development related to the use of the EU funds in the Member States.
SROLFLHVSURGXFWLRQHI¿FLHQF\DQGFDSDFLW\RIWKH0HPEHU The average GDP indicators in the period 2000 – 2011
States to acquire the funds, to the development priorities GLIIHU VLJQL¿FDQWO\ DPRQJ WKH 0HPEHU 6WDWHV JURXSV
determined by the Member States, and internal forms (Figure 1).
of cooperation between enterprises and institutions. The &RPSDULQJWKH*'3LQGLFDWRUVRIWKHJURXSVDQGWKH
most typical problems of the Member States are: changes of the indicators, the following conclusions can
— development levels among the EU Member States be made based on the information presented in Figure 1:
DUHVLJQL¿FDQWWKH(8IXQGVDUHDWRROWRUHGXFHWKH — in all three groups the GDP average indicators have
differences among the levels; increased until 2009, and after that have decreased
— WKH (8 IXQGV¶ ¿QDQFLQJ LV VLJQL¿FDQWO\ GLIIHUHQW as a result of recession; in 2011, the growth began
between the Member States, it does not allow DJDLQ EXW WKH VL]H EHWZHHQ WKH JURXSV DQG WKH
levelling out the economic differences between JURZWKEHWZHHQWKHSHULRGVGLIIHUVLJQL¿FDQWO\
them; — the differences of the GDP indicators of the EU 12
— the 12 EU Member States that accessed to the and the EU 15 Member States groups in 2000 –
EU in 2004 and 2007 have not coordinated their 2007 were 10 and more times larger; in the period
development priorities with the support directions of 2009 – 2011, the differences between the average
provided by the structural funds; GDP indicators in the Member States groups have
— DOORFDWLQJ WKH IXQGV¶ ¿QDQFLQJ IRU VROYLQJ LQWHUQDO reduced by approximately eight times over three
problems, the Member States do not evaluate years, which indicates that in the Member States of
contribution to sustainability but are trying to solve the EU 12 group a rapid economic growth is taking
short-term problems. place;
A common opinion of the theoreticians and — the EU 12 Member States group exhibits a rapid
practitioners of economics V. Marikov, H. Baloul (2006); growth of the average GDP between the periods,
$ 0LFNLHZLF] % 0LFNLHZLF] 3 .REXV
and on average per year it is 12%, whereas in the
6 5\QFN 3 0F$OHDYH\ 6 &LQJXOH , /DWYLHWH
EU 15 Member States group it is 15%. The
(2010); I. Vaidere (2010); I. Haite (2010); V. Tetere
average GDP percentage growth per year in the
(2009) is positive when evaluating the importance of the
EU 12 Member States group can be explained
funds in enhancing economics.
E\ WKH XVH RI WKH DYDLODEOH (8 IXQGV ¿QDQFLQJ
ZKHQ WKH ¿QDQFLQJ DYDLODEOH WR WKH 0HPEHU 6WDWH
Research results and discussion has increased faster than the number of the
GDP is an indicator of economic welfare that allows employed;
evaluating the economic activity and development. When — as a result of recession, a reduction of GDP average
evaluating the available Eurostat information about indicators is observed in all the three groups from
average GDP indicators for the periods of 2000-2006 and 2007 till 2011, however, the amount of reduction

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Source: author’s design based on Busch, 2008
Fig.2. Distribution of the EU funds to the Member States in the period 2000 – 2006
Source: author’s design based on Busch, 2008
Fig.3. Distribution of the EU funds between the EU 15 and the

EU 10 Member States groups in 2000 - 2006, %
differs. For the EU 15 and the EU 27 groups, it is 4%, 2000 – 2006, the EU consisted of 25 Member States: the
whereas for the EU 12 group – 8%, and it indicates (8³ROG´0HPEHU6WDWHVDQGWKH(8³QHZ´0HPEHU
the instability of the EU 12 economics in case of States; the data used for the comparison of the period
crisis, which is not observed in the EU 15 Member are compared between the two groups as well as among
States group. the Member States.
7KHXVHRIWKH(8IXQGV¿QDQFLQJLWVHOIGRHVQRWPHDQ In the period of 2000 – 2006, EUR 512.9 bill. was
anything, it is important to choose an appropriate form allocated to the Member States from the EU budget.
of the use of the EU funds, which depends on the goals 7KH ¿QDQFLQJ RI VWUXFWXUDO IXQGV ($**) ),)* (5')
RI WKH UHJLRQDO SROLF\ RI WKH 0HPEHU 6WDWH &RPSDULQJ (6) DQG &) DFFRXQWHG IRU (85 ELOO RI WKLV
the average GDP growth of the EU 12 Member States DPRXQW)LJXUH7KHGLVWULEXWLRQRI¿QDQFLQJUHÀHFWV
group between the periods, the author concludes that the priorities of the EU funds budget: 65% were
the rapid growth of the EU 12 and the balanced average allocated to agriculture, 20% - regional cohesion, 11% -
GDP growth of the EU 15 are related to the use of the to levelling out social conditions between the
EU funds and reveals the importance of the EU funds in regions, 3.4% - to levelling out the economic and
enhancing the development level and that the EU funds social differences between the regions, and 0.6% -
can be considered as economic facilitators. WR WKH GHYHORSPHQW DQG PRGHUQLVDWLRQ RI ¿VKHU\
To reduce regional differences, in the period of industry.
2000 – 2006 the EU Member States had access to &RPSDULQJ WKH ¿QDQFLQJ LQ WKH SHULRG ±
¿QDQFLQJ RI YDULRXV IXQGV 7KH DXWKRU DQDO\VHG over various categories of funds and their distribution
LQIRUPDWLRQ DERXW WKH SODQQHG (8 IXQGV¶ ¿QDQFLQJ between the Member States groups, the following
and support to agriculture of the Member States in conclusions can be made (Figure 3).
2000 – 2006. Information was obtained from the — RI WKH WRWDO ¿QDQFLQJ ZDV SODQQHG IRU WKH (8
Internet environment virtual library publications site 15 Member States group and 8% - for the EU 10
³(XURSD´ %XVFK ,Q WKH IXQGV¶ SODQQLQJ SHULRG 0HPEHU 6WDWHV JURXS 7KH GLIIHUHQFH LV VLJQL¿FDQW

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but it has to be taken into consideration that the 10 — ,W ZDV SODQQHG WR XVH WKH &RKHVLRQ IXQG IRU
³QHZ´ 0HPEHU 6WDWHV DFFHVVHG WR WKH (8 LQ Member States in the amount of EUR 17.5 bill.,
and only two years and eight months were left until which was 3.4% of the total amount (Figure 3).
the end of the use of the funds, which limited the ,Q WKH GLVWULEXWLRQ RI ¿QDQFLQJ WKH (8 ZHUH
RSSRUWXQLW\WRXVHDODUJHUSDUWRI¿QDQFLQJ planned to receive 22%, whereas the EU 15 Member
— It was anticipated that all the EU 25 Member 6WDWHV JURXS ± 7KH XVH WKH &) ¿QDQFLQJ LQ
States will receive EUR 311.7 bill. from the the Member States must correspond to the goal of
guaranteed part of the EAGGF, which is the largest WKH IXQGV ¿QDQFLQJ DOORFDWLRQ $V )LJXUH GHSLFWV
¿QDQFLDOVXSSRUWSDUW±RIWKHWRWDO¿QDQFLQJ the EU Member States, in comparison with the other
these are different support measures to provide IXQGV KDYH WKH ODUJHVW GLVWULEXWLRQ RI ¿QDQFLQJ
competitiveness of agricultural production. However, between the both Member States groups.
WKHDPRXQWRI¿QDQFLQJGLIIHUVEHWZHHQWKH0HPEHU 6XPPDULVLQJ WKH FRPSDUHG (8 IXQGV¶ ¿QDQFLQJ WR
States groups – it is 63% for the EU 15 and 37% - the Member States in 2000 – 2006, the author concludes
for the EU 10. The EU 15 Member States – France, WKDW WKH GLVWULEXWLRQ RI IXQGV ¿QDQFLQJ IRU DJULFXOWXUH
Germany, Spain, and Italy – receive the largest is not equal and it differs not only between the EU 15
SDUW RI ¿QDQFLQJ ZKLFK DOORZV FRQFOXGLQJ WKDW WKH and the EU 10 Member States groups but also
GLVWULEXWLRQ RI ¿QDQFLQJ KDV D YHU\ OLWWOH LPSDFW RQ between the Member States of the EU 15 group, where
the EU 10 Member States . The coordination of direct the dominating position of the largest Member States:
SD\PHQWVDWWKHOHYHORIWKH(XURSHDQ&RPPLVVLRQ Spain, Germany, Italy and France is observed. In the
is still topical, and the situation that has developed distribution of the ESF and the ERDF funds, a similar
does not facilitate fair competition among the FRQQHFWLRQLVREVHUYHG±WKHODUJHVW¿QDQFLQJLVUHFHLYHG
Member States in the single market. by Spain, Germany, Italy, and France, which allows
— In the EAGGF direction part, the distribution of FRQFOXGLQJ WKDW WKHVH 0HPEHU 6WDWHV KDYH D VLJQL¿FDQW
¿QDQFLQJ EHWZHHQ WKH 0HPEHU 6WDWHV JURXSV LPSDFW RQ WKH GLVWULEXWLRQ RI WKH ¿QDQFLQJ RI WKH (6)
GLIIHUV ± WKH ODUJHVW SDUW RI ¿QDQFLQJ ZDV and the ERDF funds. In the period of 2000 – 2006, the
planned for the EU 15, but 5% were planned for the EU regional policy was directed to the development of
(8 ,W ZDV SODQQHG WR ¿QDQFH PHDVXUHV IRU WKH the EU 15 Member States, facilitating the less developed
development of structural policy and rural regions states of the EU 15 Member States group and their
ZLWKWKHVXSSRUWRIWKHIXQGV&RPSDULQJWKHDPRXQW regions with the help of the EU funds.
RI ¿QDQFLQJ EHWZHHQ WKH 0HPEHU 6WDWHV LQ WKH Evaluating the distribution of the planned EU funds
direction part, the EU 15 Member States –Germany, ¿QDQFLQJLQWKHSHULRG±EHWZHHQWKH0HPEHU
Spain, and Italy –were anticipated to receive the States groups, information about the volumes of the
ODUJHVWSDUWRI¿QDQFLQJ (8IXQGV¿QDQFLQJWRWKH0HPEHU6WDWHVLQWKH±
— 7KH (5') ¿QDQFLQJ )LJXUH IRU DOO WKH (8 2013 period available on the Internet regional policy site
Member States was planned in the amount of ³(XURSD´ZDVXVHG&RKHVLRQSROLF\
EUR 104 bill., which is 20% of the total EU funds The number of the Member States changed in
DPRXQW ,Q WKH GLVWULEXWLRQ RI ¿QDQFLQJ EHWZHHQ 2007 – 2013, as in 2007 two more Member States
both Member States groups (Figure 3), in the EU 10 accessed to the EU. Their economic development was
it is 14%, whereas in the EU 15 – 86%. The similar to the economic development of the countries
GLVWULEXWLRQ RI ¿QDQFLQJ VKRXOG FRUUHVSRQG WR WKH that accessed to the EU in 2004, thus in the 2007 –
determined goals of the EU regional policy, which 2013 period of the use of the EU funds, the need for
provided the use of ERDF in the Member States D ODUJHU (8 IXQGV ¿QDQFLQJ LQFUHDVHG LQ RUGHU WR
that have the lowest macroeconomic indicators. The implement the goal of the EU regional policy and
GLVWULEXWLRQRI¿QDQFLQJEHWZHHQWKH0HPEHU6WDWHV to balance the differences between the Member
groups allows concluding that regional policy was States.
directed toward the EU 15 Member States in this 7KH FRPSDULVRQ RI ¿QDQFLQJ EHWZHHQ WKH 0HPEHU
period, facilitating the less developed states and States groups in the period 2007 – 2013 indicates that
their regions of the EU 15 Member States. WKH GH¿QHG JRDOV RI WKH (8 UHJLRQDO SROLF\ DQG WKHLU
— The ESF (Figure 3) was used in all the 25 Member attainment criteria are aimed at facilitating sustainable
States, and in total it was planned EUR 55.6 bill., growth, competitiveness, and employment, as it is
ZKLFK LV RI WKH WRWDO ¿QDQFLQJ ,Q WKH provided in the renewed Lisbon Strategy.
GLVWULEXWLRQRI¿QDQFLQJZHUHSODQQHGIRUWKH 7KH (8 IXQGV ¿QDQFLQJ LQ ± SHULRG
EU 10 and 90% for the EU 15 Member States group. together with the technical support and interregional
The distribution shows that the need of the EU 15 solidarity programme is EUR 347.4 billion. Financing can
0HPEHU 6WDWHV IRU ¿QDQFLQJ WR UHGXFH UHJLRQDO be used for three purposes: to attain the convergence
differences was taken into consideration. JRDO ± (85 ELOO RI WKH WRWDO ¿QDQFLQJ IRU
— Within the framework of FIFG (Figure 3), the competitiveness and employment – EUR 53.1 bill. (15%
¿QDQFLQJSODQQHGIRUWKH(80HPEHU6WDWHVZDV of the total), territorial cooperation – EUR 8.31 bill. (2%
0.6% of the total amount, which was EUR 3 bill. RIWKHWRWDOEXWRIWKHWRWDO¿QDQFLQJZLOOEHDOORFDWHG
,Q ERWK 0HPEHU 6WDWHV JURXSV ¿QDQFLQJ GLIIHUV for technical support. In this period, the distribution of
VLJQL¿FDQWO\ 7KH (8 0HPEHU 6WDWHV JURXS ZDV WKH¿QDQFLQJLVEDODQFHGEHWZHHQWKHWZR0HPEHU6WDWHV
planned to receive the largest support – 89%, groups (Figure 4). In the EU 15 Member States group, it
whereas for the EU 10 Member States group it is 45%, whereas in the EU 12 Member States group it is
was 11%. RIWKHWRWDO¿QDQFLQJRIIXQGV

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6RXUFHDXWKRU¶VFDOFXODWLRQVEDVHGRQWKH&RKHVLRQSROLF\
Fig.4. 3ODQQHG(8IXQGV¿QDQFLQJWRWKH(8DQGWKH(80HPEHU6WDWHV
groups in the period of 2007 – 2013
6RXUFHDXWKRU¶VFDOFXODWLRQVEDVHGRQ%XVFK&RKHVLRQSROLF\
Fig.5.,QFUHDVHUHGXFWLRQRIWKH(8IXQGV¿QDQFLQJGXULQJ±DQG±
Within the framework of the Convergence goal, the GLVWULEXWLRQ RI ¿QDQFLQJ EHWZHHQ WKH 0HPEHU 6WDWHV
0HPEHU6WDWHVVKRXOGXVHWKH¿QDQFLQJVRWKDWLWIDFLOLWDWHV groups (Figure 4), in the EU 15 Member States group the
the growth potential, maintains and achieves a high ¿QDQFLQJLVZKHUHDVLQWKH(80HPEHU6WDWHV
development rate, prevents basic infrastructure problems, group – 34%.
and strengthens institutional and administrative capacity. 6XPPDULVLQJWKHFRPSDUDWLYHLQGLFDWRUVRI¿QDQFLQJ
7KHGLVWULEXWLRQRI¿QDQFLQJEHWZHHQWKH0HPEHU6WDWHV in the period of 2007 – 2013 between the Member States
groups (Figure 4) is 35% in the EU 15 group and 65% groups, the author concludes that the distribution of
in the EU 12 group. When implementing this part of the ¿QDQFLQJ EHWZHHQ WKH (8 DQG WKH (8 0HPEHU
programme, the main task is to create such conditions in States groups is more balanced than it was observed in
the territories of less developed Member States and their the period of 2000 – 2006. However, the economically
regions that their development level would get closer to stronger EU Member States France and Germany
the average EU development level. PDLQWDLQDODUJHLPSDFWRQWKHGLVWULEXWLRQRI¿QDQFLQJ
Within the framework of competitiveness and DV WKHVH 0HPEHU 6WDWHV KDYH UHFHLYHG D VLJQL¿FDQWO\
employment, it is important to enhance growth and ODUJHU ¿QDQFLQJ LQ WKHLU DFWLYLW\ SURJUDPPHV WKDQ WKH
creation of work places in different industries of the other Member States.
&RPPXQLW\,QWKHGLVWULEXWLRQRI¿QDQFLQJEHWZHHQWKH &RPSDULQJPXWXDOO\WKHSODQQHG(8IXQGV¶¿QDQFLQJ
Member States groups (Figure 4), it is observed that in of the periods 2000 – 2006 and 2007 – 2013, which is
WKH(8JURXS¿QDQFLQJLVZKHUHDVLQWKH(8 summarised in Figure 5, it can be concluded that the
Member States group it is 94%. GLVWULEXWLRQ RI ¿QDQFLQJ WR WKH 0HPEHU 6WDWHV GLIIHUV
The goal of territorial cooperation is of utmost &RPSDULQJ WKH SDQQHG ¿QDQFLQJ WR 0HPEHU 6WDWHV LQ
importance for providing balanced and sustainable ±DQGLQ±WKH&]HFK5HSXEOLFKDV
GHYHORSPHQW LQ WKH WHUULWRU\ RI WKH &RPPXQLW\ ,Q WKH the largest growth – 343%, then comes Malta – 302%,

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6ORYHQLD±&\SUXV±DQG+XQJDU\± against the EU 15 Member States during the EU funds

ZKHUHDVWKHSODQQHGDPRXQWRI¿QDQFLQJIRU/DWYLDZLOO ¿QDQFLQJSHULRGRI±
increase only by 46%. On average, the volume of the EU Per 1000 inhabitants. The EU 15 Member States
IXQGV¿QDQFLQJKDVLQFUHDVHGE\WLPHVDPRQJDOO(8 JURXSKDGWKHODUJHVW(8IXQGV¿QDQFLQJLQWKHSHULRGRI
0HPEHU 6WDWHV LQ WKH SHULRG ± &RPSDULQJ 2000 – 2006. The EU 12 Member States group had
ERWKSHULRGVDUHGXFWLRQRI¿QDQFLQJLVDOVRREVHUYHGLW WKH OHDVW (8 IXQGV ¿QDQFLQJ SHU LQKDELWDQWV 2Q
is planned that in the period of 2007 – 2013, Ireland will DYHUDJHWKH¿QDQFLQJLQ WKH(8 0HPEHU6WDWHVSHU
receive by 81% less, Spain – 36% and Luxembourg – by number of population has decreased by 34.5% in the
29% less than in the previous period. In 2007 – 2013, period of 2007 – 2013, which can be explained by the
the regional policy is aimed at the development of the EU EU expansion process in 2004 and 2007. The reduction
12 Member States group. RI WKH (8 IXQGV ¿QDQFLQJ WR WKH (8 0HPEHU 6WDWHV
The goal of the regional policy is to reduce regional in the period of 2007 – 2013 can be explained by
differences; nevertheless regional policy implementation DOORFDWLQJ¿QDQFLQJWRFRQYHUJHQFHJRDOVIRUOHYHOOLQJRXW
is developed through inter-state negotiations where differences between the less developed regions.
interests of the states dominate. However, it has to be 7KH (8 IXQGV ¿QDQFLQJ SHU QXPEHU RI SRSXODWLRQ
taken into consideration that it is impossible to reach WR (8 0HPEHU 6WDWHV KDV VLJQL¿FDQWO\ LQFUHDVHG LQ
the same economic level as the EU 15 Member States ±LIFRPSDUHGZLWK¿QDQFLQJLQ±
group has just over seven years. The prosperous EU The free labour force mobility among the EU Member
Member States have developed their economic strength 6WDWHV KDV IDFLOLWDWHG WKH ÀRZ RI WKH SRSXODWLRQ WR WKH
VLQFHWKH¿IWLHVRIWKHth century, and during that time, developed regions giving the inhabitants the opportunity
regional support was not available in the amount it is to increase their level of life by earning more, whereas
now. As the economists J. Bradley, G. Untiedt, J. Zaleski less developed territories lose one of the most necessary
(2009) consider, those EU 15 Member States that pay resources for developing economic activities – people.
WKH ODUJHVW SDUW RI ¿QDQFLQJ LQWR WKH (8 EXGJHW JDLQ D Per 1000 km2 territory. 7KH (8 IXQGV ¿QDQFLQJ
VLJQL¿FDQWSUR¿WDVDUHVXOWRIWUDGHH[SDQVLRQZLWKWKH to the EU 15 Member States group in the period of
EU 12 Member States, since the export of the EU 15 2000 – 2006 exceeded the EU 12 indicators 10 –
0HPEHU6WDWHVKDVLQFUHDVHGVLJQL¿FDQWO\DQGKDVHYHQ 20 times. The situation is opposite in the period of
more affected the total development level of the EU 15 ± WKH DPRXQW RI ¿QDQFLQJ WR WKH (8
Member States. Member States per 1000 km2 of territory is larger. The
The author of the research compared the planned EU regional policy equality principle is as if observed, but
IXQGV ¿QDQFLQJ LQ WKH 0HPEHU 6WDWHV LQ WKH SHULRGV RI another force – time – works, which has given a strong
2000 – 2006 and 2007 – 2013, evaluating its volume per hitch to the development of the EU 15 Member States
Member States GDP indicators, the number of population, during the 2000 – 2006 EU funds acquisition period.
DQGWKHVL]HRIWKHWHUULWRU\
7KH(8IXQGV¿QDQFLQJLQWKH0HPEHU6WDWHVGLIIHUV
per 1000 EUR GDP in the period 2000 – 2006. Two similar Conclusions, proposals,
characteristics groups can be distinguished: with little/ recommendations
ZLWK ODUJH (8 IXQGV¶ ¿QDQFLQJ SHU VHOHFWHG LQGLFDWRU ,I 1. Theoreticians and practitioners of economics in
compared between the two Member States groups, the various countries have researched the impact of the
(80HPEHU6WDWHVJURXSKDVOLWWOH(8IXQGV¿QDQFLQJ use of the EU funds on the development indicators of
It is explained by the fact that there are the largest GDP the Member States. According to researchers, the EU
indicators in these Member States, and it approves that IXQGVDUHHYDOXDWHGDVVLJQL¿FDQWWRROVIRUIDFLOLWDWLQJ
the Member States have high productivity. Financing to economics with positive effect on the processes.
the EU 12 Member States group should be evaluated 2. Two similar groups of the EU 27 Member States
DV VLJQL¿FDQW DQG DSSURYHV WKH ORZ SURGXFWLYLW\ LQ WKH FDQ EH GLVWLQJXLVKHG WKH (8 RU ³QHZ´ DQG WKH
Member States and the low competitiveness at the (8RU³ROG´0HPEHU6WDWHVZKRVHGLIIHUHQFHVRI
international market, and it exceeds the average EU level GHYHORSPHQW OHYHOV DUH VLJQL¿FDQW 7R OHYHO RXW WKH
up to six times. differences, various EU funds and programmes are
,QWKHSHULRGRI±WKH(8IXQGV¿QDQFLQJ available to the EU Member States.
SHU(85*'3WRWKH(80HPEHU6WDWHVÀXFWXDWHV 3. In the period of 2000 – 2006, the distribution of
within EUR 20 – 37 thou because the economic growth ¿QDQFLQJ WR WKH 0HPEHU 6WDWHV DFURVV WKH IXQGV
rates in the Member States have increased rapidly due is as follows: 65% were allocated to agriculture;
WRWKHLPSDFWRIWKHXVHRIWKH(8IXQGV¿QDQFLQJLQWKH 20% - to regional cohesion and others. The
previous period, but the economic growth has not reached GLVWULEXWLRQ RI WKH (8 IXQGV ¿QDQFLQJ EHWZHHQ WKH
the level of the EU 15 Member States group yet. The EU Member States groups was planned as follows:
IXQGV¿QDQFLQJSHU(85*'3LQWKH(80HPEHU RIWKHWRWDOIXQGV¿QDQFLQJWRWKH(8
States is between EUR 0.39-5 thou, which compared to WR WKH (8 $IWHU FRPSDULQJ ¿QDQFLQJ EHWZHHQ
the EU 12 Member States group is four to nine times the Member States, it was observed that the larger
VPDOOHU7KHIXQGV¿QDQFLQJWRWKH(80HPEHU6WDWHV Member States of the EU 15 group receive more
group has reduced in this period if compared with the ¿QDQFLQJWKDQLWLVSODQQHGIRUWKHRWKHU(80HPEHU
previous period. On average, in the EU 27 Member States States.
LWLV(85WKRX7KHVLJQL¿FDQWGLIIHUHQFHVLQGLFDWHWKH 4. In the period of 2007 – 2013, the distribution of
still existing low economic development level of the EU ¿QDQFLQJ EHWZHHQ WKH 0HPEHU 6WDWHV LV EDODQFHG
12 Member States, which was impossible to be balanced in the EU 15, it is 45%; whereas in the EU – 55%,

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but regarding the distribution between the Member 3. Cohesion Policy 2007-2013: Financial Allocations
6WDWHVWKHODUJHVW¿QDQFLQJLVSODQQHGIRUWKHODUJHVW per Year. Retrieved: ec.europa.eu/regional_
Member States of the EU Member States group. policy/policy/fonds/pdf/annexe-verso.pdf. Access:
5. &RPSDULQJ WKH ¿QDQFLQJ SODQQHG IRU WKH SHULRG 19.12.2009.
2000 – 2006 and 2007 – 2013, it has increased 4. &LQJXOH 6 /DWYLHWH , Eiropas Savienibas
1.7 times in the period of 2007 – 2013. In total, sniegtas iespejas – strukturfondi Latvija un Irija
in the period 2000 – 2013 it is planned to allocate (European Union Provided Possibilities – Structural
EUR 547.3 bill. to the Member States. Funds in Latvia and Ireland). In: Economic Science for
6. (YDOXDWLQJ WKH (8 IXQGV ¿QDQFLQJ WR WKH 0HPEHU Rural Development: Proceedings of the International
States per 1000 GDP (EUR), 1000 inhabitants, and 6FLHQWL¿F &RQIHUHQFH 1R -HOJDYD //8
1000 km2, the situation reveals the same trend pp. 215-225.
in all the analysed indicators: in the period of 5. *'3 DQG 0DLQ &RPSRQHQWV ± 9ROXPHV >RQOLQH@
2000 – 2006, the EU 15 Member States received (85267$7 Retrieved: appsso.eurostat.ec.europa.
larger investment, whereas in the period of 2007 – eu/nui/show.do?dataset=nama_ gdp_k&lang=ne.
2013, these are the EU 12 Member States, which Access: 18.12.2012.
reveals the correspondence of the distribution 6. Haite, I. (2010). Sustainable Development Planning
RI ¿QDQFLQJ WR WKH UHJLRQDO SROLF\ SULQFLSOHV WKDW ([SHULHQFH LQ 5H]HNQH ,Q Economic Science for
¿QDQFLQJ LV DOORFDWHG WR WKH UHJLRQV ZLWK D ORZHU Rural Development: Proceedings of the International
development level. 6FLHQWL¿F &RQIHUHQFH 1R -HOJDYD //8
7. (FRQRPLFJURZWKLVOLQNHGQRWRQO\ZLWKWKHVL]HRI pp. 30-26.
WKHXVHRIWKH(8IXQGV¿QDQFLQJEXWDOVRZLWKWKH 7. .REXV 3 &KDQJHV RI /HYHO DQG 9DULDELOLW\
ability of the Member State to implement domestic of Wheat Production in the EU Member States for
policy related to a targeted application of the EU the Period of 1961-2008. In: Economic Science for
IXQGV ¿QDQFLQJ WR UHDFK DQ HTXLYDOHQW TXDOLW\ RI Rural Development: Proceedings of the International
economy development of the EU Member States. In 6FLHQWL¿F &RQIHUHQFH 1R -HOJDYD //8
WKH SHULRG RI ± WKH H[FHVV RI ¿QDQFLQJ pp. 90-100.
to the EU 12 Member States may not provide such 8. 0LFNLHZLF] $ 0LFNLHZLF] % 3ROLVK )RRG
a fast economic development rate because the Sector in the European Union. In: Economic
development of the Member States does not take Science for Rural Development: Proceedings of the
place under identical competitive conditions and is ,QWHUQDWLRQDO6FLHQWL¿F&RQIHUHQFH1R-HOJDYD
DIIHFWHGE\WKHJOREDO¿QDQFLDOFULVLVDVZHOODVWKH LLU, pp. 45-52.
regional policy of each Member State. The strategy 9. 5\QFN60F$OHDYH\37KH&RKHVLRQ'H¿FLW
IRUWKHXVHRI¿QDQFLQJLQFRQQHFWLRQZLWKDWWDLQLQJ in Structural Fund Policy. Journal of European Public
long-term goals is important. Policy, No. 8. 541 p.
10. Tetere, V. (2009). European Structural Funds - Part
Bibliography of Investment in Latvia’s Development. In: Economic
1. Bradley, J., Untiedt G., Zaleski J. (2009). The Economic Science for Rural Development: Proceeding of the
5HWXUQRI&RKHVLRQ([SHQGLWXUHIRU0HPEHU6WDWHV ,QWHUQDWLRQDOVFLHQWL¿FFRQIHUHQFH1R-HOJDYD
EMDSGEFRA- WARR, report for Directorate General LLU, pp. 240-245.
for Internal Polices, European Parliament, 2009. 11. Vaidere, I. (2010). Common Agricultural Policy of the
2. Busch, B. (2008). Auswirkungen der EU-Erweiterung EU - Latvia’s perspective. In: Economic Science for
auf die Entwicklung und Verteilung des EU- Rural Development: Proceedings of the International
Haushalts. Retrieved: www.iwkoeln.de/Portals/0/ 6FLHQWL¿F &RQIHUHQFH 1R -HOJDYD //8
pdf/trends03_08_1.pdf. Access: 19.12.2009. pp. 22-29.

ISSN 1691-3078
T. Staube, I. Geipele Regional Specialization Performance to be Improved in
Latvia for The Multinational Industrial Companies
REGIONAL SPECIALIZATION PERFORMANCE TO BE IMPROVED IN

LATVIA FOR THE MULTINATIONAL INDUSTRIAL COMPANIES
Tatjana Staube 1, Mg.oec., Ineta Geipele, Dr.oec.

Riga Technical University
Abstract. The research is a part of the investigation of models assessing investments’ allocation of the powerful
countries neighbouring Latvia. The main attention is concentrated on the industrial development of Latvia under the
territorial cohesion in scope of the Baltic Sea Region. The problem of the attractiveness of Latvia industrial location is
DQDO\VHGDSSO\LQJ*LQLFRHI¿FLHQWIRUUHJLRQDOVSHFLDOL]DWLRQDQGJHRJUDSKLFDOFRQFHQWUDWLRQRIPDQXIDFWXULQJDPRQJ
other sectors of economy and within the three Baltic countries. The authors have examined the variables incurred
by the new trade theory of the 20th century and the role of multinational enterprises in the industrial business. The
PDLQ¿QGLQJVRIWKHUHVHDUFKDUHDVIROORZVDPRQJWKHWKUHH%DOWLFFRXQWULHV/DWYLDKDVH[SHULHQFHGDFRQVLGHUDEOH
GHFUHDVHRILQGXVWULDOUHJLRQDOVSHFLDOL]DWLRQIURPWRORZHFRQRP\FRQFHQWUDWLRQDQGSURGXFWLYLW\OHYHO
which indicates that it is early to predict a stable and balanced economy development in Latvia. The paper comprises
WKHRUHWLFDOGLVFXVVLRQRQWKHUDWLRVRIWKHDQDO\VHG*LQLFRHI¿FLHQW
Key words:LQGXVWULDOORFDWLRQORFDWLRQDWWUDFWLYHQHVVPXOWLQDWLRQDOHQWHUSULVHUHJLRQDOVSHFLDOL]DWLRQ
JEL code: F11, F23, L16, R11, R30.
Introduction *LQL FRHI¿FLHQW RI JHRJUDSKLFDO FRQFHQWUDWLRQ GHULYHG

&RQVLGHULQJ WKH SUHYLRXV UHVHDUFK UHVXOWV IURP from the index proposed by Krugman in 1991, and the
the evaluation of the Scandinavian direct investment variables of productivity difference from Ricardo’s model
territorial allocation in the context of Latvia commercial and scale economies incurred by new trade theory
property development and other research involvement approach. The theoretical discussion is focused on the
concerning the stDWHPHQWV RI /DWYLD LQHI¿FLHQW analysis of a number of driving economy categories under
and unbalanced economy development (Staube T., WKH UHJLRQDO VSHFLDOL]DWLRQ JHRJUDSKLFDO FRQFHQWUDWLRQ
*HLSHOH , WKH LQÀRZ RI WKH FDSLWDO WR /DWYLD setting the research parallel with Krugman and Venables
after its accession to the EU has not been used to cause two sector-two regions modelling, and the mean ratios
positive changes in internal economy as Latvia still IRUPXODWLRQ RI WKH *LQL FRHI¿FLHQW 7KH IROORZLQJ WDVNV
FDQQRW¿QGWKHVSHFLDOL]DWLRQLQWKH(8DQGLQWKHJOREDO are set for the research: 1) to analyse the manufacturing
markets (Skribans V., 2011). The questions regarding the sector in the context of multinational scale within the last
major principles in allocating the external capital and the decade in Latvia; 2) to calculate and compare the set
reasons of multinational companies’ foundation in the of determinants; 3) to draw conclusions in support or
Baltic States2 as the host countries raised the conduct of UHMHFWLRQRIWKHVWDWHGK\SRWKHVHV(%6&2KRVW$FDGHPLF
the given research. In this context, the authors analysed 6HDUFK &RPSOHWH (OVHYLHU 6FLHQFH SXEOLVKHU $/(3+
how attractive Latvia is for foreign investors offering AGRIS databases, and Riga Technical University library
the industrial locations to multinational enterprises. resources are the main sources of information. Inaccuracy
Hypothesis No.1: in the last decade, Latvia’s regional of statistical data at national and European level, the
VSHFLDOL]DWLRQ GHFUHDVHG DPRQJ WKH %DOWLF 6WDWHV time scale limitations of the oldest and latest data, its
Hypothesis No.2: the geographical concentration of the compatibility, and limited availability of detailed statistics
RQ WKH VXEFDWHJRULHV DFFRUGLQJ WR 1$&( FODVVL¿FDWLRQ
manufacture remains low in Latvia. The research deals
caused the main limitations of the research.
with the problems of regional misbalance in the country,
development of multipolarity of the territory, foreign
investment generation, and raise of the competitiveness Research results and discussion
of Latvia recently proposed for adoption by the National 1. Theoretical framework and empirical
'HYHORSPHQW 3ODQ RI /DWYLD IRU &URVV evidence
6HFWRUDO&RRUGLQDWLRQFHQWUH An ability of a country to attract external capital is
7KH DLP RI WKH FXUUHQW UHVHDUFK LV WR ¿QG RXW WKH a focus of a number of studies. The authors have not
regional specialisation of Latvia among the three Baltic IRXQG D VLPLODU DSSURDFK LQ RWKHU VFLHQWL¿F OLWHUDWXUH LQ
States analysing the commercial branches of economy Latvia and the Baltic, therefore the main bibliography
as the research object in the context of the potential of listed comprises the theoretical basis and the previous
Latvia market attractiveness to foreign investors. For HPSLULFDO VWXGLHV $UDX]R&DURG HW DO DGPLWV WKDW PRVW
this purpose, the chosen method includes calculations of the contributions to literature consist of new evidence
RIWKH*LQLFRHI¿FLHQWIRUUHJLRQDOVSHFLDOL]DWLRQDQGWKH on certain determinants (taxes, wages, agglomeration
___________________________
1
E-mail address: tatjana.staub@gmail.com.
2
hereafter the Baltic countries, namely Estonia, Latvia and Lithuania

ISSN 1691-3078
economies etc.) and/or new empirical approaches (e.g., 6HSDUDWHO\ WKH VXEFDWHJRU\ RI & FRGH PDQXIDFWXULQJ
Poisson models etc.), often using new data sets (for together with the particular agriculture of crop and
smaller geographical areas, with longitudinal structure animal production, hunting and related service activities
etc.). The researchers have found that agglomeration (A01 code) as alternative producing types of a land-use
HFRQRPLHV DQG PDUNHW VL]H WHQG WR KDYH D VLJQL¿FDQW were explored as a major focus of the research.
positive effect, while wages and taxes tend to act in the $PRQJ GLIIHUHQW PHDVXUHV RI VSHFLDOL]DWLRQ DQG
RSSRVLWH ZD\ +D\WHU 5 $UDX]R&DURG - HW DO concentration applied in the literature such as the
,Q )DOFLRJOX DQG $NJQJ|U SUHVHQWHG DQ +HU¿QGDKO ,QGH[ 'LVVLPLODULW\ ,QGH[ WKH .UXJPDQ
original research made for the industry of Turkey based ,QGH[ WKH DXWKRUV FKRVH *LQL FRHI¿FLHQW RI UHJLRQDO
on the previous studies including analysis of the industrial VSHFLDOL]DWLRQ DQG WKH *LQL FRHI¿FLHQW RI JHRJUDSKLFDO
location, allocation of the business activities and relocation concentration, which provide a measure of relative
of the resources as well as the structure of economic VSHFLDOL]DWLRQDQGFRQFHQWUDWLRQ7UDLVWDUX,HWDO
DFWLYLW\ LQ WHUPV RI VSHFLDOL]DWLRQ RI WKH UHJLRQV DQG )DOFLRJOX3$NJQJ|U6DQGDGLVVLPLODULW\LQGH[
JHRJUDSKLFDO FRQFHQWUDWLRQ RI WKH LQGXVWULHV 3DOX]LH ( derived from the index proposed by Krugman in 1991.
et al., 2001, Petersson L., 2002, Traistaru I. et al., 2002, The determinants used are employment data (for Gini
6XHGHNXP - )DOFLRJOX 3 $NJQJ|U 6 FRHI¿FLHQW DQG RWKHU UHVHDUFK YDULDEOHV FDOFXODWLRQV
Discussing a focus of multinational enterprises, *URVV'RPHVWLF3URGXFW*'3DQGWKHQXPEHURI¿UPV
&DQWZHOO HW DO DUJXHV WKDW PXOWLQDWLRQDO HQWHUSULVHV in industry calculating 7(&',)i and SCALE i variables
DJHQF\ GHULYHV IURP PRUH GHFHQWUDOL]HG IRUPV followed by the resume of only those variables that
of experimentation in international corporate DUH VLJQL¿FDQW LQ H[SODLQLQJ WKH LQGXVWU\ FRQFHQWUDWLRQ
networks, which competence-creating nodes of )DOFLRJOX3$NJQJ|U67KHFDOFXODWLRQLVEDVHG
new initiatives can co-evolve with local institutions on the following formulae:
&DQWZHOO - HW DO 6WDXEH 7 *HLSHOH , — *LQL FRHI¿FLHQW IRU UHJLRQDO VSHFLDOL]DWLRQ
A standard theory of the professor John H. Duning on 'DPJDDUG & :HLQHU - 7UDLVWDUX , HW DO
the multinational enterprises knowledge says that )DOFLRJOX3$NJQJ|U6
§ · n
success of the foreign direct investment occurs when
¸ «¦ i i
¨ 2 ¸ª º
RZQHUVKLS ORFDWLRQ DQG LQWHUQDWLRQDOL]DWLRQ 2/, WULDG
¨ O j »
advantages exceed the costs of establishing and running _
¨ n2 R ¸¬ i 1 ¼
s
foreign subsidiaries (Dunning J., 1981, Kronborg D., Gini R R (1.0),
© ¹
j _
Thomsen S., 2009). The two sector (agriculture and
manufacturing)-two region model of Krugman and j
9HQDEOHV LQ ZKLFK HDFK VHFWRU XVHV D VSHFL¿F IDFWRU RI
SURGXFWLRQDQGRQO\WKHIDFWRUVSHFL¿FWRPDQXIDFWXULQJ
(industrial workers), is mobile between regions
(Krugman P., Venables A., 1990, Traistaru I. et al.,
where (1.1), (1.2)
2002). The place where agglomeration happens could
be the result of a historical accident: one small change
in the share of manufacturing in a region may then
set off a chain reaction and produce cumulative effect (1.3), (1.4), and
(Traistaru I. et al., 2002). Yet, it could hardly be
possible in the Baltic due to the small-scale markets of
region j, value Oi denotes the position of the industry

each country, cultural differences, and low pan-Baltic indicates employment in each industry i in a certain
migration dynamics. The developed neo-classical trade
theory (Ricardo D., 1817, Ohlin B., 1933, Traistaru I. i in the ranking of Ri in descending order, n indicates
et al., 2002) explaining the phenomenon of intra-industry the number of regions, m – the number of industries. _
trade in Krugman’s models assumes that geographical 7KH DXWKRUV SUHVHQW
_ WKH PRGL¿HG IRUPXOD IRU_ Rj
advantage is endogenous and suggests that regional and
_ (2.2) for C i . The original paper names it R and
VSHFLDOL]DWLRQPD\EHWKHUHVXOWRIWKHVSDWLDOSDWWHUQRI C )DOFLRJOX 3 $NJQJ|U 6 ,Q WKH ¿UVW RI WKH
agglomeration of economic activities (Krugman P., 1991). mentioned formulae, the calculated meaning shows an
Krugman’s hypothesis suggests that regions become more average within the industries in a region, however it is
VSHFLDOL]HG DQG LQGXVWULHV EHFRPH PRUH FRQFHQWUDWHG different for each region j and formula (2.2) measures an
with economic integration. There was found a tendency average value within all regions per industry. Gini index
RI UHJLRQDO VSHFLDOL]DWLRQ LQ WKH FRQWH[W RI (XURSHDQ WDNHVYDOXHVEHWZHHQ]HURDQGRQHZKHUHYDOXHVFORVH
integration between 1992 and 2001, yet there was no WR]HURLQGLFDWHORZVSHFLDOL]DWLRQZKHUHDVYDOXHVFORVH
evidence for increased industrial concentration in Turkish WRRQH±DKLJKVSHFLDOL]DWLRQ
manufacturing industry. — *LQLFRHI¿FLHQWIRUJHRJUDSKLFDOFRQFHQWUDWLRQ
7UDLVWDUX , HW DO )DOFLRJOX 3 $NJQJ|U 6
2. Data and methods 2008):
§ 2 ·ª m
,Q WKLV SDSHU WKH SDWWHUQV RI UHJLRQDO VSHFLDOL]DWLRQ
¨ 2 _ ¸ «¬¦
_ º
¨ ¸ O
and concentration of commercial sectors of the economy
i »
DUH DQDO\VHG E\ WKH 1$&( UHY VWUXFWXUH FRGLQJ
¼
Giniic
©m C¹ j 1
agriculture (A code), manufacturing (B - E codes), j C j C (2.0),
construction (F code), trade and accommodation (G,
I codes), and services and transport (H, J-N codes).

ISSN 1691-3078
where (2.1), (2.2), (2.3), (2.4), value Oi denotes the position
of the industry i in the ranking of C j in descending order.

— Ricardo model for the relative productivity differences 7(&',)i 3DOX]LH ( HW DO )DOFLRJOX 3
$NJQJ|U6
(3)
7KHRULJLQDOIRUPXODLVPRGL¿HGE\XVLQJWKHVDPHGHQRWLQJRIWKHQXPEHURIUHJLRQVc in original, n in this Paper)

and number of industries (n in original m in this paper) to keep identity with the above formulae’s meanings. The
equation measures the value added, and measures employment of an industry i in a region j.
— SCALE ratio 3DOX]LH ( HW DO )DOFLRJOX 3 on the commercial real estate development of Latvia,
$NJQJ|U6 although in the Baltic the rate is the lowest. The results
SURYLGHG WKH PRGHOLQJ ¿QGLQJV RQ WKH PXOWLQDWLRQDO
enterprises business. These data are aggregated
(4), in Table 1. The economic crisis period did not show
VLJQL¿FDQW FKDQJHV LQ WKH DERYH PHQWLRQHG GDWD LQ
available statistics (for the years 2008 and 2009).
Obviously, the number of foreign control enterprises
where the number of enterprises of an industry i decreased in the entire economy of the Baltic in 2008 and
at a region j. 2009 entirely counting for 34% drop in comparison with
the data of 2007. Lithuania experienced the largest loss
of 45%, but Latvia the smallest – only 5% from number
New trade theory predicts that scale economies
in 2007. The phenomena is that general comparison of
FDXVH ¿UPV WR FRQFHQWUDWH LQ FHUWDLQ UHJLRQV PHDVXUHG
the foreign control enterprises’ statistics from the BSR
by the SCALE i variable. In this paper, the calculations
region of 2003 and 2009 in manufacturing sector, reveal
on 7(&',)i and SCALE i variables are detected only
that all the countries gained positive change: Estonia had
with the focus on the economy sectors: agriculture and
8% increase (15% down in crisis period), Latvia gained
manufacturing. 32% (5% down in 2008-2009), and Lithuania increased
the number of the BSR original capital enterprises for
3. Findings 36% (24% drop in the years of crisis).
The preliminary research made on the foreign Under Estlatrus crossborder cooperation programme,
direct investment territorial allocation in the context of Latvia has the common development directions of
commercial property development of Latvia (Staube T., LPSURYHPHQWRIWKHUHJLRQ¶VFRPSHWLWLYHQHVVE\XWLOL]LQJ
Geipele I., 2011) proved that during the last 20 years LWV SRWHQWLDO DQG EHQH¿FLDO ORFDWLRQ LQ WKH FURVV URDGV
Sweden had invested in the fast developing economies between the EU and the Russian Federation (EU Territorial
(including Finland and the USA) more actively than into &RRSHUDWLRQ 3URJUDPV¶ 2I¿FH +RZHYHU LW LV
the developed partner states – Norway and the United clear that no priorities are set for the industrial business
.LQJGRP 7KH 6ZHGLVK LQYHVWPHQW KDV DQ LQÀXHQFH development. In 2008 and 2009, the manufacturing
Table 1
Analysis on the foreign control of enterprises from the BSR3 in the Baltic in manufacturing in the
period from 2003 to 2007 (before economic crisis)
Baltic States Share of the average annual number of Share of the average annual number
the BSR control enterprises split within of the BSR control enterprises from all
the Baltic States4 foreign control units in a country
Estonia 34% 20%
Latvia 29% 3%
Lithuania 37% 2%
Source: authors’ calculations based on the EUROSTAT statistics
___________________________
3
The Baltic Sea Region (hereafter BSR), namely: Denmark, Estonia, Finland, Latvia, Lithuania, Poland,
Sweden and northern parts of Germany, Norway, Belarus and north-west regions of the Russian Federation
(Staube T., Geipele.I., 2011)
4
The statistics of Belarus enterprises is not available

ISSN 1691-3078
Source: authors’ construction based on the national statistical data
Fig. 1. Regional specialization chart of the commercial analysed economy sectors5

in the Baltic according to the NACE rev.2 coding in 2000, 2007, and 2011
0.80
Gini index, concentration, dynamics
0.60
0.40
0.20
-
A B-E F G, I H, J-N A01 C
(0.20)
(0.40)
2000 2007 2011 dynamics, 2000-2011
Source: authors’ construction based on the national statistical data
Fig. 2. Geographical concentration of the commercial analysed economy sectors in

the Baltic according to the NACE rev.2 coding from 2000 to 2011
sector enterprises of Latvia were dominantly controlled highest rate of Gini index reaching 1.20 point, which
by the BSR shared 20% for Sweden, 19% - Denmark, accordingly does not mean that the region is concentrated
and 18% - Germany. Russia and Lithuania, the closest in one sector. Nevertheless, it is a consequence of the
neighbouring investors, counted for 7% of each interest problem of statistical secrecy, when a region has less
WKDWLV¿YHSHUFHQWSRLQWOHVVWKDQWKHVKDUHRI(VWRQLD than two companies in a sector data are not available
Latvia is the leader among the Baltic host countries for )DOFLRJOX3$NJQJ|U6/DWYLDKDVWKH±ORZHVW
Russian enterprises in the multinational business context. LH FORVH WR ]HUR UDWH RI SRLQWV QRW HYHQ UHDFKLQJ
According to the literature summary on the Gini the 2000 level in manufacturing and agriculture in one
FRHI¿FLHQWVHHVHFWLRQWKH)LJXUHGHPRQVWUDWHVD context. All 12 years Latvia had the highest relative
ELJGLIIHUHQFHRIUHJLRQDOVSHFLDOL]DWLRQRIWKHFRPPHUFLDO LQGXVWULDOVSHFLDOL]DWLRQ Ri in trade and accommodation
sectors among the three Baltic States. The average rate LQLQWKHORZHVWUDWHZDV¿[HG
for the Baltic is 0.78 in all the period that is close to one, in services and transport (0.46 in 2000, 0.61 in 2011),
ZKLFK SRLQWV DW D KLJK VSHFLDOL]DWLRQ UDWH 7KH DQDO\VLV manufacturing kept the fourth (1.00 in 2000, 0.83 in
of separate subcategories reveals that Estonia gets the 2011), and agriculture – the third result (0.99 in 2000,
___________________________
5
VHHWKHOLVWLQWKHVHFWLRQ³'DWDDQGPHWKRGV´

ISSN 1691-3078
0.90 in 2011). Lithuania survived the largest increase locations determines the industrial concentration.
XS LQ WKH ERWK VHFWRUV¶ VSHFLDOL]DWLRQ UDWH LQ WKH 6PDOO VFDOH DQG ORZ UHJLRQDO VSHFLDOL]DWLRQ UDWH
Baltic. Estonia keeps the leading position announcing a of the Baltic market create conditions for low
PRGHUDWH UHJLRQDO VSHFLDOL]DWLRQ LQ PDQXIDFWXULQJ DQG industry development paces. The results predict
agriculture. WKDW FXUUHQWO\ /DWYLD KDV JUHDWHVW LQÀXHQFH IURP
Entirely, Latvia holds the second result among the the longer distance foreign investors, and it
%DOWLF UHJLRQDO VSHFLDOL]DWLRQ +RZHYHU WKH HFRQRPLF might increase its attractiveness for the border
crisis caused dramatic changes for Latvia by 2011. In neighbour countries. This empirical study requires
Figure 1, the data on the dynamics support the stated further analysis on foreign direct investments
hypothesis No. 1 proving that Latvia passed through the and dynamics of the represented industries’
UHDVRQDEOHGHFUHDVHLQUHJLRQDOVSHFLDOL]DWLRQZLWKLQWKH scales.
Baltic. The most negative dynamics of Gini index was 3. 6LQFH WKH KLJKHVW UHJLRQDO VSHFLDOL]DWLRQ UDWH ZDV
¿[HGLQDJULFXOWXUHDQGPDQXIDFWXULQJJHWWLQJDQDYHUDJH observed in Estonia, this country seems to be more
slope of 31% down in 2000-2011, which is affected by attractive for cooperation and business activities.
the slope of almost 88% down during the economic crisis. Whereas, Latvia and Lithuania compete to increase
7KH UHJLRQDO VSHFLDOL]DWLRQ RI (VWRQLD LQ DJULFXOWXUH DQG the potential of the investments’ attractiveness
manufacturing sectors survived indicating a positive by developing authentic economy branches. The
dynamics even in the period from 2007-2011, and growth of the number of enterprises and real
Lithuania had minor difference of less than 10% down. estate market at the economy development stage
Figure 2 demonstrates that the highest geographical in the last decade should not be ignored, so
concentration rate is declared for agriculture and services, the questions of a pricing policy for merger and
including transport in the Baltic. Manufacturing has the acquisition and national politics supporting the
lowest rate in 2000-2011, however, currently, due to H[WHUQDOFDSLWDOLQÀRZVDUHRSHQIRUIXUWKHUUHVHDUFK
the market stagnation; the construction sector has the investigation.
smallest concentration. The results of the calculations 4. According to the Krugman’s theory (Krugman P.,
showed that Ri and C j meanings are identical because Venables A., 1990) and the obtained statistics
of the proportion levels off the basic data. 7(&',)i RQ *LQL FRHI¿FLHQWV WKH LQWHJUDWLRQ LQWR WKH (8
FDOFXODWLRQV JRW FORVH WR ]HUR YDOXH 7KHUHIRUH /DWYLD promoted the reduction of the trade barriers and
experience adds to the Ricardian theory’s predictions – increased the attractiveness for the Scandinavian
WKHJUHDWHUWKHKLJKHUGHJUHHRIUHJLRQDOVSHFLDOL]DWLRQ investments. Therefore, Estonia has strengthened
the higher the level of geographical concentration of LWVSRVLWLRQDVEHLQJ´WKHFHQWUH´ZLWKDJRRGPDUNHW
industry. The SCALE i ratio showed 56% slope down in access for major economic sectors, thus, impairing
agriculture to seven persons per unit and double decrease the positions of Latvia and Lithuania leaving them
in manufacturing from 2000 to 2011 to the enterprise DVUHPRWHUHJLRQVLQ³WKHSHULSKHU\´$WWKLVVWDJH
VL]H RI SHUVRQV 6XFK FRQVLGHUDEOH FKDQJHV VFDOLQJ WKHFRVWVRISURGXFWLRQIDFWRUVZRXOGPRWLYDWH¿UPV
agriculture and manufacturing economies might be the to move back to the peripheral regions (original
FRQVLGHUDWLRQWRHI¿FLHQF\UHYDOXDWLRQDVDFRQVHTXHQFH locations).
RILQGXVWULDOVSHFLDOL]DWLRQGHFUHDVHZLWKLQWKHORZVFDOH 5. The results support the hypothesis No.2. The research
Baltic market. results suggest the need to consider the advantages
of the local market of Latvia and the foundation of
WKH LQGXVWULDO VSHFLDOL]DWLRQ QLFKH /LWKXDQLD PLJKW
expect only structural changes in agriculture.
recommendations 6. Based on the theoretical discussion, the paper
1. 7KH ¿QGLQJV RI WKH SDSHU IXOO\ FRQ¿UP WKH demonstrates amendments _ to _ the formulation of
hypothesis No.1: in scope of the Baltic, Latvia WKH *LQL FRHI¿FLHQW¶V R and C UDWLRV DQG ¿QGV
H[SHULHQFHG WKH WHQGHQF\ RI UHJLRQDO VSHFLDOL]DWLRQ that Ri and C j meanings are identical, because in
decrease within the last decade that might result calculating a value the proportion levels off the basic
in weakening of investment attractiveness for data.
Latvia among the other Baltic countries. Krugman’s
7. ,Q WKH FXUUHQW FRQWH[W RI WKH LQGXVWULDOL]DWLRQ
hypothesis (see section No.1) is true for the A01
DVSLUDWLRQVRI/DWYLDFKDUDFWHUL]HGE\KLJKH[WHUQDO
DQG&1$&(FDWHJRULHV5HJDUGLQJDOOWKHFRPPHUFLDO
GHEW ZHDN FXUUHQW UHJLRQDO VSHFLDOL]DWLRQ DQG
branches as whole, Latvia has lost its regional
low economy concentration and productivity
VSHFLDOL]DWLRQ SRVLWLRQV VLQFH WKH SHULRG RI /DWYLD¶V
level, the authors conclude that in the medium-
integration into the EU.
term perspective it is too early to judge about
2. The analysis of the multinational companies’
the stable and balanced economical development
geography and number in the Baltic countries gave
opportunities.
phenomenal data showing that during the years of
economic crisis the major number of the companies
with the BSR capital were in the manufacturing Bibliography
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results provide that these might be the companies Antolin, M. (2010). Empirical studies in industrial
from the historical partner countries that mainly location: An assessment of their methods and
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Ricardo model predictions on the market access and Issue 3, pp. 685–711.

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2. &DQWZHOO - 'XQQLQJ - + /XQGDQ 6 0 http://www.csb.gov.lv, http://www.stat.gov.lt.
An evolutionary approach to understanding Access: 02.01.2013
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International Business Studies, Volume 41, Issue 4, 14. 3DOX]LH ( 3RQV - 7LUDGR ' Regional
pp. 567-586. ,QWHJUDWLRQ DQG 6SHFLDOL]DWLRQ 3DWWHUQV LQ
3. &URVV6HFWRUDO &RRUGLQDWLRQ FHQWUH 1DWLRQDO Spain. Regional Studies, Volume 35, Issue 4,
Development Plan for 2014-2020. Retrieved: http:// pp. 285-296.
www.nap.lv. Access: 20.12.2012 15. Petersson, L. (2002). The theory of new economic
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6. (XURSHDQ &RPPLVVLRQ 6WDWLVWLFV 5HWULHYHG Savieniba ekonomisko efektu modelesana (Latvia
http://ec.europa.eu/eurostat. Access: 02.01.2013 accession to the European Union. Modelling
7. )DOFLRJOX 3 $NJQJ|U 6 5HJLRQDO of economic effects). Economics & Business,
6SHFLDOL]DWLRQ DQG ,QGXVWULDO &RQFHQWUDWLRQ pp. 2176-2184.
Patterns in the Turkish Manufacturing Industry: 18. Staube, T., Geipele, I. (2011). Valuation of the
An Assessment for the 1980-2000 Period. Swedish Direct Investment Territorial Allocation
European Planning Studies, Volume 16, Issue 2, LQ WKH & RQWH[W RI /DWYLDQ &RPPHUFLDO
pp. 303-323. Property Development. Selected papers of the
8. Hayter, R. (1997). The dynamics of industrial 8th International Conference Environmental
ORFDWLRQ 7KH IDFWRU\ WKH ¿UP DQG WKH SURGXFWLRQ Engineering, Volume 3, pp. 993-1000.
system. New York: Wiley. p.504. 19. Staube, T., Geipele, I. (2012). Industry location
9. Kronborg, D., Thomsen, S. (2009). Foreign ownership assessment for multinational enterprises in Latvia.
and long-term survival. Strategic Management Proceedings of the 2nd World Sustain. Forum.
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10. Krugman, P. (1991). Geography and Trade, 20. 6XHGHNXP - &RQFHQWUDWLRQ DQG
&DPEULGJH0,73UHVVS 6SHFLDOL]DWLRQ 7UHQGV LQ *HUPDQ\ VLQFH
11. Krugman, P., Venables, A. (1990). Integration and 5HXQL¿FDWLRQ +::$ 'LVFXVVLRQ 3DSHU
the competitiveness of peripheral industry. In: Bliss, (Hamburg: The Hamburg Institute of International
&KULVWRSKHU DQG %UDJD GH 0DFHGR -RUJH HGV Economics).
Unity with diversity in the European economy: the 21. Traistaru, I., Nijkamp, P., Longhi, S. (2002). Regional
&RPPXQLW\¶VVRXWKHUQIURQWLHU&DPEULGJH8QLYHUVLW\ VSHFLDOL]DWLRQ DQG FRQFHQWUDWLRQ RI LQGXVWULDO
3UHVV&DPEULGJHS activity in accession countries. ZEI.: Working Paper.
12. 1DWLRQDO &HQWUDO 6WDWLVWLFDO %XUHDXV RI (VWRQLD ZEI, Zentrum für Europ. Integrationsforschung,
Latvia, Lithuania. Retrieved: http://pub.stat.ee, p. 34.
Acknowledgements
This work has been supported by the European Social Fund within the project «Support for the implementation of
doctoral studies at Riga Technical Universityors)

ISSN 1691-3078
N. Cudecka-Purina et al. New European Union Member States Towards Sustainable Waste Management,
Involvement of Individuals into The System
NEW EUROPEAN UNION MEMBER STATES TOWARDS SUSTAINABLE

WASTE MANAGEMENT,
INVOLVEMENT OF INDIVIDUALS INTO THE SYSTEM
Natalija Cudecka-Purina+1, Mg.oec., PhD student; Dzintra Atstaja2, Dr.oec., associate professor;
Vladimirs Cudeckis3, Mg.oec.
1,2
BA School of Business and Finance;
3
³9LGHV&HQWUV´/WGFKDLUPDQRIWKH%RDUG
Abstract. This paper provides a study focused on the new Member States and their experience in the development
of sustainable waste management system and involvement of individuals into it. Almost all countries have achieved
WKH¿UVWVWDJH±FRQVWUXFWLRQRIQHZLQIUDVWUXFWXUHDQGFORVXUHDQGUHFXOWLYDWLRQRIROGVXEVWDQGDUGODQG¿OOV7KH
article provides comparison of different methods used to involve inhabitants into the waste management system; the
paper concludes with one important aspect – deposit system which has been discussed a lot lately. The general aim of
WKHSDSHULVWRFRPSDUHWKH(XURSHDQ8QLRQQHZ0HPEHU6WDWHVLQWHUPVRIWKHLUDFKLHYHPHQWVLQWKH¿HOGRIZDVWH
management and, especially, in the implementation of deposit system in the Baltic States. Tasks, undertaken within
the research are, as follows: comparison of the EU New Member State achievements in waste management; and a
FRPSDUDWLYHDQDO\VLVRIHFRQRPLFLQVWUXPHQWVDSSOLHGLQWKH¿HOGDQGRIGHSRVLWV\VWHPLPSOHPHQWHGLQWKH%DOWLF
States. The applied methodology includes a quantitative and qualitative comparative analysis. The main conclusions of
the paper state that the society education remains one of the most important aspects to achieve goals set for waste
management.
Key words: sustainable waste management, Baltic States, European Union, economic instruments.
JEL code: O52, R58, R38
Introduction Table 1 shows that extensive work has been done

The new Member States, including Estonia, Latvia LQ WKH ¿HOG RI ZDVWH PDQDJHPHQW PDLQO\ ZLWK WKH XVH
and Lithuania have begun their way towards sustainable RI WKH (XURSHDQ &RKHVLRQ )XQG DQG ,63$ FR¿QDQFLQJ
waste management in the mid 1990s. Accession of the It also shows the correlation between the population
new Member States to the European Union required GHQVLW\ DQG WKH QXPEHU RI VXEVWDQGDUG ODQG¿OOV )RU
harmonisation of the existing legislation system with the example, in Latvia there were 4480 inhabitants/sub-
European legislation and implementation of Sustainable VWDQGDUG ODQG¿OO LQ ZKLOH WKH QXPEHU H[FHHGV
ZDVWHPDQDJHPHQWV\VWHP&XGHFND1 LQKDELWDQWVSHUODQG¿OOLQ,Q3RODQGWKHUH
$FFRUGLQJ WR &XGHFND3XULQD WKH FRXQWULHV ZHUH LQKDELWDQWV SHU VXEVWDQGDUG ODQG¿OO DQG
had to develop an integrated approach to municipal QRZWKHQXPEHULVLQKDELWDQWVSHUODQG¿OO7KLV
waste management in order to implement the European leads to a conclusion that the new system is focused on
Waste Management Directive. Latvian sustainable waste the use of developed infrastructure in more economically
management system underwent three main stages: HIIHFWLYHDQGHQYLURQPHQWDOO\HI¿FLHQWZD\
1) development of new infrastructure – construction of
VDQLWDU\ZDVWHODQG¿OOVDQGGXPSVLWHUHFXOWLYDWLRQ± 1. Economic instruments in the new European
XSWRQRZLVWRWDOO\IXO¿OOHGLQWKH%DOWLF6WDWHVDQG Union Member States
in part of the Member States; The countries have introduced various measures
2) involvement of 100% of urban and at least 75% of WR LQFUHDVH WKH FRVW RI ODQG¿OOLQJ WR FRPSO\ ZLWK WKH
UXUDO LQKDELWDQWV ± SUDFWLFDOO\ IXO¿OOHG LQ WKH %DOWLF SURYLVLRQV RI WKH /DQG¿OO 'LUHFWLYH 7KH LQFUHDVLQJ JDWH
States and in part of the Member States; fees mainly result from rising technical standards for
3) implementation and development of sorted waste ODQG¿OOV DQG LPSOHPHQWDWLRQ RI WKH SULQFLSOH WKDW JDWH
collection from 5% in 1995 to 25% in 2025. fees should cover all costs involved in the setting up,
RSHUDWLQJ DQG FORVLQJ ODQG¿OOV 7KLV VWXG\ ¿QGV WKDW WR
The second and third stages were in the awareness
EH HIIHFWLYH ODQG¿OO WD[ UDWHV VKRXOG EH UHODWLYHO\ KLJK
of the regions and local governments, and their
although in Estonia, rapid increases to a relatively low
LPSOHPHQWDWLRQZDV¿QDQFHGE\WKHVWDWHRUUHJLRQ7KH
ODQG¿OOWD[KDYHDFKLHYHGDVLPLODUHIIHFW(($
¿UVWVWDJHLQYROYHGUHFXOWLYDWLRQRIDOOH[LVWLQJGXPSVLWHV
DQGFRQVWUXFWLRQRIUHJLRQDOODQG¿OOVZKLFKUHTXLUHG co-
¿QDQFLQJIURPWKH(XURSHDQ8QLRQIXQGV&RKHVLRQDQG
ISPA funds). The following table shows the situation in the The table below provides information on the taxes
new Member States, in terms of closure and recultivation DQGJDWHIHHVLQWKH(XURSHDQ8QLRQ7KH¿JXUHRXWOLQHV
RIVXEVWDQGDUGODQG¿OOVDQGFRQVWUXFWLRQRIQHZODQG¿OOV WKDW WKH FRVWV IRU ODQG¿OOLQJ LQ WKH QHZ 0HPEHU 6WDWHV
___________________________
+
&RUUHVSRQGLQJDXWKRUTel.: +371 26789563;
E-mail address: natalija@vtc.lv

ISSN 1691-3078
Table 1
6XEVWDQGDUGODQG¿OOVLQWKHQHZ0HPEHU6WDWHV
Inhabitants Number of
Country Area, km2 1XPEHURIVXEVWDQGDUGODQG¿OOV
(2010) ODQG¿OOV
Bulgaria 110,910 7,621,337 124 controlled, 56
9 meet the EU standards,
720 reported by the Ministry of Environment,
2500 in total
&\SUXV 9,250 800,000 120 4
&]HFK 78,866 10,674,947 1270 237
Republic
Estonia 45,226 1,415,681 351 10
Hungary 93,000 10,075,034 2670 53
Latvia 64,589 2,366,515 565 10
Lithuania 65,200 3,601,138 800 (incl. contaminated sites and liquid waste 11
reservoirs)
Malta 316 400,000 3 1
Poland 312,685 38,625,478 998 200
Romania 238,391 22,303,552 7686 65
Slovakia 48,845 5,422,366 8000 71
Slovenia 20,273 2,048,847 60 15
Source: authors’ analysis based on 9,10,11,15,18,28,30,31
Source: authors’ calculations based on the CEWEP (2011) and EC (2012) data
Fig. 1 7RWDOFRVWV(85IRUODQG¿OOLQJLQWKH(8
(excluding Slovenia and Poland) range from 2% to 40% countries with taxes, the taxes vary from EUR 3 per
of the highest costs – in Sweden (EUR 155.5). tonne in Bulgaria to up to EUR 107.49 per tonne in the
$FFRUGLQJWRWKHUHSRUWRIWKH(XURSHDQ&RPPLVVLRQ 1HWKHUODQGV7KHWRWDOFRVWVRIGLVSRVDOWRODQG¿OOLQWKH
(DG ENV) (2012)), the level of taxation ranges very EU appear to range between EUR 0.33 in Slovakia and
widely, while some countries levy no tax. Among the EUR 155.50 in Sweden.

ISSN 1691-3078
Table 2
2YHUYLHZRIODQG¿OOWD[HVDQGIHHVLQWKHQHZ0HPEHU6WDWHV
Country (year, tax /DQG¿OOWD[UDWH Gate fee range (EUR) 7RWDOW\SLFDOFKDUJHIRUODQG¿OOLQJ

introduced) (EUR) (EUR)
Bulgaria (2004) 3 No data found, but very low 3
&\SUXV - 56 56
&]HFK5HSXEOLF 20 12- 20 36
Estonia (1990) 12 50 62
Hungary - 35 35
Latvia (1991) 10 18 – 28 35
Lithuania (2012) 22 15 - 17.50 38.25
Malta - 20 20
Poland (2001) 27 58 - 81 96.10
Rumania - 2.80 - 4.60 3.70
Slovakia - 0.33 - 13.28 6.80
Slovenia (2001) 11 36 - 157 116.50
Source: authors’ analysis based on 12
Table 2, along with Figure 1, shows that all Member the regional – regulations, waste management plans
States excluding Poland and Slovenia have considerably HWF DQG ¿QLVK ZLWK WKH PXQLFLSDOLWLHV ZLWK WKHLU RZQ
VPDOO FKDUJH IRU ZDVWH ODQG¿OOLQJ 6WLOO WKH UDWHV KDYH regulations.
increased up to 500% (Estonian case) compared Social methods – were totally new for the Baltic
with the gate fees that were in force 10 years ago. States, since no such term as non-governmental
7KH JDWH IHHV DQG ODQG¿OO WD[HV GR QRW VWLPXODWH organisations existed in the Soviet Union, especially, in
much the waste management companies to collect WKH¿HOGRIZDVWHPDQDJHPHQW1RZHDFKFRXQWU\KDVD
sorted waste, as it requires infrastructure (waste ODUJH QXPEHU RI VXFK RUJDQLVDWLRQV IURP ³JUHHQ FOXEV´
containers), land (where the sorted waste areas up to professional associations. The most important of
would be located), special transport, and storage areas. which are:
Still, the fee and tax cannot be increased to the level — waste management associations (Latvia – LASA
of other Member States instantaneously, as this would (Waste Management Association of Latvia),
only lead to illegal dumping and to the fact that no /$68$ /DWYLDQ :DVWH 0DQDJHPHQW &RPSDQ\
ZDVWH LV WUDQVSRUWHG WR ODQG¿OOV 7KLV PHDQV WKDW WKH $VVRFLDWLRQ /LWKXDQLD ± 5$7&$ $VVRFLDWLRQ RI
Member States have to implement the progressive 5HJLRQDO :DVWH 0DQDJHPHQW&HQWUHV RI /LWKXDQLD
rates and to use them alongside with popularisation /.$7$ /LWKXDQLDQ &RPPXQDO 6HUYLFH DQG :DVWH
and implementation on the individual involvement Management Association); and Estonia – EJKL
level of the three R strategies – Reduce, Reuse, and (Estonian Waste Management Association));
Recycle. — Green dot (in each country its own).
Main activities of the non-governmental organisations
2. Economic instruments for involvement include:
of individuals into the Waste Management — preparation and discussion of planning
system in the Baltic States documentation;
In this part, special attention will be drawn on — organisation and implementation of practical
three countries – Estonia, Latvia, and Lithuania, activities in waste sorting;
as these countries are the only countries within — cooperation with governmental institutions;
the European Union, which previously were part of — increase of environmental consciousness,
different union – the Soviet Union and this means that development of consumption habits.
the starting situation was identical in all three states.
The following main methods for involvement of Results and discussion
population into the waste management system exist in $ YHU\ SUHFLVH UHPDUN ZDV PDGH E\ &RVVX
the Baltic States: that waste management decisions may be strongly
— institutional; LQÀXHQFHGE\VHYHUDORWKHUIDFWRUVLQFOXGLQJWKHIDPRXV
— social; syndromes:
— ¿QDQFLDO – NIMBY (Not In My Back Yard) - the best known
Institutional methods are the same along all syndrome representing a widely spread public
countries. They start with the European legislation – attitude towards the installation of waste
directives, frameworks and regulations, followed by management facilities close to any particular
the national level – legislation of particular country, residential area;

ISSN 1691-3078
Table 3
Waste collection fees in the Baltic States
Country Waste fee calculation Collection fee Deposit Rates

basis system
Estonia %ORFNRIÀDWV Yes, since EUR 0.06 – glass, PET > 0.5l
0.038 EUR/m2 2005 (85±PHWDOFDQV3(7O
Household 60 - 70 EUR/t (4 -
6 EUR/month)
Latvia %ORFNRIÀDWV 0.88 – 1.74 EUR / Yes, since EUR 0.08 – colourless glass 0.33 l
person 2003 EUR 0.07 – brown glass 0.33 l and
Household 3.13 – 14.80 EUR 0.5 l
/m3 EUR 2.45 green plastic bottle boxes
(20 x 0.5 l)
Refuse bag (in one region EUR 3.30 EUR 2.85 blue plastic bottle boxes
only) (24 x 0.33 l)
Lithuania 0.05 – 1.01 m2 Yes, since EUR 0.09 – glass < 0.5 l
2002 EUR 0.10 – glass > 0.5 l
Buy back in retail chains for 0.33 l:
EUR 0.04- EUR 0.05
Buy back in retail chains for 0.33 l:
EUR 0.04- EUR 0.07
Source: authors’ data summarisation
– 1,02 1RW ,Q 0\ 2I¿FH WLPH LW LV VWLOO FRPPRQ — de facto collection rate EUR/m3;
practice among politicians and administrators to — accumulation ratio = R * Ni/f – where Ni/f stands for
avoid or postpone decisions that may adversely WKHQXPEHURILQKDELWDQWVSHUÀDW
impair their careers; — EUR/m2 – mainly used for catering, schools, business
– BANANA (Building Absolutely Nothing Anywhere Near centres etc.;
Anybody) - this syndrome represents an extremely — GRRUKDQGOH±XQL¿HGUDWHSHUÀDW
radical conclusion to the approaches described — ¿[HGGXW\DGGHGWRUHDOHVWDWHWD[
previously. — combination of the above-mentioned.
These aspects shall be taken into consideration, when The analysis of the two lists leads to the conclusion
speaking about social factors. These are the issues that WKDWQRXQL¿HGV\VWHPKDVEHHQGHYHORSHGDQGDYDULHW\
have to be explained and the society has to be educated of methods for the calculation of waste collection fee exist
about. across the European Union. Though, Table 3 shows that
This leads to a conclusion that the best and most these differences exist not only between the countries
HI¿FLHQW ZD\ WR LQYROYH LQKDELWDQWV LQWR WKH ZDVWH but also even within one country. The following table
management system is with the help of economic provides a comparison of economic instruments used in
methods. The main economic instruments in waste the Baltic States.
management include waste collection fee from inhabitants The table presents that even the three countries,
and the deposit system. which have a common background and starting situation,
It should be mentioned that different methods exist now have totally different approaches to the collection
regarding the waste collection fee. The latest method fees applied to the inhabitants and the existing deposit
used in the European Union is a PAYT (Pay-As-You- system.
Throw) scheme. Still it differs among countries: If turning to the deposit system, Estonia has most
— ¿[HG DQQXDO IHHV SHU KRXVHKROG IURP (85 VLJQL¿FDQW DFKLHYHPHQWV VLQFH LW KDV LQWURGXFHG WKH
(Spain) up to EUR 2,415 (Germany)); system not only for glass beer bottles (as Latvia and
— fees for the purchase of the mandatory refuse bags Lithuania) but it also has deposit points and buy back
for residual waste (from EUR 0.65 for 17 l bag in V\VWHP ,Q /LWKXDQLD IRXU RXW RI ¿YH ELJJHVW UHWDLO
Spain up to EUR 5.50 for 70 l bag in Germany, i.e. chains are involved into the deposit system. In Latvia,
from EUR 0.03/kg in Spain and EUR 0.07/kg in still no buy back system from the retail chains or deposit
Germany); points are in use. The only possibility for inhabitants
— fees for emptying a bin – 120 l or 140 l only, for to participate in the deposit system is to use private
comparison purposes (from EUR 0.50 in France to small buy back points, which offer a rate of EUR 0.028 -
EUR 4.20 in Finland); EUR 0.056 per glass bottle.
— fees per kg (EUR 0.17 in Slovakia to EUR 0.36 in Here, it is vital to emphasise that the European Union
Sweden) (16). Member States have dedicated a lot of time and effort in
In addition to the above-mentioned options, the order not only to implement but to develop and adjust
following waste collection fees exist: deposit system. The deposit system has been introduced

ISSN 1691-3078
in Germany – from the 1950s, Austria – the 1990s, HQYLURQPHQWDO DFWLYLWLHV DQG QRW LQWR WKH SUR¿W
Denmark – in 1967, the Netherlands – the 1970s, and increase for waste management companies.
Sweden – the 1980s. This means that the system has 4. The performed analysis of involvement methods
been in operation for decades, and the consumers have for individuals into the waste management system
already grown up with this scheme. revealed that the involvement can be achieved,
The reuse deposit scheme is compulsory for some when all three methods are in use, with special
types of drinks in the Netherlands, Denmark and Sweden attention paid to a social method. These methods
(PET) – in these cases, only bottles that are part of a explain the necessity of sorted waste collection,
deposit scheme can be sold – and voluntary in Germany, in order to decrease the economic load on the
Austria, and Sweden (glass). inhabitants.
Only Austria and Germany have sought to promote 5. Analysis and comparison of the European countries
the reuse by means other than a deposit scheme: has revealed that a long time period is needed to
— the German Packaging Directive sets a minimum LPSOHPHQW DQG GHVLJQ DQ HI¿FLHQW GHSRVLW V\VWHP
packaging quota for reusable drink packaging and Successful establishment of the deposit system has
RQHZD\SDFNDJLQJFRQWDLQHUVGHHPHG³(FRORJLFDOO\ WR IXO¿O QHHGV DQG EULQJ EHQH¿WV WR WKH LQGXVWU\
DGYDQWDJHRXV´7KLVGH¿QLWLRQGRHVQRWH[LVWLQWKH and individuals; hence, requiring an extensive
EU law and it has been contested by a number of educational work and profound economic basis.
Member States, including France;
— the voluntary agreement for the Austrian drinks
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QGHG:DVKLQJWRQ'&,VODQG3UHVS (2009). Waste Management Plan for the Maltese
16. Department of Environment (1995). Making Waste ,VODQGV&RQVXOWDWLRQGRFXPHQW
:RUND1DWLRQDO6WUDWHJ\IRU:DVWH/RQGRQ+062 31. Ministry of Environment, Denmark (2001). Lithuania.
17. 'LUHFWLYH (& RQ :DVWH :DVWH )UDPHZRUN Environmental Financing Strategy.
'LUHFWLYH 2I¿FLDO -RXUQDO RI WKH (XURSHDQ 32. Ministry of Environment (1998). State Waste
Union. Management Strategy. Riga: Ministry of Environment
18. Dvorsak, S., Ekart, S., Kroslin, T. (2011). of Latvia.
National Report Slovenia. Maribor, August 2011. 33. Ministry of Environment (2000). State Waste
Establishment of Waste Network for Sustainable Management Plan. Riga: Ministry of Environment of
Solid Waste Management Planning and Promotion Latvia.
of Integrated Decision Tools in the Balkan Region 34. Ministry of Environment (2012). State Waste
(BALKWASTE) LIFE07/ENV/RO/686. Management Plan. Ministry of Environment of Latvia.
19. Environment and Sustainable Development (2010). 35. Read, R. (2007). Economics is Philosophy, Economics
Edited by Maris Klavins, Walter Leal Filho and Janis is not Science, Int. J. Green Economics, Vol. 1, ISSN
Zaloksnis. Riga: University of Latvia. p. 300. 1744-9928- Nos. 3/4, pp. 307–325.
20. Ernst&Young (2009). Assessment of Results on 36. 5RFNVWU|P - 6WHIIHQ: 1RRQH . 3HUVVRQ c
the Reuse and Recycling of Packaging in Europe. &KDSLQ ) 6 ,,, /DPELQ ( /HQWRQ 7 0
Retrieved: http://www2.ademe.fr/servlet/ 6FKHIIHU0)RONH&6FKHOOQKXEHU+1\NYLVW%
getDoc?sort=-1&cid=96&m=3&id=67532&ref=1761 'H :LW & $ +XJKHV 7 YDQ GHU /HHXZ 6
8&nocache=yes&p1=111. Access: 12.12.2012. 5RGKH + 6|UOLQ 6 6Q\GHU 3 . &RVWDQ]D 5
21. (VWRQLDQ (QYLURQPHQW ,QIRUPDWLRQ &HQWUH 6YHGLQ8)DONHQPDUN0.DUOEHUJ/&RUHOO5:
Estonian Environmental Indicators 2009. Fabry, V. J., Hansen, J., Walker, B., Liverman, D.,
22. European Environmental Agency Report (2009). 5LFKDUGVRQ . &UXW]HQ 3 )ROH\ -
'LYHUWLQJ:DVWHIURP/DQG¿OO(IIHFWLYHQHVVRI:DVWH Planetary Boundaries: Exploring the Safe Operating
Management Policies in the European Union. Space for Humanity. Ecology and Society 14 (2): 32.
23. Furtado, J.I. (1991). Multiple Approaches towards Retrieved: http://www.ecologyandsociety.org/
Sustainable Development Seminar, Ecological vol14/iss2/art32/. Access: 10.11.2012.
Research, 6(2) IRRI, Los Banos; 30 September 2005 37. Saleem, J., Ian, T. and Darryn, Mc (2010). Framing
Ecological Research, 6 (2). Retrieved: beta.irri.org/ &OLPDWH &KDQJH $GDSWLRQ /HDUQLQJ DQG $FWLRQ
news/bulletin/.../Furtado%20Seminar.pps. Int.Journal of Climate Change Strategies and
24. Gavena, I., Jekale, I. et.al. (2011). The Public Management, Vol. 2, Number 3 -ISSN 1756-8692,
&RQVXOWDWLRQV DV WKH 7RRO RI &RRUGLQDWLRQ RI pp. 281-282.
Interests Municipalities, Residents and Business 38. 60$57 (QDEOLQJ WKH /RZ &DUERQ (FRQRP\
Interests (in Latvian). Methodological material. Riga, LQ WKH ,QIRUPDWLRQ $JH 7KH &OLPDWH *URXS
VARAM, p. 70. Retrieved: http://www.varam.gov.lv/ GeSI Global Sustainability Initiative. Retrieved:
lat/publ/met/?doc=14074. Access: 10, November http://www.smart2020.org/_assets/files/02_
2012. Smart2020Report.pdf. Access: 15.12.2012.

ISSN 1691-3078
M. Zwolinska-Ligaj Management and Use of Natural Resources in The Development of
Rural Economic Functions in Lublin Voivodeship
MANAGEMENT AND USE OF NATURAL RESOURCES IN THE

DEVELOPMENT OF RURAL ECONOMIC FUNCTIONS IN
LUBLIN VOIVODESHIP
Magdalena Zwolinska-Ligaj1, Dr.sc.

Pope John Paul II State School of Higher Education in Biala Podlaska
Abstract. The aim of this paper is to present the state of management and use of natural resources of rural areas
in the Lublin Voivodeship for selected economic functions: agriculture, forestry, and tourism. The purpose has been
implemented based on statistical data and other source materials on the examined region. The study demonstrated
the unfavourable situation of the examined region in terms of the three functions in relation to the overall situation in
WKHFRXQWU\7KHDXWKRUKDVHPSKDVL]HGLQWHUFRQQHFWLRQEHWZHHQWKHGHYHORSPHQWRIWKHDQDO\VHGIXQFWLRQVDQGKDV
shown that, in the development policy of the region, multifunctional and sustainable development should be created
as the basis ensuring innovative and effective use of natural resources.
Key words: management and use of natural resources
JEL code: Q56
Introduction Innovative solutions for the management of

Environmental elements used by humans are called natural resources should be developed within regional
natural resources. These include natural resources, coordination in consultation with local communities.
the forces of nature and environmental values, which Achieving sustainable development is possible when
determine the quality of human life and which directly, environmental innovation (innovative milieu) sees natural
meet the biological and mental needs and are the base resources in an integrated manner, taking into account
IRU PDWHULDO SURGXFWLRQ 'REU]DQVND % 'REU]DQVNL * the interdependence between the natural environment
.LHOF]HZVNL ' ,Q SDUWLFXODU QDWXUDO UHVRXUFHV and the local community (Peyrache-Gadeau V., 2007).
determine the scale and effects of the economic activity Multifunctional character of rural areas at the same
associated with the development of rural bioproductive time forms the basis for the implementation of various
functions, which include agriculture, forestry, and policies in support of economic, social and environmental
¿VKHU\ 7KH\ DUH DOVR LPSRUWDQW IURP WKH SRLQW RI YLHZ functions of these areas (Kopeva D., 2012).
of technoproductive and service functions, including in The aim of this paper is to present the state of
management and use of natural resources in rural areas
particular tourism and leisure (Stola W., 1987).
of the Lublin Voivodeship in relation to the functions of
In successful development processes, both the
agriculture, forestry, and tourism. The study was focused
existence of natural resources and their quality and
on verifying the hypothesis of disadvantaged situation
quantity are important as well as their economic use. The
of the region in terms of all three functions. To verify
degree and extent of the use of resources is an important
the hypothesis, the author used methods of descriptive
part of natural competitiveness of the region and depends
statistics. To conduct analysis, statistical data and other
on the ability to acquire and/or process environmental
PDWHULDOVSXEOLVKHGE\WKH&HQWUDODQG5HJLRQDO6WDWLVWLFDO
resources by the entities in the region (Kruk H., 2007).
2I¿FH ZHUH XVHG WRJHWKHU ZLWK GLIIHUHQW VRXUFHV¶
The foundation of modern rural development is created
documents about the region. The scope of the analysis
by the concept of sustainable development; its essential
covers the period 2007-2011. Data on rural areas of the
element is comprehensive recognition of rural areas’
region are presented in relation to the background data
functions, integrating a variety of economic and non-
of the whole country. The proposed construction of some
economic functions, including social and environmental management indicators and the use of natural resources
ones. In the area of economic functions, the importance of the region have been taken from the works of J. Suchta
of creating non-agricultural functions is becoming more and W. Zebrowski (2003). The paper was prepared within
important with the function of tourism or other functions the research project No. 2011/01/D/HS4/03927 entitled
based on the use of natural resources occupying a special ³(QYLURQPHQWDOFRQGLWLRQVDQGIDFWRUVRIGHYHORSPHQWRI
SRVLWLRQ,QQRYDWLYHHI¿FLHQWXVHRIQDWXUDOUHVRXUFHVRI the economic functions of valuable natural areas of Lublin
a region in the development processes that do not lead 9RLYRGHVKLSÍXQGHGE\WKH1DWLRQDO6FLHQFH&HQWUH
to lowering the qualitative and quantitative parameters
is one of the most important areas for the concept of
sustainable development. It can also be one of the main General characteristics of the natural
directions of the development of peripheral regions of resources in Lublin region
preserved natural beauty and economy dominated by The Lublin Voivodeship covers an area of
agricultural sector. 25.1 thousand km², which represents 8% of the
___________________________
1
E-mail addressP]ZROLQVNDOLJDM#G\GDNW\NDSVZESSO

ISSN 1691-3078
country. The region is located in the central-eastern part Largest afforestation (almost 30%) is in the northern
of Poland, bordering the east of Ukraine and Belarus. and southern areas of the region with poor sandy soils
The voivodeship is one of the least populated and and wetlands. The largest share are forests (65% of
XUEDQL]HGUHJLRQVLQ3RODQG,QWKHSRSXODWLRQZDV the total afforestation) and hornbeam (about 30%)
2171.9 thousand people (5.6% of the Polish population), DQGWKHORZHVWDOGHUDERXW8]LDN67XUVNL5
of which the majority (53.5%) lived in rural areas. 2008). Dominant tree species include pine (54.9%), oak
Lublin is a region with an agro-industrial economy, the (14.1%), birch (8.3%), and alder (7.6%). In comparison
rural areas of which require structural transformation with the structure of species, the Lublin region forests
towards multifunctional and sustainable development. exhibit lower share of pine (5 percentage points) and
The region is attractive in terms of natural and a higher proportion of oak (7 percentage points), birch
ODQGVFDSHYDOXHV/XEOLQ8SODQGFKDUDFWHUL]HGE\YDULHG (1 percentage point) and alder (2.2 percentage points)
and attractive land relief occupies central and south- (Lesnictwo 2012).
eastern part of the region. From the east, adjacent to The most forested areas of the Lublin Voivodeship are
Lublin Upland, there is Wolyn Upland, and from the Janow District (afforestation rate is 40.4%), Wlodawa
VRXWKHDVW ± WKH 5R]WRF]H +LOOV 7R WKH QRUWK IURP WKH District (39.4%) and Bilgoraj District (39.1%). The
stretch of the uplands, there are mostly lowlands: municipalities with afforestation rate of 15-50% account
0D]RYLD /XEOLQ 3ROHVLH DQG 6RXWK 3RGODVLH /XEOLQ to 61.7% of all the rural and semi-urban areas, less than
3ROHVLHLVWKHPRVWDWWUDFWLYHIRUWRXULVWVZLWK/HF]\QVNR 15% - 33.7% and greater than 50% - 4.7% (BDL).
Wlodawskie Lake District and its 67 lakes larger than The age structure of tree stands of class III in the
1 ha and a forest complex. The most attractive tourism Lublin Voivodeship is similar to the structure of tree stands
DUHDVRIWKHUHJLRQDUHDOVRWKHIRUHVWVRIWKH5R]WRF]H in the country. The share of class I tree stands is 10.1%,
+LOOV DQG WKH 1DOHF]RZ 3ODWHDX DQG WKH /HVVHU 3RODQG II - 15.6%, while class III - 27.8%. In further classes
Vistula Valley (loess canyons), where there are created RIDJHGLIIHUHQFHVDUHWKHVKDUHRI&ODVV,9JUHDWHUE\
two landscape parks and several nature reserves 7.6 percentage points in the case of the Lublin region
(Studium). (representing 26.1%) and the share of class V lower by
7KH/XEOLQYRLYRGHVKLSLVFKDUDFWHUL]HGE\DUHODWLYHO\ 5.9 percentage points and greater (15.3%) compared
low level of afforestation, and the afforestation rate is with the structure of the country (table 1) (BDL).
VSDWLDOO\ GLYHUVH UHÀHFWLQJ WKH GLYHUVLW\ RI DJULFXOWXUDO In the period 2001-2020, the agricultural land
soil suitability. The largest dense forests are on the provided for afforestation is 64,038 hectares in the
6DQGRPLHU] %DVLQ WKH 5R]WRF]H +LOOV DQG WKH 3ROHVLH Lublin Voivodeship, including public sector - 7,313 ha
whereas the Lublin Upland is the least forested (Studium). (Krajowy Program…, 2003). Opportunities to increase
Good soil favours agricultural production, which is afforestation of the region should be associated with the
VLJQL¿FDQWLQWKHFRXQWU\0DLQQDWXUDOUHVRXUFHVRI/XEOLQ implementation of the Rural Development Operational
are formed by non-renewable resources - minerals, and 3URJUDPPH FR¿QDQFHG E\ WKH (XURSHDQ 8QLRQ ,Q
in terms of renewable ones - water resources, forestry the Lublin Voivodeship, in the period 2007-2011,
and soils of high quality. In the Lublin region, such natural 3100.4 hectares were earmarked for afforestation, of
resources as coal, natural gas, and crude oil are exploited ZKLFK PRUH WKDQ KDOI ZDV UHDOL]HG ZLWKLQ WKH
(Strategia, 2005). RDOP (Lesnictwo, 2012).
Abundance of tree stands in the region is 253 m2 and
is less than the average abundance of tree stands in the
The state of management and use of
country. Most tree resources of the region (61.4%) are in
natural resources in relation to the the third and fourth age class (in Poland - 52.4%). In the
function of forestry region, compared to Poland, the share of standing wood
Forestry includes forestry activities with the LQWKH¿IWKDQGKLJKHUDJHFODVVLVORZHUUHVSHFWLYHO\
arrangement, protection and forest management, 24.2% and 32.8%). In the period 2007-2011, the volume
maintenance and enhancement of forest resources of harvested wood (m2/100ha of forest) in the region
and crops, farming animals, logging, resin extraction, showed a clear upward trend, whereas, in 2011, it was
harvesting trees, acquiring stumpwood, bark, needles, VLJQL¿FDQWO\ORZHUWKDQWKHYDOXHIRUWKHFRXQWU\DQGZDV
animals and undergrowth resources, the sale of these 285.1 to 381.4 (the country) (BDL).
products, and implementation of the non-productive In 2011, the forests of the Lublin region provided
functions of forests – social and protective ones. These 6.6% of non-coniferous timber and 4.1% of coniferous
functions should be implemented in accordance with the timber in the country - a total of 1 652.1 thousand m3.
concept of the sustainable forest management (Ustawa o &RQLIHURXVWLPEHUUHSUHVHQWHGRIWKHWRWDOWLPEHU
lasach, 1991). in the region. Half (50.5%) of the acquired coniferous
In 2011, the forest land in the Lublin region DQGQRQFRQLIHURXVWLPEHUZDVODUJHVL]HZRRGRIJHQHUDO
amounted to 587.9 thousand ha, of which 98.6% were DQG VSHFLDO SXUSRVHV 7KH VKDUHV RI PHGLXP VL]H ZRRG
forests (the land for forest production or being nature IRULQGXVWULDOSURFHVVLQJDQG¿UHZRRG
reserves included in the national parks and registered as were lower (Lesnictwo, 2012).
monuments), and the remaining land was associated with The Lublin region is rich in forest fruit, which is
silviculture. In 2011, forests covered 579.4 thousand ha UHÀHFWHG LQ WKH YROXPH RI WKH VROG IUXLW ,Q WKH
in the region, occupying 23.1% of the total area. The VL]H RI WKH SURFXUHPHQW RI IRUHVW IUXLW ZDV DOPRVW ¿YH
forest area in the region per one inhabitant was 0.27 ha, times higher than the national average and amounted to
in the country - 0.24 ha. More than half (58.7%) of the 5.4 kg/ha of forest. In 2011, Lublin Voivodeship provided
forests are public (in Poland - 79.5%) (Lesnictwo, 2012). 31% of forest fruit in the country. The most important

ISSN 1691-3078
Table 1
The state of management and use of natural resources in the Lublin Voivodeship in relation to the
function of forestry with reference to national data in 2007-2011
Selected indicators Value of the indicator in 2007-2011

Lublin Voivodeship Poland
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
Management
1. Afforestation (%) 22.60 22.60 22.80 23.00 23.10 28.90 29.00 29.10 29.20 29.20
2. Renewal and afforestation
in relation to the total forest
area (%) 0.4 0.4 0.4 0.4 0.4 0.7 0.6 0.5 0.6 0.6
3. Abundance of tree stands 253.0 269.0
gross timber overbark/1 ha of
forest area (m2)*
4. Standing wood by age of I (1–20 years old) + KO 0.6 0.9
tree stands on forested area II (21–40 years old) 9.6 10.0
(%)* III (41–60 years old) 29.1 28.7
IV (61–80 years old) 32.3 23.7
V and more (81 years old
and more) 24.2 32.8
Use
5. Acquisition of wood
(timber) per 100 ha of forest
area (m2) 248.3 242.7 238.6 250.6 285.1 377.4 357.5 359.8 368.0 381.4
6. The share of legally
protected areas in the total
area (%) 22.7 22.7 22.7 22.7 22.7 32.3 32.3 32.3 32.4 32.5
7. Protection forests % of
forest area (%) 0.41 0.41 0.41 0.40 0.40 5.71 5.76 5.44 5.13 4.97
8. Forest fruit procurement
(kg/ha of forests) 5.3 3.9 4.4 3.2 5.4 1.8 1.0 1.3 0.9 1.1
* Figures are based on the large-scale forest inventory of the country carried out in 2007-2011 by the Bureau of
Forest Management and Geodesy
6RXUFHDXWKRU¶VVWXG\EDVHGRQWKHGDWDIURPWKH&HQWUDO6WDWLVWLFDO2I¿FH/RFDO'DWD%DQNLQ:DUVDZ
species were European elder and bilberry. In 2011, the PDQDJHPHQW ZKLFK LV FKDUDFWHUL]HG E\ DVVLJQLQJ
procurement of game in the Lublin Voivodeship (335 t) more and more importance, in addition to production
accounted for 3.6% of the national procurement. The functions, to protection, ecological and social functions
most important species were deer and wild boar. The of forests can halt the decline in economic activity of the
volume of the procurement of mushrooms in comparison region. Making use of recreational opportunities for the
ZLWKRWKHUUHJLRQVRIWKHFRXQWU\LVQRWVLJQL¿FDQW%'/ use of forest and its tourism development is not without
Lesnictwo, 2012). VLJQL¿FDQFH3ORWNRZVNL/
$QHOHPHQWLQÀXHQFLQJWKHXVHRIWKHQDWXUDOYDOXHV
of forests in the region is the share of legally protected
areas (Suchta, Zebrowski, 2003), which in the Lublin
Voivodeship constitutes 22.7% of its surface. In 2011, natural resources in relation to the
there were 2 625 m² of protected area per capita, in function of agriculture
Poland – 2 633. Among the protected objects, there are The function of agriculture in Lublin Voivodeship
two national parks, 16 landscape parks, and 17 protected concerns agricultural land, the surface of which in 2011
landscape areas. In 2011, the area of protected forests, amounted to 1.77 million hectares constituting 9.4% of
ZKLFK DUH SURWHFWHG EHFDXVH RI WKH IXQFWLRQV WKH\ IXO¿O agricultural land of the country. In 2011, the share of
and remain under the management of the National agricultural land in the total area of the region was 70.6%
Forests, was 126 322 ha. The share of the protected and was greater by 10.3 percentage points in comparison
forests in the region was 0.4% of the forests and was to the country. The share of arable land in the area of
much lower than in the country (4.97) (BDL) (Table 1). agricultural land in the region and the country was at
Observing the increasing value of afforestation of a similar level – respectively 75% and 73.8%. Almost
the region, one has to note that a reasonable increase the entire area of agricultural land (96.7%) was privately
in afforestation on the lands excluded from agricultural owned, highly fragmented in the Lublin Voivodeship
use and the development of multifunctional forest (BDL).

ISSN 1691-3078
Table 2
function of agriculture with reference to national data in 2007-2011

2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
Management
1. Agricultural area (%)* 71.3 71.1 71.1 70.8 70.6 61.0 60.8 60.7 60.5 60.3
2. Arable land % in
agricultural area* 75.1 75.1 75.1 75.1 75.0 73.6 73.7 73.8 73.8 73.8
3. Fallow land in arable land
(%) 2.7 2.6 3.3 3.2 3.4 3.8 4.1 4.4 4.1 4.2
4. Meadows and pastures in
agricultural area (%) 16.1 15.8 16.2 16.3 16.1 20.2 19.7 19.7 21.2 21.3
5. Agricultural Property
Stock of the State Treasury
impermanently disposed
(%) 67.9 67.1 66.7 67.1 66.6 74.3 75.4 75.5 75.6 75.0
Use
&HUHDO\LHOGVGWKD 28.5 33.3 30.3 31.5 31.1 32.5 32.2 34.8 35.6 34.3
7. Permanent grassland
yields (dt/ha) 47.0 48.0 37.3 45.7 42.8 51.7 48.3 49.2 49.0 50.5
8. Potato yields (dt/ha) 200.0 202.0 189.0 266.0 234.0 207.0 191.0 191.0 211.0 230.0
9. Sugar beet yields (dt/ha) 489.0 455.0 559.0 479.0 545.0 513.0 465.0 543.0 483.0 574.0
10. Oilseed and turnip rape
yields (dt/ha) 20.1 20.3 21.0 22.1 24.1 26.7 27.3 30.8 23.6 22.4
*geodetic area of the country
6RXUFHDXWKRU¶VVWXG\EDVHGRQWKHGDWDIURPWKH&HQWUDO6WDWLVWLFDO2I¿FH/RFDO'DWD%DQNLQ:DUVDZDQG$JULFXOWXUDO
Property Agency
Natural potential of the Lublin region is much more In the Lublin Voivodeship, in late 2011, the land
favourable in comparison to the average values in Poland. remaining in the Agricultural Property Stock of the
The indicator of the quality of agricultural production in State Treasury included 55 933 ha, accounting for 2.2%
the Lublin Voivodeship is 74.1 points on IUNG [Institute of the region. Nationally, in the Stock there remained
RI 6RLO 6FLHQFH DQG 3ODQW &XOWLYDWLRQ@ VFDOH LQ 3XODZ\ 6.2% of the land. The land managed on impermanent
(national 66.6 points) and is one of the highest in Poland basis - remaining in the lease - accounted for 66.7%.
.UDVRZLF] 6 7KH EHVW VRLOV DV IDU DV VXLWDELOLW\ IRU This share was lower by 8.4 percentage points than the
agriculture is concerned are located in the south-eastern rate for the country. The above data indicate that the
part of the region and in the vicinity of Lublin, Konopnica, process of the State Treasury land management in the
and Jastkow, while the worst – in the northern part of UHJLRQ LV PRUH DGYDQFHG WKDQ LQ WKH FRXQWU\ 5DSRUW ]
WKHYRLYRGHVKLS5RF]QLN6WDW\VW\F]Q\5ROQLFWZD G]LDODQRVFL«7DEOH
Bonitation of arable land and permanent grassland in Despite favourable natural conditions for the
the Lublin Voivodeship is much better than in the country. development of the function of agriculture and favourable
In relation to arable land in the region, the largest area indicators of agricultural land management in the region,
of land is covered by very good or good soils (45.5% WKHYRLYRGHVKLSLVFKDUDFWHUL]HGE\DORZOHYHORIWKHXVH
versus 29.1% in the country), while poor and very poor RI UHVRXUFHV &HUHDO \LHOG REWDLQDEOH LQ WKH UHJLRQ ZDV
soils have the lowest percentage (19.7% vs. 31.8% in GH¿QHG DW WKH OHYHO RI GW KD ZKLOH LQ 3RODQG
WKHFRXQWU\.UDVRZLF]6 GWKD.UDVRZLF],QWKHSHULRGDFWXDO
In 2011, the area of fallow land - arable land not used cereal yields obtained in the Lublin region were lower in
for production purposes but managed according to good absolute terms than in the case of cereal yields in the
agricultural and environmental practice - amounted to country. The rate of yield acquisition in comparison to the
36 872 ha constituting 7.9% of the fallow land in the potentially possible one was also lower. In 2011, cereal
country. In the case of Lublin Voivodeship, fallow land yields in the Lublin region accounted for 66.5% of the
accounted for 3.4% of arable land. This share was smaller obtainable yield, while in the country - 79.2% (BDL).
than the one of the country by 0.8 percentage point. The Lower yields obtained in the Lublin Voivodeship,
rising trend in changes in the rate applies to both the compared to the average values for the country also
region and the country (BDL). apply to permanent grassland and sugar beet. Yields

ISSN 1691-3078
Table 3
function of tourism with reference to national data in 2007-2011

2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
Management
&ROOHFWLYH
accommodation
facilities /1000km² 12.2 11.9 11.3 12.8 10.9 21.5 21.9 22.4 23.0 22.5
2. Individual
accommodation
facilities /1000 km² - - - 0.9 1.7 - - - 5.3 6.7
3. Beds per 1000
people 8.8 8.7 8.8 9.3 8.4 15.3 15.7 15.9 15.8 15.7
Use
4. The use of beds
in tourist collective
accommodation (%) 32.3 33.8 35.6 33.3 31.9 37.8 37.6 35.8 34.3 34.5
5. Accommodation
provided 1000 people 650.2 719.0 742.0 739.0 684.1 1441.8 1486.1 1442.1 1448.6 1483.4
6. Accommodated
people 1000 people 283.9 313.0 302.0 305.1 301.2 497.1 513.1 507.3 531.2 557.5
6RXUFHDXWKRU¶VVWXG\EDVHGRQWKHGDWDIURPWKH&HQWUDO6WDWLVWLFDO2I¿FH/RFDOGDWD%DQNLQ:DUVDZ
above the national average were achieved during the The indicator of the number of beds per
period considered in the case of potatoes and oilseed and SHRSOH LQ WKH DUHD ZDV DOPRVW KDOI WKH VL]H LQ
turnip rape (BDL) (Table 2). 2011 (8.4 beds/1000 people) in comparison to the
Lublin is a region with a high potential for agricultural country (15.7 beds/1000 people). The voivodeship has
production, yet it has a relatively low level of its use. unevenly distributed accommodation. In 2011, most
5XUDO DUHDV RI WKH UHJLRQ DUH FKDUDFWHUL]HG E\ KLJK tourist collective accommodation facilities were located
diversity of natural, economic, and organisational in the counties focusing the most important tourist
conditions, which determine the level of use of attractions: Pulawy - 41, Wlodawa - 38, Zamosc - 23,
the productive potential of agriculture and rural Biala - 19, Lubartow – 15, and in the cities: Lublin - 27
development opportunities. Improving the use of and Zamosc – 14 (BDL).
the productive potential of agriculture requires the Tourist collective and individual accommodation,
implementation of technological advances and the which includes guest rooms and agri-tourism vacation
expansion and upgrading of rural infrastructure. In the rentals, is not numerous as evidenced by low values
region, there is a need to support projects determining of the saturation of the region with these facilities. In
the implementation of sustainable development, 2011, the number of collective accommodation facilities
reconstruction of the agrarian structure of rural areas, per 1000km² area of the region was double, and, in the
and to give a multifunctional character to the rural areas case of individual accommodation, almost four times
.UDVRZLF]6 lower in comparison to the country (the value amounted
to -10.9 and 1.7 facilities per 1000km² of the region).
In addition, in the case of collective accommodation
the rate was reduced in 2011 compared to 2010. One
natural resources in relation to the should note, however, the increase in the saturation of
function of tourism the region with individual accommodation facilities - in
In 2011, 273 tourist collective accommodation the period 2010-2011 there was a rapid development
facilities were operated in the Lublin Voivodeship, i.e. of private accommodation. In 2011, agri-tourism farms
3.9% of the total number in the country. Hotels (19.0%), possessing 220 beds provided 7 240 nights. Three times
hostels (12.5%) and training and recreation centers more nights were provided in the offered rooms (BDL).
(7.7%) mainly represented this group. In the period In 2011, the number of guests of collective
2007-2011, the number of those facilities decreased and individual accommodation amounted to
by 11.1%. In 2011, tourist collective accommodation 657.6 thousand. The number of guests of tourist
facilities had a total of 18.2 thousand beds arranged collective accommodation in Poland increased by
mostly in hotels (38.4%). In the period 2007-2011, the 13.4%, while in the Lublin Voivodeship - only by 6.4%.
number decreased by 4%, while in the country it was In 2011, the number of guests in the studied region was
increased by 4% (BDL). 655.1 thousand people, of which 85.1% were Poles (in

ISSN 1691-3078
the country the percentage of Poles using the services Conclusions

of this group of objects was 79.5%). In the region, the — Varied natural conditions of the region determine the
number of foreign tourists during the period increased VSHFL¿F ]RQLQJ RI WKH GLVFXVVHG IXQFWLRQV DQG WKHLU
by 0.4%, while in the country - by 5.0%. In 2011, the economic structure.
number of foreign tourists in collective accommodation — The presented data on the state of management and
amounted to 97.8 thousand (BDL). use of natural resources in the Lublin Voivodeship
The number of people using the facilities of against the rest of the country, in relation to the
individual accommodation in 2011 amounted to development of the analysed functions, give evidence
14.2 thousand people, of which 82.6% used guest of the region’s disadvantageous situation in terms of
rooms. In comparison to 2010, in 2011, the number all the three functions. The function of agriculture
of people accommodated in guest rooms increased by is particularly unfavourable; in its case, favourable
20.3%. The rate of accommodated people/1000 people QDWXUDO FRQGLWLRQV FDQQRW EH IXOO\ HI¿FLHQWO\ XVHG
during the period in the region was gradually increasing. GXHWRHFRQRPLFDQGRUJDQL]DWLRQDOFRQVWUDLQWV
In 2011, it reached the level of 301.2, which was much — Shaping the three functions within the framework of
lower than the national level (557.5), whereas the rate of regional spatial policy and strategy of socio-economic
accommodation provided/1000 people in 2011 was more development based on natural resources should take
than two times lower in the region than in the country into account natural interconnections existing among
(amounted to – 684.1 and 1483.4) (BDL). these functions. Due to the fact that agricultural
The degree of the use of beds in tourist collective sector is undergoing a restructuring process, it
accommodation for the region was comparable in will be forced to release workforce, who might be
the period 2002-2011 with the degree of the use employed by other sectors. In tourism, more
in the country. In 2011, in the Lublin Voivodeship, efforts are required in the development of tourism
the rate reached 31.9%, and it was 2.6 percentage infrastructure and the creation of unique tourism
points lower than in the country. During the study products. Simultaneous increase of the role of the
period, it showed a slight downward trend (BDL) function of forestry because of advance in the process
(Table 3). RI DIIRUHVWDWLRQ ZLOO FRQWULEXWH WR WKH LQWHQVL¿FDWLRQ
The main development potential of tourism and of the processes of structural transformation of rural
recreation in the Lublin region connected with natural areas and at the same time will perform more and
environment and resources values includes well- more important public functions. This process will
SUHVHUYHGGLYHUVL¿HGQDWXUDOHQYLURQPHQWUHVXOWLQJIURP stimulate excluding of low agricultural suitability
WKHVSHFL¿FSK\VLRJUDSKLFDQGJHRERWDQLFDOORFDWLRQRIWKH land from agricultural production.
region, landscape and natural environment attractive for — In the case of Lublin region, multifunctional and
WRXULVW DUULYDOV FRQQHFWHG ZLWK DFWLYH TXDOL¿HG WRXULVP sustainable development based on the innovative use
eco-tourism, agro-tourism and leisure tourism as well as of natural resources should be created alongside with
UHFRJQL]HG TXDOLWLHV RI ELRFOLPDWH PLQHUDO VSULQJV DQG UHFRJQL]LQJLQWHUFRQQHFWLRQVDPRQJWKHIXQFWLRQVRI
developed health resorts (Plan marketingu…, 2007). agriculture, forestry, and tourism. They predispose
The potential of landscape and natural values of the region to develop these features, however, also
the Lublin Voivodeship is very high, yet unevenly used. to use other options inherent in the development
The areas with high natural values where tourism of the SME sector based on the processing of fruit
has developed most extensively include the western and vegetables, or the production of energy from
SDUW RI WKH 1DOHF]RZ 3ODWHDX /HF]\QVNR:ORGDZVNLH renewable resources.
/DNH 'LVWULFW DQG WKH 5R]WRF]H +LOOV ,Q DGGLWLRQ
there are many other areas with great natural values,
including Janow Forests, the Bug River Area, and Bibliography
WKH DUHD RI WKH :LHSU] DQG *LHOF]HZ ULYHUV YDOOH\V 1. Audit turystyczny wojewodztwa lubelskiego (Auditing
Other areas outside urban areas should be included tourism in Lublin province) :DUV]DZD
among average natural beauty areas. They occur mainly PART, pp. 86-87.
in the northern part of the region. Those are potential 2. Bank Danych Lokalnych (Local Data Bank) (BDL)
sites for specialist tourism development. Different forms *86Z:DUV]DZLH
of eco-tourism, alternative tourism should be developed 3. 'REU]DQVND%'REU]DQVNL%.LHOF]HZVNL'
there. In the northern part of the Lublin region, the 2FKURQD VURGRZLVND SU]\URGQLF]HJR (Protecting the
forms of nature conservation are the least numerous, natural environment).:DUV]DZD3:1SS
which reduces the attractiveness of the area, however, 4. Kopeva, D. Madjarova, S. Peneva, M. (2012).
facilitates the development of tourism infrastructure Assessing the EU policy impacts on the
$XG\WWXU\VW\F]Q\« multifunctional characters of rural areas. Trakia
The major obstacles to the use of natural potential Journal of Sciences, Volume 10, No 4, pp. 28.
of the region include low use and poor quality of most 5. Krajowy Program Zwiekszania Lesistosci (National
KROLGD\IDFLOLWLHVLQWKHUHJLRQLQVXI¿FLHQWDFFRPPRGDWLRQ Afforestation Programme) =DODF]QLN
IRU PDVV VSHFLDOL]HG DQG FRQIHUHQFH WRXULVP ZHDN :DUV]DZD0LQLVWHUVWZR6URGRZLVND
tourism infrastructure in attractive tourist areas, very 6. .UDVRZLF] 6 Potencjal produkcyjny rolnictwa
OLWWOHGLYHUVL¿HGSRUWIROLRRIWRXULVPSURGXFWVLQVXI¿FLHQW Lubelszczyzny i jego wykorzystanie (Lublin
recreational and sports facilities, leisure offers for tourists, agricultural production potential and its use).
and poor use of therapeutic potential (Plan marketingu…, Retrieved: http://www.pan-ol.lublin.pl/biul_7/
2007). art_707.htm. Access: 5.12.2012.

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7. .UXN + =QDF]HQLH SU]\URGQLF]HM 15. Stola, W. (1987). .ODV\¿NDFMDIXQNFMRQDOQDREV]DURZ

konkurencyjnosci regionu dla trwalego i wiejskich Polski. Proba metodyczna (Functional
]URZQRZD]RQHJR UR]ZRMX (The importance FODVVL¿FDWLRQ RI 3ROLVK UXUDO DUHDV 0HWKRGLFDO
of natural competitiveness of the region for attempt). Wroclaw: Ossolineum. p. 139.
sustainable development). In: Ekologiczne aspekty 16. Strategia Rozwoju Wojewodztwa Lubelskiego na
]URZQRZDĪRQHJR UR]ZRMX UHJLRQDOQHJR L ORNDOQHJR lata 2006-2020 (Lublin Province Development
ed. Michalowski, K. Bialystok: Wyd. WSE w Strategy for 2006-2020). T. I: Uwarunkowania i
Bialymstoku. p. 17. diagnoza stanu wyjsciowego (2005). Lublin: ZWL.
8. Lesnictwo (Forestry) :DUV]DZD*86 p.149.
9. Peyrache-Gadeau, V. (2007). Natural resources, 17. Studium uwarunkowan atrakcyjnosci turystycznej
innovative milieux and the environmentally 3ROVNL:VFKRGQLHMF]ĊVFDQDOLW\F]QD) (Study of the
sustainable development of regions. European determinants of tourist attractiveness of Poland and
Planning Studies, Volume 15, No. 7, p. 956. Eastern Europe (analytical part). Instytut Turystyki,
10. Plan marketingu turystyki na lata 2007-2013 POT, p.112.
(Marketing Plan of Tourism 2007-2013). (2007). 18. 6XFKWD - =HEURZVNL : 0R]OLZRĞFL
Lublin: ZWL. p. 16. Z\NRU]\VWDQLD ZDORURZ VURGRZLVND SU]\URGQLF]HJR
11. Plotkowski, L. Zajac, S. (2004 2SUDFRZDQLH UHJLRQX Z SURFHVLH MHJR UR]ZRMX QD SU]\NODG]LH
modelu wielofunkcyjnej gospodarki lesnej w regionie :DUPLL L 0D]XU The possibility of using
rolniczym (Developing a model of multifunctional environmental values of the region in its development
forest management in the agricultural region). (the example of Warmii and Mazur). In: Walory
Synteza:DUV]DZD,%/S przyrodnicze jako czynnik rozwoju regionow
12. 5DSRUW\ ] G]LDODOQRVFL $JHQFML 1LHUXFKRPRVFL wschodniej Polski HG +RURGHĔVNL 5 6DGRZVND
Rolnych na Zasobie Wlasnosci Rolnej Skarbu 6QDUVND & %LDO\VWRN :\G :6( Z %LDO\PVWRNX
3DQVWZD]ODWReports on the activities pp. 263-280.
of the Agricultural Property Agency for Agricultural 19. Ustawa z dn. 28 wrzesnia 1991 r. o lasach (Law
Property Stock of the State Treasury in 2007-2011). on Forests, 28 September 1991) ']8
13. Rocznik statystyczny rolnictwa (Statistical Yearbook 1USR]$UW
of Agriculture):DUV]DZD*86 20. 8]LDN67XUVNL5Srodowisko przyrodnicze
14. Rolnictwo w wojewodztwie lubelskim w 2011 roku Lubelszczyzny (The natural environment of
(Agriculture in Lublin province in 2011). (2012). Lublin) /XEOLQ /XEHOVNLH 7RZDU]\VWZR 1DXNRZH
Lublin: US w Lublinie. p. 21. p. 377.

ISSN 1691-3078
A. Bulis, R. Skapars Latvian Logistics Cluster and Its Development Perspectives
LATVIAN LOGISTICS CLUSTER AND ITS DEVELOPMENT PERSPECTIVES
Aldis Bulis1+, Mg.pol.sc., PhD student; Roberts Skapars2, Dr.oec., professor

1,2
Faculty of Economics and Management, University of Latvia
Abstract.1RZDGD\VFOXVWHUVH[LVWLQPDQ\DQGYHU\GLIIHUHQWLQGXVWULHVLQFOXGLQJORJLVWLFV&OXVWHUVDVJHRJUDSKLFDOO\
bounded concentration of interdependent organisations can consist not only of private companies but also of labour
DQGSURIHVVLRQDODVVRFLDWLRQVJRYHUQPHQWDXWKRULWLHVDQGDFDGHPLFUHVHDUFKDQGWUDLQLQJLQVWLWXWLRQV&OXVWHUVDUH
created and developed in Latvia as well. There is a cluster organisation in the logistics economic sector in Latvia but
LWKDVQRWEHHQVFLHQWL¿FDOO\VWXGLHGVRIDU7KHDLPRIWKLVVWXG\LVWRDVVHVVWKHGHYHORSPHQWRIORJLVWLFVFOXVWHULQ
/DWYLDRULJLQDOWLWOHRIFOXVWHU±³/DWYLDQ6XSSO\&KDLQ&OXVWHU´DQGWRGHYHORSVXJJHVWLRQVIRULWVLPSURYHPHQW7KH
monographic method, a case study and focus group discussions were applied in the study. This paper contributes to
the development of knowledge in operation of clusters in logistics revealing structure and specialisation of the Latvian
6XSSO\&KDLQ&OXVWHUDVZHOODVEDUULHUVIRUWKHGHYHORSPHQWRIWKLVFOXVWHUDQGSHUVSHFWLYHVIRULWVGHYHORSPHQWLQ
the future.
Key words:FRPSHWLWLYHQHVV/DWYLDQ6XSSO\&KDLQ&OXVWHUORJLVWLFVFOXVWHUUHJLRQDOGHYHORSPHQWWUDQVSRUW
JEL code: &/
Introduction measures and clusters contribute towards increasing

In the 21st century, clusters exist in many and very of competitiveness of industries, regions, nations, and
GLIIHUHQWLQGXVWULHV&OXVWHUVDUHJHRJUDSKLFDOO\ERXQGHG companies participating in a cluster. Kowalski (2012)
concentration of interdependent organisations and they conducted a survey on 50 cluster coordinators and
can consist not only of private companies but also of labour 350 companies belonging to the cluster initiatives in
and professional associations, government authorities, Poland and concluded:
DQGDFDGHPLFUHVHDUFKDQGWUDLQLQJLQVWLWXWLRQV&OXVWHUV — on microeconomic level – clusters increase the
should have active channels for business transactions, HI¿FLHQF\ DQG SURGXFWLYLW\ RI FRPSDQLHV DV ZHOO DV
communication and dialogue. Without active channels, WKHLU OHYHO RI LQQRYDWLYHQHVV &OXVWHULQJ SOD\V DQ
even a critical mass related companies do not operate as important role in enhancing effective communication
a cluster (Rosenfeld S.A., 1997). EHWZHHQ SDUWQHUV LW ZDV FRQ¿UPHG E\ RI
&OXVWHUV DUH FUHDWHG DQG GHYHORSHG LQ ORJLVWLFV surveyed companies), cooperation (61%) and trust
economic sector as well. Logistics clusters are mainly (60%) which are important elements in modern
concentrated in or around seaports because seaports are innovation processes;
strategically important centres in global logistics and a — on mesoeconomic level (including sectoral and
lot of logistics operations are located in seaports or near UHJLRQDO GLPHQVLRQV ± WKH PDLQ EHQH¿W RI
seaports. clustering from this perspective is driving intelligent
&OXVWHUVDUHFUHDWHGDQGGHYHORSHGLQ/DWYLDDVZHOO specialisation of regional economies through spatial
There is a cluster organisation in logistics economic concentration of different assets in the sectors where
VHFWRULQ/DWYLDEXWLWKDVQRWEHHQVFLHQWL¿FDOO\VWXGLHG the region has competitive advantage;
so far. Therefore, the aim of this study is to assess the — on macroeconomic level – clusters contribute to the
development of logistics cluster in Latvia (original title of GDP growth, reduction of unemployment rate, and
FOXVWHU±³/DWYLDQ6XSSO\&KDLQ&OXVWHU´DQGWRGHYHORS higher level of innovativeness of the economy.
suggestions for its improvement. Accordingly, the tasks Forming cluster industry can create competitive
RIWKHVWXG\DUH¿UVWO\WRLGHQWLI\VSHFLDOIHDWXUHVZKLFK DGYDQWDJH 3RUWHU 0( &luster initiatives
characterise the operation of logistics clusters, and can be developed in different sectors of economy,
VHFRQGO\ WR VWXG\ WKH /DWYLDQ 6XSSO\ &KDLQ &OXVWHU DV characterised by all levels of technological intensity.
a case for empirical research. The methods of the study Many economists have highlighted the special importance
include the monographic method, a case study and focus of clusters in high-technology industries (Bresnahan T.,
group discussions. Two focus groups were conducted Gambardella A., Saxenian A.L., 2001) and improvement
and their consisted of the representatives of member- RIFRPSHWLWLYHQHVVRIVPDOODQGPHGLXPVL]HGHQWHUSULVHV
RUJDQLVDWLRQV RI WKH /DWYLDQ 6XSSO\ &KDLQ &OXVWHU .DUDHY$.RK6&/6]DPRVL/7
Overall, 12 persons participated in the focus groups.
Karaev et al. (2007) making a review of literature on
clusters revealed that the concept of clusters is always Research results and discussion
related with competitiveness but a distinction should be 1. Features of logistics clusters
made between the competitiveness of a nation, a region, The two types of clusters in logistics sector
an industry, and a single company. It is important because FDQ EH LGHQWL¿HG UHYLHZLQJ VFLHQWL¿F OLWHUDWXUH RQ
HDFKOHYHORIFRPSHWLWLYHQHVVKDVLWVRZQVSHFL¿FVHWRI FOXVWHUV SRUW FOXVWHUV HJ &KXDQ[X :
___________________________
+
&RUUHVSRQGLQJDXWKRUE-mail: aldis.bulis@gmail.com

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Table 1
Description of logistics clusters: maritime clusters and port clusters
Maritime cluster Port cluster

'H¿QLWLRQ Maritime clusters are clusters which consist The port cluster is a cluster which consists
of a group of industries directly or indirectly of all economic activities, public and
related with shipping within a certain area or private organisations which are related
a nation with the arrival of ships and cargo in ports
Potential members of Ship operators and a host of auxiliary
cluster support services like ports, freight forwarding Terminal operators, hinterland transport
companies, shipping/linear agencies, companies, transport service providers,
stevedovie companies, dredging services warehousing companies, transport
and professional services – management, intermediaries, port authority
LQVXUDQFH¿QDQFHOHJDODQGDFFRXQWDQF\
Examples 7KH 6RXWK :HVW 0DULWLPH &OXVWHU (QJODQG The Lower Mississippi port cluster, the port
WKH0DULWLPH&OXVWHURI-DSDQ cluster in Rotterdam
Source: authors’ construction based on Shinohara M., 2010; Morrissey K., O’Donoghue C., 2013; de Langen P.W., 2004;
de Langen P.W., Visser E.J., 2005
de Langen P.W. Visser E.J., 2005) and maritime clusters seaports in Latvia (Kasalis E., Kassalis I., Kasalis J.,
HJ 0RUULVVH\ . 2¶'RQRJKXH & &KDQJ <& 2012). Vilcina and Boronenko (2009) argue that clusters
2011). emerge and develop in competitive regions where the
The maritime cluster consists of a group of industries environment for competition is developed and only Riga
directly or indirectly related with shipping within a certain region has this environment in Latvia, since it is on the
area or a nation (Shinohara M., 2010). Morrissey and transition stage to the innovation-driven economy. Other
O’Donoghue (2013) investigating potential for the Irish UHJLRQV RI /DWYLD DUH RQ WKH HI¿FLHQF\GULYHQ VWDJH
PDULWLPH FOXVWHU FUHDWLRQ LGHQWL¿HG WKDW WKH PDULWLPH Kasalis et al. (2012) are convinced that cluster based
cluster could consist of ship operators and a host of approach can be applied for increasing competitiveness
auxiliary support services like ports, freight forwarding of the Freeport of Riga in Latvia and clusters can be
companies, shipping/linear agencies, stevedovie created on three levels:
companies, dredging services, and professional services — industrial business cluster inside the Freeport of
VXFK DV PDQDJHPHQW LQVXUDQFH ¿QDQFH OHJDO DQG Riga;
accountancy. One maritime cluster can be created in the — territorial cluster for the Riga region, where the
country or even in the whole region as well as two or Freeport of Riga is included as a member;
more maritime clusters can operate in the country. — transport cluster (national, regional or international),
Port clusters are usually understood as seaport where the Freeport of Riga is included as a member.
clusters where companies related with the seaport There is an environment for cluster formation in the
logistics operate. In the 21st century, seaports work logistics economic sector in Latvia because all transport
not only with transhipment of cargoes but they also modes (sea transport, rail transport, road transport,
offer additional services (e.g. warehousing, packaging). pipelines transport and air transport) are used for cargo
The port cluster consists of all economic activities, transportation in and through the territory of Latvia as
public and private organisations which are related with well as international cargo transit transport dominates
the arrival of ships and cargo in ports (de Langen P.W., in rail transport, sea transport (seaports), and pipelines
2004). Activities which are included in the port cluster transport. There are three international seaports with
are cargo handling, transport, logistics, manufacturing, ZLGH FDUJR WUDQVKLSPHQW SUR¿OH 5LJD 9HQWVSLOV DQG
and trade. Liepaja) and seven comparatively small sea ports focused
As it is seen in Table 1, maritime clusters are focused RQVHUYLQJRIH[SRUWJRRGVPDLQO\WLPEHUDQG¿VKLQJ
on shipping, while port clusters – on ports. The central Three ports (Riga, Ventspils, and Liepaja) are connected
problem in the port cluster is the necessity to create to TENT-T road and rail as well as two oil and oil products
FROOHFWLYH DFWLRQ UHJLPHV LQ WKH SRUW WR JHW EHQH¿WV pipelines to Ventspils (Figure 1). The contribution of
(de Langen P.W., Visser E.J., 2005) but in the maritime international transit cargo transport to Latvian GDP was
cluster – to address problems of coordination 6.6% in 2010 (Bulis A., Orovs A., Skapars R., 2012). The
and fragmentation in maritime sectors and policy Latvian logistics sector is participating in regional and
&KXDQ[X: global competition for transportation of goods, and thus,
the promotion of international competitiveness of Latvian
2. The assessment of the Latvian Supply logistics industry is important.
Chain Cluster At the moment, one cluster in the logistics economic
,W LV VFLHQWL¿FDOO\ UHFRJQLVHG WKDW WKH GHYHORSPHQW sector is operating in Latvia. It is the Latvian Supply
of clusters can promote regional development and &KDLQ&OXVWHU/6&&7ZRIRFXVJURXSVZHUHFRQGXFWHG
competitiveness in Latvia (Vilcina A., Boronenko V., in October and November 2012 for the assessment of the
2009), facilitate competitiveness of companies in Latvia /6&& 7ZHOYH UHSUHVHQWDWLYHV RI PHPEHURUJDQLVDWLRQV
(Kassalis I., 2011), and promote competitiveness of RI WKH /6&& SDUWLFLSDWHG LQ WKH IRFXV JURXSV 7KH

ISSN 1691-3078
ORFDWLRQRIVHDSRUWVZLWKZLGHFDUJRWUDQVKLSPHQWSUR¿OH/LHSDMD9HQWVSLOVDQG5LJD
Source: Google Maps
Fig. 1. Geographical location of Latvia
Fig. 2. Model of the Latvian Supply Chain Cluster
main topics for discussion were: 1) the structure and industry) and support organisations (e.g. academic and
specialisation of cluster; 2) the activities of cluster in the UHVHDUFK LQVWLWXWLRQV LQVXUDQFH FRPSDQ\ 7KH /6&&
previous 3 years (since cluster operates); and 3) barriers GH¿QHVLWVHOIDVD³PDULWLPHLQIUDVWUXFWXUHUHODWHGVXSSO\
IRUWKHGHYHORSPHQWRIWKH/6&& FKDLQFOXVWHU´
7KH /6&& LV D EUDQFK RI WKH /DWYLDQ /RJLVWLFV )URP WR WKH DFWLYLWLHV RI WKH /6&& ZHUH
Association, and thus, the cluster can use networks ¿QDQFHGE\WKH0LQLVWU\RI(FRQRPLFVVXSSRUWLQJSURMHFW
and resources of the Latvian Logistics Association for for operation of cluster. The main activities included
LWV GHYHORSPHQW 7KH /6&& ZDV IRXQGHG LQ ZKLOH the organisation of events and trainings, participation
WKH /DWYLDQ /RJLVWLFV $VVRFLDWLRQ ± LQ 7KH /6&& in international and local events (discussions, seminars
ZDV HVWDEOLVKHG ZLWK ¿QDQFLDO VXSSRUW RI WKH 0LQLVWU\ DQG FRQIHUHQFHV LPSOHPHQWDWLRQ RI WKH 6&25 PRGHO
of Economics of the Republic of Latvia (the Ministry of WKH 6XSSO\&KDLQ 2SHUDWLRQV 5HIHUHQFHPRGHO LQ
(FRQRPLFV7KLV¿QDQFLDOVXSSRUWGHWHUPLQHGWKHPRGHO Latvia, development and maintenance of the cluster’s
RI FOXVWHU RULHQWLQJ WKH /6&& RQ SURPRWLRQ RI H[SRUW web page, creation of the cluster’s stylebook, and
(Figure 2). In October 2012, seventeen organisations participation in local and regional projects. After ending
ZHUHWKHPHPEHUVRIWKH/6&&DPRQJWKHP±ORJLVWLFV RI ¿QDQFLDO VXSSRUW RI WKH 0LQLVWU\ RI (FRQRPLFV LQ
companies, manufacturing companies (from forest 2012 the activities of cluster were related with the

ISSN 1691-3078
participation in regional projects in logistics and cargo and should be focused on the creation of commercial
WUDQVSRUWDWLRQ ¿QDQFHG E\ WKH (XURSHDQ 8QLRQ 7KH EHQH¿WVIRUWKHPHPEHUVRIFOXVWHU7KHH[DPSOHRIWKH
topics of the projects are green transport in the Baltic Sea /6&& VKRZV WKDW WKH FUHDWLRQ DQG RSHUDWLRQ RI ORJLVWLFV
Region, new innovative logistics solutions and networking cluster provide different activities for the members of
among maritime clusters in the Baltic Sea Region where FOXVWHU ZKLOH WKH FUHDWLRQ RI FRPPHUFLDO EHQH¿WV IRU
the main activities are organisation and participation members of cluster is a challenge and activities of cluster
in events (workshops, conferences), networking, and FDQQRWEULQJFRPPHUFLDOEHQH¿WV±WKHUHDUHFRPPHQWV
implementing studies. and experience of cluster’s members on the cluster’s
7KH ¿QDQFLDO VXSSRUW RI WKH 0LQLVWU\ RI (FRQRPLFV operation from 2009 to November 2012.
has determined operational directions and strategy 7KH DVVHVVPHQW RI WKH /6&& GRQH LQ WKLV VWXG\ KDV
RI WKH /6&& )RU DOO QLQH VXSSRUWHG FOXVWHUV LQ /DWYLD indicated that there is a lack of knowledge between
in 2009, the Ministry of Economics applied the same the cluster management and members of cluster on
UHTXLUHPHQWV ,W PHDQV WKDW WKH DFWLYLWLHV RI WKH /6&& the methods how and which activities (or combination
IURPWRGHSHQGHGRQ¿QDQFLQJUHTXLUHPHQWV of different activities) could be transformed into cluster
of the Ministry of Economics doing activities which could FRPPHUFLDO EHQH¿WV DFFHOHUDWLRQ RI LQQRYDWLRQV
EH ¿QDQFHG DQG UHVSHFWLQJ EXUHDXFUDWLF SURFHGXUHV productivity, and competitiveness). This problem is
WKDW ZHUH D VLJQL¿FDQW EDUULHU IRU WKH RSHUDWLRQ RI WKH not solved in the cluster theory in logistics sector as
/6&& IURP WR 0HPEHUV RI WKH /6&& DUJXH well. Previous studies on clusters’ development in
WKDW WKH GLI¿FXOW\ LV WR GH¿QH FRPPRQ QHHGV RI FOXVWHU the logistics sector have developed suggestions for
members on what could be done together because there cluster management based on empirical research
LVQRPHFKDQLVPIRULGHQWL¿FDWLRQRIFRPPRQLQWHUHVWV HJ0RUULVVH\.2¶'RQRJKXH&6KLQRKDUD0
The lack of capabilities to participate more in regional 2010) but those suggestions have not been devoted
SURMHFWV FR¿QDQFHG E\ WKH (XURSHDQ 8QLRQ LV DQRWKHU to the development of proposals how cluster activities
barrier for the operation of cluster. could be transformed into acceleration of innovation,
0HPEHUVRIWKH/6&&DUHFRQYLQFHGWKDWWKHUHZHUH productivity, and competitiveness in companies which
QR FRPPHUFLDO EHQH¿WV IURP RSHUDWLRQ RI WKH FOXVWHU are members in the port cluster or the maritime
from 2009 to November 2012 because participation in FOXVWHU 6RPH VFLHQWLVWV LQ SUHYLRXV VWXGLHV RI WKH ¿HOG
WKH /6&& ZDV IUHH RI FKDUJH DQG PHPEHUV ZHUH QRW have mentioned that there is no clear evidence that
active and motivated as well as the operation of cluster companies which are members of cluster are more
ZDVUHVWULFWHGE\¿QDQFLQJUHTXLUHPHQWVRIWKH0LQLVWU\ competitive than companies which are not members
RI(FRQRPLFV%HQH¿WVIURPWKH/6&&ZHUHWKHDFWLYLWLHV RI FOXVWHU LQ WKH VDPH LQGXVWU\ HJ &KDQJ <&
RUJDQLVHG E\ WKH /6&& ± GLVFXVVLRQV FRQIHUHQFHV .DUDHY $ .RK 6&/ 6]DPRVL /7
trainings, studies, and a common cluster web page. 7KHVH LVVXHV VKRXOG EH DGGUHVVHG LQ WKH VFLHQWL¿F
Suggestions for the improvement of operation of studies in the future.
WKH /6&& IURP LWV PHPEHUV DUH ¿UVWO\ WR GHYHORS QHZ
strategy where new operational directions and priorities
DUH GH¿QHG VLQFH QR PRUH JRYHUQPHQWDO VXSSRUW LV
received for the operation of cluster. New orientation of recommendations
WKH/6&&VKRXOGEHUHODWHGZLWKSULRULWLHVDQGDFWLYLWLHV 1. There are two types of clusters which exist in logistics
ZKLFKKDYHSRWHQWLDOIRUFUHDWLQJFRPPHUFLDOEHQH¿WVIRU industry: maritime clusters and port clusters.
members and take into account trends in transport and Maritime clusters are formed focusing on shipping,
logistics in the European Union like regionalisation and while port clusters – on ports.
green transport. Research and academic institutions could 2. In Latvia, one cluster operates as an organisation in
EH LQYROYHG PRUH LQ WKH /6&& VLQFH LW ZRXOG LPSURYH the logistics economic sector - the Latvian Supply
expertise, knowledge transfer, and innovations in the &KDLQ &OXVWHU ,W ZDV IRXQGHG LQ DQG LW LV
cluster. Secondly, solutions for regular communication DI¿OLDWHGZLWKWKH/DWYLDQ/RJLVWLFV$VVRFLDWLRQ7KH
with the members of cluster should be created in order /DWYLDQ6XSSO\&KDLQ&OXVWHULVDPDULWLPHFOXVWHU
WR IDFLOLWDWH WKH LGHQWL¿FDWLRQ RI FRPPRQ LQWHUHVWV RI 3. 7KH DFWLYLWLHV RI WKH /DWYLDQ 6XSSO\ &KDLQ
cluster’s members. Some recommendations suggested &OXVWHU LQFOXGH WKH RUJDQLVDWLRQ RI HYHQWV DQG
by the cluster’s members for the cluster in its further trainings, participation in international and local
work are to develop activities which involve all members events (discussions, seminars and conferences),
or essential part of members in activities of cluster and LPSOHPHQWDWLRQ RI WKH 6&25 PRGHO LQ /DWYLD
increase contribution of cluster’s members in organising development and maintenance of the cluster’s web
activities and initiatives as well as to issue a regular page, creation of cluster’s stylebook, participation
newspaper for the information of cluster’s members on in local and regional projects, networking and
the news of cluster and logistics sector. Thirdly, there implementing studies. The cluster members are
LV QHFHVVLW\ WR LPSURYH FDSDELOLWLHV HJ FR¿QDQFLQJ convinced that the operation of cluster has not
and expertise) for participating in regional projects co- EURXJKWFRPPHUFLDOEHQH¿WVIRULWVPHPEHUVGXULQJ
¿QDQFHG E\ WKH (XURSHDQ 8QLRQ ,Q 1RYHPEHU WKH ¿UVW WKUHH \HDUV VLQFH WKH /6&& KDV EHHQ
WKH /6&& KDV ZRUNHG LQ WZR SURMHFWV FR¿QDQFHG E\ RSHUDWHG EHFDXVH SDUWLFLSDWLRQ LQ WKH /6&& ZDV
WKH (XURSHDQ 8QLRQ \HW WKH /6&& KDV WR LPSURYH LWV free of charge and members were not active and
capabilities to be involved more in similar projects. Some motivated as well as the operation of cluster was
PHPEHUV RI WKH /6&& FRQVLGHU WKDW WKH XWLOLW\ IURP UHVWULFWHGE\¿QDQFLQJUHTXLUHPHQWVRIWKH0LQLVWU\
cluster’s involvement in projects should be increased of Economics.

ISSN 1691-3078
4. 7KH RSHUDWLRQ RI WKH /DWYLDQ 6XSSO\ &KDLQ /RZHU 0LVVLVVLSSL 3RUWU&OXVWHU Journal of Transport
&OXVWHU FDQ EH LPSURYHG LQ WKUHH ZD\V )LUVWO\ Geography, Volume 13, pp. 173-186.
it is necessary to develop a new strategy where 6. De Langen, P. W. (2004). The performance of
RSHUDWLRQDO GLUHFWLRQV DQG SULRULWLHV DUH UHGH¿QHG SeaportsClusters, a Framework to Analyse Cluster
because no more governmental support is received Performance and an Application to the Seaport
for the operation of cluster. Secondly, solutions for Clusters of Durban, Rotterdam, and the Lower
regular communication with the members of cluster Mississippi. Rotterdam: Erasmus Research Institute
should be created. Thirdly, it is necessary to improve of Management, p. 277..
FDSDELOLWLHV HJ ¿QDQFLQJ DQG H[SHUWLVH IRU 7. .DUDHY $ .RK 6& / 6]DPRVL /7
participating in the regional projects. All activities 7KH &OXVWHU $SSURDFK DQG 60(V&RPSHWLWLYHQHVV
organised by cluster should be focused on creation awReview. Journal of Manufacturing
RIFRPPHUFLDOEHQH¿WVIRULWVPHPEHUV Technology Management, Volume 18, Issue 7,
5. ,Q WKH IXWXUH WKH VFLHQWL¿F VWXGLHV RQ FOXVWHUV LQ pp. 818-835.
logistics sector can be devoted to the development 8. Kasalis, E., Kassalis, I., Kasalis, J. (2012).
of methods how and which activities (or combination &OXVWHU %DVHG $SSURDFK DV 7RRO IRU ,QFUHDVLQJ
of different activities) could be transformed into &RPSHWLWLYHQHVV RI )UHHSRUW RI 5LJD Journal of
FOXVWHU FRPPHUFLDO EHQH¿WV DFFHOHUDWLRQ RI Maritime Transport and Engineering, Volume 1,
innovations, productivity and competitiveness) Issue 1, pp. 41-46.
as well as a methodology should be developed to 9. .DVVDOLV,,QGXVWULDO&OXVWHUV$&RHI¿FLHQW
facilitate a comparative assessment of companies’ Factor for Integrated Development. Intellectual
competitiveness by comparing companies- Economics, Volume 5, Issue 2, pp. 212-223.
members of cluster with companies which are 10. Kowalski, A.M. (2012). Development of
outside the cluster organisation in the same &OXVWHUV LQ 3RODQG DQG WKHLU 5ROH IRU (FRQRPLFV
industry. &RPSHWLWLYHQHVV International Journal of
Economics and Finance Studies, Volume 4, Issue 2,
Bibliography pp. 11-20.
1. Bresnahan, T., Gambardella, A., Saxenian, A.L. 11. 0RUULVVH\.2¶'RQRJKXH&7KH3RWHQWLDO
(2001). Old Economy Inputs for New Economy IRU DQ ,ULVK 0DULWLPH 7UDQVSRUWDWLRQU &OXVWHU
2XWSXWV &OXVWHU )RUPDWLRQ LQ WKH 1HZ 6LOLFRQ An Input – OutputsAnalysis. 2FHDQ &RDVWDO
Valleys. Industrial and Corporate Change, Management, Volume 71, pp. 305-313.
Volume 10, Issue 4, pp. 835-860. 12. Porter, M.E. (1990 2Q &RPSHWLWLRQ. Boston:
2. %XOLV$2UORYV$V6NDSDUV5&RQWULEXWLRQ Harvard Business Press.
of International Transit Transport to Latvian GDP. 13. 5RVHQIHOG 6$ %ULQJLQJ %XVLQHVV &OXVWHUV
Proceedings of the 12th International Conference into the Mainstream of EconomictDevelopment.
“Reliability and Statistics in Transportation and European Planning Studies, Volume 5,
Communication”, pp. 128-135. pp. 3-23.
3. &KDQJ <& 0DULWLPHV&OXVWHUV :KDW DQ 14. 6KLQRKDUD 0 0DULWLPH &OXVWHU RI -DSDn:
be Learnt from the South West of England. 2FHDQ ,PSOLFDWLRQV IRU WKH &OXVWHU )RUPDWLRQV3ROLFLHV
Coastal Management, Volume 54, pp. 488-494. Maritime Policy and Management, Volume 37,
4. &KXDQ[X : 2SWLPL]DWLRQ RI +XEDQG Issue 4, pp. 377-399. Vilcina, A., Boronenko, V.
Spoke Two-stage Logistics Network in Regional Port 5ROH RI &OXVWHUV LQ 'HYHORSLQJ WKH
&OXVWHU Systems Engineering – Theory & Practice, &RPSHWLWLYHQHVV RI WKH 5HJLRQV RI /DWYLD
Volume 28, Issue 9, pp. 152-158. 3URFHHGLQJRIWKH,QWHUQDWLRQDO6FLHQWL¿F&RQIHUHQFH
5. 'H /DQJHQ 3: 9LVVHU (- &ROOHFWLYH “Economic Science for Rural Development”, Vol. 19,
$FWLRQ5HJLPHVLQ6HDSRUWV&OXVWHUVWKH&DVHRIWKH pp. 150-154.

ISSN 1691-3078
$2]ROVHWDO National Innovation System of Latvia and Triple Helix Model of Innovation Development
NATIONAL INNOVATION SYSTEM OF LATVIA AND

TRIPLE HELIX MODEL OF INNOVATION DEVELOPMENT
Andris Ozols1+, MBA; -ŅQLV(JOŝWLV2, assoc.prof., Dr.oec.; Elena Ozola1, Mg.psych.

1
Daugavpils University
2
9HQWVSLOV8QLYHUVLW\&ROOHJH
Abstract. Innovation is an important component of the development of high-tech knowledge economy. It is especially
LPSRUWDQWIRUGHYHORSLQJWUDQVLWLRQDODQGFDWFKLQJXSHFRQRPLHVOLNH/DWYLDQKDYLQJQRVLJQL¿FDQWQDWXUDOUHVRXUFHV
In terms of innovation, Latvia has a serious backlog compared with other EU countries. The Triple Helix (TH) model of
interaction between university, industry, and government, aiming creation of innovations, is already used to promote
National Innovation Systems (NIS) in many countries and can be used in Latvia as well. According to the authors’
K\SRWKHVLV GXH WR VSHFL¿F KLVWRULFDO GHYHORSPHQW DQG SHRSOH¶V PHQWDOLW\ WKH 1,6 LQ /DWYLD FDQ EH EDVHG RQ WKH
national TH model combining the best foreign experience and considering local conditions. The aim of the research is
to study the place and role of the Triple Helix model in NIS of Singapore, South Korea, and Sweden and the potential
applicability of their experience and models in Latvia. Special attention is paid to the role of universities, which can
become the engines of innovation development. The authors have made recommendations for Latvian TH model
development and appropriate changes in Latvian NIS.
Key words: economy of Latvia, innovations, National Innovation System, Triple Helix model.
JEL code: R11
Introduction the TH model combining the best foreign experience and

Innovation is an important component of the considering local conditions.
development of high-tech knowledge economy. The aim of the research is to study the place and
According to ideas of J.Schumpeter, the main target of role of the Triple Helix model of university-industry-
innovations is to get the oligopolistic rent over the market government relations in NISs of Singapore, South Korea
SUR¿W 6FKXPSHWHU 7KH UHQW LV VKDUHG EHWZHHQ and Sweden, its distinctive features in these countries
entrepreneurs, banks, workers, and state. Therefore, and potential applicability of their experience in Latvia.
as a stakeholder of innovative development, the In the framework of the research, the authors carried
JRYHUQPHQWFRXOGEHQH¿WIURPWKHFUHDWLRQRILQQRYDWLRQ RXW D UHYLHZ DQG DQDO\VLV RI VFLHQWL¿F PRQRJUDSKV
environment and support of innovative business. DUWLFOHV DQG VFLHQWL¿F SDSHUV RI ORFDO DQG IRUHLJQ
Technologies of creation of innovation environment and SXEOLFLVWV7KHGDWDIURPRI¿FLDOGRFXPHQWVDQGEXOOHWLQV
innovations are particularly important for developing, of Latvian, Swedish, Singaporean, and South Korean
WUDQVLWLRQDOFDWFKLQJXSHFRQRPLHVKDYLQJQRVLJQL¿FDQW governments and Higher Education Institutions (HEIs),
QDWXUDOUHVRXUFHVOLNH/DWYLD$FFRUGLQJWRVRPH¿JXUHV reports of international institutions and international
given further, Latvia has problems concerning innovation VWDWLVWLFV ZHUH H[DPLQHG VXPPDUL]HG DQG LQWHUSUHWHG
development in comparison with other EU countries, in order to formulate comprehensive interaction between
and import of foreign experience and its successful VWDWHEXVLQHVVDQGDFDGHPLD&DVHVRIDSSOLFDWLRQRIWKH
implementing in national models could be a way to solve TH model in NISs of Singapore, South Korea and Sweden
some of these problems. were observed in authors’ research. The applied part of
'HYHORSHG E\ +(W]NRZLW] DQG //H\GHVGRUII LQ PLG the research was undertaken to verify the applicability
90s, the Triple Helix (TH) model of interaction between of foreign experience in economic development in
universities, industry, and government successfully Latvia. The results given in the research are a part of a
explains some issues related to creation, development, wider research devoted to the application of innovation
and implementation of innovations in countries and development models in the regions of Latvia.
regions. According to this model, an innovation is an The TH model in Sweden was studied by many
outcome of interaction among three social coordination DXWKRUV LQFOXGLQJ (W]NRZLW] DQG /H\GHVGRUII %HQQHU
mechanisms: markets, knowledge production, and DQG 6DQGVWU|P 'DQHOO DQG 3HUVVRQ
(public or private) governance. Three environments or Pin and Liu (2010), Fogelberg and Thorpenberg (2012);
IXQFWLRQV DUH VSHFL¿HG LQ WKH PRGHO ZHDOWK JHQHUDWLRQ in Singapore - by Parayil (2005), Wong, P.-K. (2006),
(industry), novelty production (academia), and public Wong, P.-K., Ho, Y.-P., Singh, A. (2006); in South
FRQWUROJRYHUQPHQW(W]NRZLW]/H\GHVGRUII7KH Korea – by Salmi (2006), Shapiro (2007), Shapiro, So,
TH model is already used to promote National Innovation 3DUN &KXQJ $FKD DQG 0DUWLQ
Systems (NIS) in many countries and can be used in The aspects of the TH model in Latvia were researched
Latvia as well. According to the authors’ hypothesis, the E\ $PEUXVHYLF 2]ROV $ (JOLWLV - 2]ROD (
NIS in Latvia can be based on the national variant of (2012a, 2012b). The TH model is studied in the Institute
___________________________
+
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ISSN 1691-3078
Table 1
Stylized Stages of Economic Development and Changes of NIS of Singapore
1960s-1970s 1970s-1980s 1980s-late 1990s From late 1990s

Economic Beginning of DFI- Transition to NIE Transition from NIE to Transition to knowledge-
Development driven, export led developed economy based economy
LQGXVWULDOL]DWLRQ
National Primary focus Primary focus Primary focus on Primary focus on developing
Innovation on developing on developing developing innovative intellectual creation and
System operative adaptive capability capability to support FRPPHUFLDOL]DWLRQ
capability to man to support process applied R&D entrepreneurial capability to
production of technological support knowledge-based
deepening economic growth
Source: Wong, Ho, Singh, 2006
for Triple Helix Innovation (Hawaii, the USA) and A more rigid bureaucratic control by the state and
International Institute of Triple Helix (Spain). lower demand and ability of private enterprises to
FRPPHUFLDOL]H XQLYHUVLW\ NQRZOHGJH VXJJHVWHG WKDW WKH
pre-conditions for TH dynamic interactions were much
weaker in Singapore than in the advanced economies.
1. Case of Singapore
Therefore, Singapore universities had greater urgency
Singapore is one of the world countries vanguards
to tDNH RQ DQ ³HQWUHSUHQHXULDO´ UROH :RQJ +R 6LQJK
of innovative development. After gaining fully
7KH\KDGWREHPRUHSURDFWLYHLQFRPPHUFLDOL]LQJ
independence, in 1965, Singapore became one of the
their inventions through spin-offs and start-ups, rather
RULJLQDO ³)RXU $VLDQ 7LJHUV´ RU 1HZO\ ,QGXVWULDOL]HG
than relying on outside private enterprises to license
Economies (NIE). Between the 1960s to the 1980s, the
them. Similarly, they needed to undergo more drastic
country was able to attract numerous Trans-National
UHIRUP RI WKHLU RUJDQL]DWLRQDO VWUXFWXUH DQG LQFHQWLYH
&RUSRUDWLRQV 71& DQG 'LUHFW )RUHLJQ ,QYHVWPHQW
system, in order to change the culture and mindset
(DFI). The modern economy of Singapore was built
mostly due to the state participation through Economic RI WKHLU VWDII WRZDUGV NQRZOHGJH FRPPHUFLDOL]DWLRQ
'HYHORSPHQW %RDUG RWKHU VSHFLDOL]HG VWDWXWRU\ ERDUGV (Wong, Ho, Singh, 2006).
economic promotion agencies, and foreign investments, Another factor increasing the role of universities in
rather than activities of small and medium enterprises the innovation agenda in Singapore was a change of
(SMEs). The changes in priorities of NIS of Singapore priorities in the area of industry. In 2000, the Singapore
GXULQJ YDULRXV VWDJHV RI HFRQRPLF JURZWK DUH UHÀHFWHG government announced a strategic shift towards the
in Table 1. promotion of biomedical science and technology as
As it is seen from Table 1, in 2000s the focus of a leading sector in the economy for the 21st century.
national innovation system was on development and Moreover, in mid-2000s the environmental and water
FRPPHUFLDOL]DWLRQ RI LQWHOOHFWXDO FDSLWDO 6LQFH WKH technologies and interactive digital media were added to
mid-1990s, the system of innovation development in them (Biomed-Singapore, 2011).
Singapore faced the TH model. The government has The country, its industry and academia just had no
set as its main objective the creation of an innovative enough educated people to achieve their goals. Therefore,
environment through a strategic alliance between the the government suggested for the local universities to
companies, national research centres and universities, take on an additional economic role - the attraction of
statutory boards, and university spin-off companies foreign talents (Wong, Ho, Singh, 2006).
(Parayil, 2005). The Singaporean model is focused on
the universities, who are the main engine of innovation. 2. Case of South Korea
Universities are being asked to contribute to the economy Another country that achieved great success in
in real time (Parayil, 2005). economic and innovation development having begun
State-owned National University of Singapore (NUS) from very low starting points is South Korea. Its
became a leader of the new policy. In order to cope GDP was smaller than in Somalia and Afghanistan in
ZLWK WKH QHZ WDVNV LWV RUJDQL]DWLRQDO VWUXFWXUH ZDV V &,$ :RUOG )DFWERRN ,Q WKH EHJLQQLQJ
FKDQJHGEHVLGHVWUDGLWLRQDO3URYRVWV9LFH&KDQFHOORU of 1980s, the indicators of industry and agriculture
D QHZ SRVLWLRQ RI D &KLHI ([HFXWLYH 2I¿FHU &(2 ZDV of South Korea and Latvia SSR were comparable
added, whose responsibilities included: communication '2&(; .R6WDW 1RZ LW LV DVVHVVHG WKH
and coordination with overseas colleges; management WKHFRQRP\LQWKHZRUOG&,$:RUOG)DFWERRN
RI (QWUHSUHQHXUVKLS &HQWUH LQGXVWU\ DQG WHFKQRORJ\ Being a great example of catching up development (one
relations; venture support; consulting; expansion of of its models called by a Japanese economist Kaname
external relations, and publishing. Accordingly, a special $NDPDWVX ³D SDUDGLJP RI ³À\LQJ JHHVH´ $NDPDWVX
unit was created: the Industry and Technology Relations 1962)), South Korea used various methods and ways
2I¿FH,1752UHVSRQVLEOHIRUIRUPDWLRQDQGJXLGDQFHRI to promote its economical and social growth. In
VSLQRII¿UPVDQGLQFXEDWLRQRIKLJKWHFKVWDUWXSV186 1990s, the government took a course to wide support
2005). of SMEs and innovative development having created

ISSN 1691-3078
Source: NUS, 2005
Fig.1. NUS Organization Chart
geographical agglomerations of knowledge and industry planning, including industry representatives into
2]ROV the Boards of Trustees, participation of industrial
In 2006, the Korean government adopted the practitioners in the creation of study programs,
second stage of Brain Korea 21 Program (2006-2013) lectures of leading businessmen, specialists and
WR ¿QDQFH WKH VHOHFWHG XQLYHUVLW\ UHVHDUFK SURMHFWV managers, post-practice, consultations and joint
especially in the areas of technology development in projects with companies, science parks, and
collaboration with industry and development of regional LQFXEDWRUV ¿QDQFHG E\ SULYDWH FRPSDQLHV DQG ORFDO
balance. A Korean version of the TH model was called governments from regional budgets (Salmi, 2006;
NURI (New University for Regional Innovation) Project. Shapiro, 2007);
Only higher education institutions located outside — increase of universities’ role and participation in
WKH FDSLWDO UHJLRQ FRXOG EH WKH EHQH¿FLDULHV RI WKH regional economies, priority of regional projects for
NURI funds. USD 1.4 billion were invested over a period universities’ researches, and regional universities in
RI ¿YH \HDUV ,Q WKLV SURMHFW ZDV local grants, promotion of local innovative activity
WUDQVIRUPHG LQWR WKH :RUOG &ODVV 8QLYHUVLW\ :&8 (Salmi, 2006).
Project with allocation of government funding of USD
PLOOLRQ 7RJHWKHU ZLWK LW D ´+LJK ULVN KLJK UHWXUQ´ 3. Case of Sweden
pioneer research project was started – government ³6ZHGHQ LV DPRQJ WKH FRXQWULHV ZKR LQYHVW PRVW
public investment in strategically important areas, in both the private and public sector in research and
especially basic research and advanced technology R&D development (R&D) in relation to GDP. This activity is
in biotechnology, nanotechnology, and brain research. conducted in Sweden primarily in large international
Total government R&D investment increased by 2012 EXVLQHVVJURXSVDQGXQLYHUVLWLHV´0((&,Q
WR86'ELOOLRQ.LP&KXQJ185,:&8 6ZHGHQUDQNHGWKH¿UVWLQWKH(8LQWHUPVRILQQRYDWLRQ
projects aimed: (IUS, 2012). It is a great example of employing the
— the strengthening of university/industry and /DLVVH])DLUH 7+ PRGHO 6ZHGLVK *RYHUQPHQWDO $JHQF\
university/regional authorities linkages, which for Innovation Systems (VINNOVA) uses TH concept as
supposes the involvement of industrial sector and the theoretical framework for programmes and policies
regional governments to the universities’ strategic fostering public private relationships (Jacob, 2006).

ISSN 1691-3078
6RXUFH.ULVWDSVRQV'UDYQLHFH$GDPVRQH)LVNRYLFD
Fig.2. Organizational structure of Latvian System of Innovation, October 2011
The Swedish Agency for Economic and Regional Growth start and run businesses and stimulating young people’s
(Tillväxtverket) also participates in TH activities. FUHDWLYLW\´WKXVWKH*RYHUQPHQWZDQWVHQWUHSUHQHXUVKLS
6ZHGLVK SROLF\ KDV DPELWLRQV RI ¿QGLQJ D EHWWHU to be integrated in the society throughout the education
balance between top-down and bottom-up initiatives V\VWHP0((& 0(5
implying a stroQJHU UHJLRQDO IRFXV &RHQHQ $VKHLP 6ZHGHQ KDV QR RI¿FLDOO\ SURFODLPHG KLJKHU SULRULW\
2005), though the regional imbalance still exists - the industries. Instead, it announced an innovation strategy
three main urban regions Stockholm, Gothenburg, that implied innovation social climate; knowledge base
DQG 0DOP| KDYH DERXW SHUFHQW RI DOO 5 ' DFWLYLWLHV for innovation; innovative trade and industry; innovative
and outputs. These agglomerations also have a more SXEOLFLQYHVWPHQWLQQRYDWLYHSHRSOH0,(&
balanced structure of academic, governmental, and To promote the TH model, many other bodies beside
private research activities than smaller regions, and the state agencies were created, like a business incubator
interactions among sectors within these regions are more STING (Stockholm Innovation and Growth), Medicon
intense (Danell, Persson, 2003). According to Swedish Valley Swedish-Danish medical cluster, a Swedish-Danish
model, factors that can be unique to a certain place or cross-border initiative Øresund Science Region (ÖSR),
region are the existence of specialised knowledge, local Swedish-Norway innovation centres, etc.
social networks, and trust between the parties concerned Although there are many critiques of the TH model in
0,(& Sweden (Tuunainen, 2002), it is one of the most powerful
As the main bodies of research and development, national ideas considering innovation and economic
Swedish universities, which rank top worldwide in getting development. It is becoming even more popular while
public funding, highlight their responsibility in transferring many manufactures, including automotive, are being
knowledge into productivity based on the framework of PRYHGWRRWKHUFRXQWULHV(W]NRZLW].ORIVHQ
TH model. The model of knowledge transfer within TH
model in Sweden is mainly state-pulled, corporate- 4. Situation in Latvia
pushed and university-coordinated (Pin, Liu, 2010). The In 2011, Latvia ranked 27th in the EU in terms
work at universities aiming at valorisation of research of innovation (IUS, 2012); Gross Domestic Product
also include research collaboration with existing large and (GDP) expenditure on R&D (GERD) was 0.45% (the
VPDOOHQWHUSULVHVWKHUHIRUH³Whe capacity of these actors’ EU average 2.01%); business enterprise expenditure
to collaborate with each other is crucial to development on R&D (BERD) was 0.16% of GDP (the EU average
DQG UHQHZDO LQ VRFLHW\ DW ODUJH´ 0((& . In the 1.21%); Summary Innovation Index score of Latvia was
³6WUDWHJ\IRUHQWUHSUHQHXUVKLSLQWKH¿HOGRIHGXFDWLRQ´ 0.201 (the EU average 0.516) (Kristapsons, Dravniece,
6ZHGHQ *RYHUQPHQW ³RXWOLQHV ZK\ HQWUHSUHQHXUVKLS LV Adamsone-Fiskovica, 2012); more than 99% of Latvian
important in both providing skills for those who want to HQWHUSULVHVDUH60(V&6%/DQGLQYHVWPHQWVLQ

ISSN 1691-3078
entrepreneurship and innovation made only 9.6% of the 3. Ambrusevic, N. (2010). Sector of High Technology
available EU resources (Egle, 2012). LQWKH%DOWLF6WDWHV&RPSDUDWLYH$QDO\VLVBisiness
The present structure of Latvian Innovation System and Management 2010 Selected papers. Vilnius:
is rather cumbersome and vague, there are many
Vilnius Gediminas Technical University, pp. 311-320.
bodies in charge, but the scheme of their interaction
4. %HQQHU06DQGVWU|P8,QVWLWXWLRQDOL]LQJ
DQG FRPPXQLFDWLRQ LQFOXGLQJ KRUL]RQWDO OLQNV LV UDWKHU
uncertain (Kristapsons, Dravniece, Adamsone-Fiskovica, the Triple Helix: Research Funding and Norms in
2012). the Academic System. Research Policy, Volume 29,
³/RZ GHPDQG DQG OHYHO RQ EXVLQHVV 5 ' LV RQH RI Issue 2, pp. 291-301.
the major burdens in Latvian innovation system, as there 5. Biomed-Singapore. (2011). New Industrial Policy.
is a lack of communication and a mismatch between Retrieved:https://www.biomed.com.sg. Access:
XQLYHUVLW\UHVHDUFKDQGLQGXVWU\´=LHJHQEODJ0RQWHDQ
22.12.2011.
2010). The priority industries in Latvia are technologies,
6. &HQWUDO6WDWLVWLFDO%XUHDXRI/DWYLDGeneral
wood processing, and design (Kristapsons, Dravniece,
Adamsone-Fiskovica, 2012). Statistics. Retrieved: www.csb.gov.lv. Access:
22.12.2012.
7. &KXQJ 6 $FDGHPLD,QGXVWU\*RYHUQPHQW
Interaction in the Republic of Korea. In: Martin, M.
recommendations
(Ed.) In search of the Triple Helix: Academia-
,Q WKH IUDPHZRUN RI WKH ³VWDWLVW´ 7+ PRGHO FHQWUDO
and local governments are able to promote innovation industry-government interaction in China, Poland
policy indirectly through the support of local HEIs and and the Republic of Korea. Paris: International
SMEs, having the maximal synergistic effect with Institute for Educational Planning. pp.163-206.
minimum investment. 8. &,$ :RUOG )DFWVERRN Republic of Korea.
Based on the research, the authors suggest the Territory. Population. Economy. Retrieved: https://
following recommendations.
www.cia.gov/library/publications/the-world-
1. Increase the role of local governments and regional
factbook/geos/kr.html. Access: 15.03.2012.
HEIs in the NIS.
2. Implement the innovation policy based on the TH 9. &RHQHQ/$VKHLP%Constructing Regional
model, at least in regions. Advantage at the Northern Edge. WP 2005/1. Lund:
3. Review and accept the list of priority industries based Lund University
on predictive conjuncture, resource availability, and 10. Danell, R., Persson, O. (2003). Regional R&D
possibility of resource obtaining. Activities and Interactions in the Swedish Triple
4. ,PSOHPHQWWKH¿QDQFLDOLQFHQWLYHVIRU+(,VDWWUDFWLQJ
Helix. Scientometrics, Volume 58, Issue 2,
private sector investment.
pp.203-218.
5. Ensure foreign talent - students, researchers, and
faculties - attraction to the country with appropriate 11. 'RFXPHQW ([SHGLWLQJ 3URMHFW '2&(;
legislation changes, if necessary. /DWYLD $Q (FRQRPLF 3UR¿OH :DVKLQJWRQ '&
6. 6XSSRUWWKHFRPPHUFLDOL]DWLRQRINQRZOHGJHWKURXJK /LEUDU\RI&RQJUHVV
all additional activities: special support programmes 12. Egle, E. (2012). Latvija apguvusi maz ES
for students and academia for entrepreneurship fondu naudu uznemejdarbibas un inovaciju
activity, tax incentives to start-ups and spin-offs.
veicinasanai (Latvia has acquired small EU Funds
7. ,QFUHDVH WKH HI¿FLHQF\ RI WKH XVH RI WKH (8 IXQGV
for entrepreneurship and innovation promotion).
through the inclusion of the regional HEIs into
the programmes connected to the promotion of LETA, February 13, 2012. Retrieved: http://www.
entrepreneurship activities. PRUQLQJOY]LQDVHJOHODWYLMDDSJXYXVLPD]HV
6RPH FRXQWULHV KDYH DOUHDG\ DFFXPXODWHG VXI¿FLHQW IRQGXQDXGXX]QHPHMGDUELEDVXQLQRYDFLMX
experience in the implementation of the TH model. It veicinasanai.d?id=42126217. Access: 13.02.2012
is possible to use this experience in Latvia immediately 13. (W]NRZLW] + .ORIVHQ 0 7KH ,QQRYDWLQJ
to the stage of practical application, taking into account
Region: Toward a Theory of Knowledge-Based
local conditions.
Regional Development. R&D Management,
Volume 35, Issue 3, pp.243-255.
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(CEAS) VC Initiative, University of Bristol and the In Proceedings of the 2010 International Conference
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4th June 2010. New Challenges for Tertiary Education. Washington:
19. Kristapsons, J., Dravniece, A., Adamsone- Education. The World Bank.
Fiskovica, A. (2012). Mini Country Report / Latvia. 30. Shapiro, M. (2007). The Triple Helix Paradigm in
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(5$:$7&+ 5HWULHYHG http://www. Development, Volume 6, Issue 3, pp.171-191.
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¿OHV/DWYLDB7&B¿QDOSGI. Access: 30.04.2012. the National Innovation system: Inter-Regional
20. 0LQLVWU\ RI (QWHUSULVH (QHUJ\ DQG &RPPXQLFDWLRQV &ROODERUDWLRQ1HWZRUNVLQ6RXWK.RUHDTechnology
0((& The Swedish Innovation Strategy. Analysis & Strategic Management, Volume 22,
Retrieved: http://www.government.se/sb/ Issue 7, pp.845-857.
d/2025/a/202558. Access: 20.12.2012. 32. Schumpeter, J. (1949). Capitalism, Socialism &
21. 0LQLVWU\ RI (QWHUSULVH (QHUJ\ DQG &RPPXQLFDWLRQV Democracy. Taylor & Francis e-Library, 2003.
0((& 0LQLVWU\RI(GXFDWLRQDQG5HVHDUFK0(5 33. Tuunainen, J. (2002) Reconsidering the Mode 2 and
(2009). 6WUDWHJ\IRUHQWUHSUHQHXUVKLSLQWKH¿HOGRI WKH 7ULSOH +HOL[ $ &ULWLFDO &RPPHQW %DVHG RQ D
education. Retrieved: http://www.government.se/ &DVH 6WXG\ Science Studies, Volume 15, Issue 2,
sb/d/11426/a/129999. Access: 20.12.2012. pp. 36–58.
22. Ministry of Industry, Employment and 34. :RQJ 3. &RPPHUFLDOL]LQJ %LRPHGLFDO
&RPPXQLFDWLRQV RI 6ZHGHQ 0,(& 6FLHQFH LQ D 5DSLGO\ &KDQJLQJ µµ7ULSOH+HOL[¶¶
Innovative Sweden. A Strategy of Growth through Nexus: The experience of the National University
Renewal. Stockholm: Ministry of Industry, of Singapore. Journal of Technology Transfer,
(PSOR\PHQWDQG&RPPXQLFDWLRQV Volume 32, pp. 367-395.
23. National University of Singapore. (2005). NUS 35. Wong, P.-K., Ho, Y.-P., Singh, A. (2006). Towards
organisation structure. Retrieved: http://my.intranet. an “Entrepreneurial University” Model to Support
nus.edu.sg/SAPPORTAL. Access: 2.12.2012. Knowledge-Based Economic Development: The case
24. 2]ROV $ 5HFHQW ,QLWLDWLYHV WR 6WDWH of the National University of Singapore. Singapore:
assistance to Micro, Small and Medium Enterprises (QWUHSUHQHXUVKLS &HQWUH 1DWLRQDO 8QLYHUVLW\ RI
in South Korea. China-USA Business Review, Singapore.
Volume 10, Issue 12, pp.1279-1287. 36. =LHJHQEODJ&0RQWHDQX2Comprehensive
25. 2]ROV $ (JOLWLV - 2]ROD ( D (YDOXDWLRQ Analysis of Programmes and Initiatives in Latvia that
of Triple Helix Model in Regions of Latvia. Economic Assist the Collaboration between Science and SME.
Science for Rural Development, Volume 27, 43/$1 1RUWK *UHHFH /WG DQG /HLEQL] 8QLYHUVLWlW
pp. 169-173. Hannover.
Acknowledgements
7KH SDSHU ZDV SUHSDUHG ZLWK WKH VXSSRUW RI (6) 3URMHFW ³6XSSRUW IRU WKH LPSOHPHQWDWLRQ RI GRFWRUDO VWXGLHV DW
'DXJDYSLOV8QLYHUVLW\´1U'3,3,$9,$$

ISSN 1691-3078
J. Lonska Latvia’s “Success Story” in the Context of Real and Subjective Well-Being
LATVIA’S “SUCCESS STORY” IN THE CONTEXT OF REAL AND

SUBJECTIVE WELL-BEING
Jelena Lonska1, Mg.sc.soc.

'DXJDYSLOV8QLYHUVLW\3K'VWXGHQW/DWYLD5H]HNQH+LJKHU(GXFDWLRQ,QVWLWXWLRQOHFWXUHU
DFFRXQWDQWKHDGRI6WXGHQW&UHGLW*UDQWLQJ&RPPLVVLRQ
Abstract. For struggling against the crisis, the population of Latvian had to suffer many unpleasant moments and
WKHVLWXDWLRQKDVGUDPDWLFDOO\DIIHFWHGWKHSRSXODWLRQ¶VVDWLVIDFWLRQZLWKOLIH7KH¿UVWVLJQVRIUHFRYHU\DQGEDODQFH
of Latvia’s economy could be observed during 2011. The surveys reveal that the level of indicators of inhabitants’
subjective well-being of the year 2008 was only reached at the beginning of 2012. On the one hand, this achievement
LQGHHGFDQEHFRQVLGHUHGDV/DWYLD¶V³VXFFHVVVWRU\ÉXWRQWKHRWKHUKDQGWKHUHLVDTXHVWLRQZDVLWQRWSRVVLEOH
to get over the crisis within a shorter period and with fewer losses? The aim of the present article is to study the
interrelation of the real economic indicators in Latvia and inhabitant’s subjective attitudes to life in this country taking
the example of Latvia during the period of its economic downturn and recovering. As a result, the author of the article
EHOLHYHVWKDWWKHVLWXDWLRQ/DWYLDKDVJRQHWKURXJKZKHQJHWWLQJRXWRIWKHFULVLVFDQQRWGH¿QLWHO\EHFRQVLGHUHG
as Latvia’s success story, which is widely advertised in mass media. However, the author cannot completely disclaim
some known achievements. The evaluation of subjective well-being of Latvia’s population, in 2011 with the dynamic
UHFRYHU\RIHFRQRP\DQGDOUHDG\LQWKH¿UVWKDOIRIDFKLHYHGWKHSUHFULVLVOHYHOLQGLFDWLQJWKDWGHVSLWHQRWD
very humane policy of combating the economic crisis, the population of Latvia was able to go through it and is facing
the future hopefully. Research methods include the monographic method, logical analysis and synthesis method, and
the deduction method.
Keywords: /DWYLD³VXFFHVVVWRU\´VXEMHFWLYHZHOOEHLQJHFRQRPLFFULVLV
JEL code: O11, I31
Introduction data and inhabitants’ subjective life evaluation in

In the second half of 2008, Latvia faced the downturn Latvia from 2008 to 2012, the author drew ambiguous
in economy, when an enormous bubble of real estate, conclusions about the way out of the economic crisis
which actually began to swell in 2004 and 2005 when the and the achieved results. The majority of local and world
ERUURZLQJ ZDV FKHDS ¿QDOO\ EXUVW ,Q RUGHU WR FRPEDW observers consider this long-expected way out of such a
the crisis, the population of Latvia faced numerous KDUGHFRQRPLFFULVLVWREH/DWYLD¶V³VXFFHVVVWRU\´WKRXJK
unpleasant moments – ruthless national budget this way out has been rather long and full of unpleasant
cutbacks, wage cutbacks for persons employed in the moments. Though, if one examines the inhabitants’
public sector, cutbacks of education and medicine subjective well-being has been affected during the crisis,
spending, increased unemployment, an attempt to cut and analyses the world famous economists’ research
age retirement pensions, tax increase, production output of the Latvian government’s action in crisis combating,
decrease, company insolvencies etc. The government a question emerges – can this achievement really be
of Latvia and some external observers believe that QDPHGD³VXFFHVVVWRU\´"
Latvia’s crisis combating measures are to be deemed a The aim of the present article is to study the
³VXFFHVVVWRU\´DQG/DWYLDZDVGHSLFWHGDVDQH[DPSOH interrelation of the real economic indicators in Latvia and
by the media of various countries. But what about the the inhabitant’s subjective attitudes to life in this country
inhabitants of the country? All these negative socially taking the example of Latvia during the period of its
HFRQRPLF FKDQJHV H[HUWHG D GHVWUXFWLYH LQÀXHQFH economic downturn and recovering.
upon the inhabitants of Latvia and consequently The tasks of the research are as follows: to study
upon not very high subjective evaluation of life and the subjective attitudes of the population of Latvia with
current events in this country. The surveys conducted regards to the existing dynamics of national economy
by the Eurobarometer and the research centre SKDS rates starting from 2007 by analysing economic
reveal that population has been substantially affected processes in Latvia and to offer the author’s outlook on
by the crisis when compared with the average values in WKH VRFDOOHG ³VXFFHVV VWRU\´ RI /DWYLDE\ UHQGHULQJWKH
Europe. activities of the period on the subjective well-being of the
,Q ¿UVW VLJQV RI UHFRYHU\ RI HFRQRP\ ZHUH population of Latvia.
observed in Latvia. However, as regards the inhabitants’ Research object – inhabitants of Latvia.
subjective well-being, the data provided by the Research subject – objective well-being indicators
Eurobarometer and the research centre SKDS show that and subjective evaluation of life of the inhabitants of
the values of indicators of the inhabitants’ life satisfaction Latvia during the economic crisis.
and happiness of the year 2008 were achieved only Research hypothesis – although, there have been
LQ WKH ¿UVW KDOI RI $QDO\VLQJ WKH HFRQRPLF positive results in overcoming the economic crisis in
___________________________
1
&RUUHVSRQGLQJDXWKRUTel.: +37126428081; e-mail: Jelena.Lonska@ru.lv

ISSN 1691-3078
Source: Böhnke, 2005
Fig. 1. Subjective well-being and its determinants
Latvia both in objective indicators and in the inhabitants’ White, 2008; Stevenson, Wolfers, 2008; Di Tella,
subjective evaluation, the experience of Latvia cannot be 0DF&XOORFK 2VZDOG DQG LQ WKH IDPLO\ RQ WKH
QDPHGD³VXFFHVVVWRU\´ micro level) (Stevenson, Wolfers, 2008; Sirgy, 2012;
Research methods – monographic method, logical Headey, Muffels, Wooden, 2008; Han and Hong, 2011).
analysis and synthesis method, and deduction method. Nowadays, economists study how such
macroeconomic indicators as GDP per capita (Hagerty
and Veenhoven, 2003; Veenhoven and Hagerty, 2006;
Theoretical research substantiation
Dolan, Peasgood, White ,2008; Deaton, 2008; Layard,
At the end of the 20th century, world scientists and
.DKQHPDQ DQG 'HDWRQ LQÀDWLRQ OHYHO
researchers started deeper studies on people’s subjective
DWWLWXGHWRWKHSURFHVVHVKDSSHQLQJZLWKLQDGH¿QLWHDUHD 'L 7HOOD 0DF&XOORFK 2VZDOG
or people’s evaluation of life as a whole. The concept unemployment and employment (Lelkes, 2006, Lucas,
µVXEMHFWLYH ZHOOEHLQJ¶ was introduced in 1984 by &ODUN *HRUJHOOLV 'LHQHU LQFRPH LQHTXDOLW\
('LHQHU RQH RI WKH LQLWLDWRUV RI µKDSSLQHVV¶ VFLHQWL¿F $OHVLQD 'L 7HOOD 0DF&XOORFK 6DQIH\ 7HNVR]
research. Initially, the concept ‘subjective well-being’ 2008) are related with inhabitants’ life satisfaction. The
was used for studying subjective emotions, attitudes, individual’s material well-being on the micro level is also
and it was referred to pleasure, happiness, or hedonism H[DPLQHGLHLQÀXHQFHRISHRSOH¶VLQFRPHVDYLQJVDQG
approach. Diener with colleagues (Diener, Oishi, Lucas, debts on their subjective well-being.
DI¿UPWKDWVXEMHFWLYHZHOOEHLQJLVDPHDVXUHIRU 7KRXJK WKHUH DUH UHVHDUFK VWXGLHV DI¿UPLQJ WKDW
individuals’ and society’s life quality. Now, the concept the material factor does not have any impact on
‘subjective well-being’ is used in various ways: some SHRSOH¶V VXEMHFWLYH ZHOOEHLQJ RU LW LV LQVLJQL¿FDQW
people use it for all well-being measurements, which (Easterlin, 1974, 1995; Bjørnskov, Gupta, Pedersen,
are not related with economic indicators, while others 2008; Rojas, 2011).
designate all well-being measurements in psychology and However, the majority of researchers declare that
VRFLRORJ\7KH¿HOGRIWKHVXEMHFWLYHZHOOEHLQJLQFOXGHV WKH PDWHULDO IDFWRU VLJQL¿FDQWO\ LQÀXHQFHV SHRSOH¶V
WKHVFLHQWL¿FDQDO\VLVLQUHODWLRQZLWKSHRSOH¶VHYDOXDWLRQ subjective evaluation of their life. For example, Hagerty
RI WKHLU OLIH LQ VSHFL¿F PRPHQWV KDSSLQHVV DQG ZLWKLQ and Veenhoven (2003); Veenhoven and Hagerty (2006);
longer periods (general satisfaction with life) (Kim-Prieto, and Dolan, Peasgood and White (2008) proved that
Diener, Tamir, Scollon, Diener, 2005). increasing national income did go with increasing national
When analysing a person’s subjective well-being, happiness, and the GDP increase directly correlated with
his/her happiness feeling indicators are often taken the inhabitants’ subjective well-being. Deaton (2008)
LQWR DFFRXQW 6HYHUDO IDFWRUVLH OLIH DVSHFWV LQÀXHQFH argues that high-income countries have greater life
people’s subjective well-being (Figure 1). satisfaction than low-income countries; furthermore, he
7KH LQÀXHQFH RI WKH PDWHULDO UHVRXUFHV IDFWRU QRWHV WKDW WKHUH LV QR GH¿QLWH WKUHVKROG IRU WKH LQFRPH
on people’s subjective well-being is examined by a level. Whereas, Layard (2005) believes there is a certain
relatively new branch of economic science – happiness WKUHVKROG RI SHRSOH¶V ZHDOWK § 86' D \HDU SHU
economics. The study of happiness is a fairly new venture capita; when reaching it, the feeling of happiness and total
in economics. The economics of happiness approach satisfaction do not depend on the income level anymore.
provides us with new tools and data for developing However, in countries, where the income per capita is
measures of welfare that include income metrics but also lower than this threshold, the situation is completely
extend well beyond those metrics. This approach does different: individuals’ subjective well-being directly
not purport to replace income-based measures of welfare depends on the provision of primary living conditions.
but instead to complement them with broader measures Kahneman and Deaton (2010) discovered the following
of well-being. Those measures are based on the results correlations: people’s feeling of happiness increases
of large-scale surveys, across countries and over time, when their income increase, yet to a certain point
of thousands of individuals who are asked to assess RI § 86' SHU \HDU H[FHHGLQJ WKLV OLPLW
their own welfare (Graham, 2011). Representatives people do not feel happier. As regards people’s total
of this approach analyse the level of subjective well- satisfaction with life – after this income threshold,
being in relation with the material well-being, and other PRQH\ FDQ VWLOO LQÀXHQFH SHRSOH¶V VDWLVIDFWLRQ ZLWK OLIH
social and economic factors, because there is a certain but not emotional well-being (happiness). Stevenson and
interconnection between inhabitants’ satisfaction with life Wolfers (2008) reassess ‘the Easterlin paradox’ (Easterlin
and economic indicators in the country (on the macro paradox: ’In all societies, more money for the individual
level) (Hagerty, Veenhoven, 2003; Dolan, Peasgood, typically means more individual happiness. However,

ISSN 1691-3078
raising the incomes of all does not increase the happiness 2011), and conceding that these persons have mostly
of all’), showing that a positive relation between GDP per been economically active inhabitants aged up to 35, the
capita and life satisfaction exists on both the cross-country author of the research estimated that the real rate of
and within-country levels, which holds for both rich and unemployment in 2010 could have reached 20.1%!
poor countries. Later, Easterlin and Angelescu (2012) Another way to evaluate the impact of the crisis
observed that happiness did change over the course of and economic policy on the labour market is to look
the business cycle in the developed and transitioning DW HPSOR\PHQW 8VLQJ GDWD RI WKH &HQWUDO 6WDWLVWLFDO
economies – rising with the peak of the cycle and ebbing Bureau of Latvia, the author calculated that since 2007
with the downturns. the employment level in the group of inhabitants aged
There are numerous proofs demonstrating that from 15 to 74 had dropped about 15.9% to the bottom
LQKDELWDQWV¶ VXEMHFWLYH ZHOOEHLQJ LV LQÀXHQFHG QRW in 2010.
only by the GDP changes but also by other economic The economising policy chosen by Latvia for
LQGLFDWRUV VXFK DV LQFRPH LQHTXDOLW\ LQÀDWLRQ RYHUFRPLQJ WKH FULVLV ZDV ¿UVWO\ GLUHFWHG WR ORZHULQJ
unemployment, assets, and debts. Alesina, Di Tella and ZDJHV 7KH PRVW VLJQL¿FDQW VDODU\ GHFUHDVH ZDV GRQH
0DF&XOORFK¿QGWKDWZKLOH(XURSHDQUHVSRQGHQWV¶ in the public sector, where the average gross salary was
life satisfaction is negatively affected by inequality, the UHGXFHGE\IURPWR/5&6%+RZHYHU
effect does not hold for American respondents in general. the real wages of working people in Latvia reduced by
,Q DQRWKHU VWXG\ 6DQIH\ DQG 7HNVR] XVH GDWD WDNLQJLQWRDFFRXQWLQÀDWLRQ/5&6%5HYLHZLQJ
IURP WKH :RUOG 9DOXHV VXUYH\ DQG ¿QG WKDW WKH HIIHFW the poverty risk index in Latvia, it was 6.7% in 2007, and
RI LQFRPH LQHTXDOLW\ PHDVXUHG E\ WKH *LQL FRHI¿FLHQW GXULQJWKHFULVLVLWJUHZXSWRLQ/5&6%
on happiness is negative for individuals in transition Analysing the dynamics of the volume of Latvian
countries and positive for the non-transition ones. Di Tella, LQKDELWDQWV¶ JURVV ¿QDQFLDO DVVHWV FDVK VHFXULWLHV
0DF&XOORFKDQG2VZDOG (2001) show that people appear bank deposits, other deposits, insurance policies, i.e. all
WREHKDSSLHUZKHQLQÀDWLRQDQGXQHPSOR\PHQWDUHORZ LQGLYLGXDO¶V¿QDQFLDOSURSHUW\LWLVSRVVLEOHWRFRQFOXGH
unemployment depresses reported well-being more than WKDW WKH GHFUHDVH RI /DWYLD¶V SRSXODWLRQ ¿QDQFLDO DVVHWV
LQÀDWLRQGRHV6WXGLHVFRQVLVWHQWO\VKRZDODUJHQHJDWLYH in 2009 in comparison with 2007 made -8.5% and it was
effect of individual unemployment on subjective well- the fourth largest downturn in the world after Greece,
EHLQJ /HONHV /XFDV &ODUN *HRUJHOOLV 'LHQHU the USA, and Spain. Furthermore, in 2009, the amount of
'L 7HOOD 0DF&XOORFK DQG 2VZDOG DUJXH Latvian households’ debts reached 51% of the state GDP,
that macroeconomic forces have marked and statistically and it was the second highest indicator in the Eastern
robust effects on reported well-being. Europe (after Estonia) (Heise, 2010).
Sirgy (2012) believes that people’s subjective Has it been success? When implementing
satisfaction with life depends more on their possessed the ‘internal devaluation’ crisis combatting policy,
assets than on their income. Headey, Muffels, and Wooden international mass media declared it an example of
(2008) demonstrated that household (a measure that is VXFFHVVIXO PDFURHFRQRPLF SROLF\ ³/DWYLD VWDQGV RXW DV
broader than income which includes housing, business DQH[DPSOHRIKRZVXFKD¿QDQFLDOFULVLVFDQEHUHVROYHG´
assets, equity and cash investments, bank accounts, $cVOXQGDQG9'RPEURYVNLVZURWHLQLQWKHERRN
accumulated pension holdings, vehicles and collectibles, published by the Peterson institute for International
housing debt, credit cards, student debt, and personal (FRQRPLFV³:KHQDFRXQWU\QHHGVWRDGGUHVVXQGHUO\LQJ
debt) was a stronger predictor of life satisfaction than VWUXFWXUDO LQHI¿FLHQFLHV LQ WKH HFRQRP\ LQWHUQDO
GHYDOXDWLRQLVSUHIHUDEOHWRH[FKDQJHUDWHGHYDOXDWLRQ«´
household income alone. Han and Hong (2011) also
cVOXQG'RPEURYVNLV2QWKHFRQWUDU\DUDQJHRI
VKRZ WKDW DVVHWV DQG GHEWV VLJQL¿FDQWO\ LQÀXHQFHG OLIH
world famous economists (Krugman, 2012; Wren-Lewis,
satisfaction patterns.
:HLVEURW DQG 5D\ DI¿UP WKDW LQ UHDOLW\
Latvia did not implement the internal devaluation policy
Research results and discussion as such, rather, that the economic recovery resulted from
In 2008 and 2009, as many countries fell into recession WKH JRYHUQPHQW QRW DGRSWLQJ ¿VFDO WLJKWHQLQJ IRU
GXH WR WKH JOREDO ¿QDQFLDO FULVLV DQG ZRUOG UHFHVVLRQ as well as an expansionary monetary policy caused by
Latvia experienced the worst loss of output in the world. ULVLQJLQÀDWLRQ
)URPWKHSRLQWRIYLHZRIWKHVFLHQWL¿FUHVHDUFKWKHVWDWH Moreover, economists of the International Monetary
economic crisis is a good time for measuring inhabitants’ )XQG &RUVHWWL 0HLHU DQG 0OOHU GUHZ D
subjective well-being level in relation to material well- conclusion that the increase of the government’s
being and other social factors. expenditure usually caused growth of GDP; it means
$QDO\VLQJ WKH GDWD RI WKH &HQWUDO 6WDWLVWLFDO %XUHDX that the government’s expenditure multiplier brings to
of Latvia it was estimated that the country lost 21.2% effect. The most positive effect was achieved exactly on
of its GDP from 2007 to 2010. In addition to the loss the conditions of the economic crisis. Although negative
of national income, there have been other social and FRQVHTXHQFHV ZHUH REVHUYHG LH LQÀDWLRQ LQFUHDVH RI
economic costs of the Latvian government’s strategy trade surplus and decrease of the currency rate, growth
RI LQWHUQDO GHYDOXDWLRQ 7KH RI¿FLDO XQHPSOR\PHQW URVH RI WKH JRYHUQPHQW¶V H[SHQGLWXUH EHFRPHV DQ HI¿FLHQW
from 6.0% in 2007 to 16.9% in 2009 and 18.7% in 2010. WRROIRUHFRQRP\VWDELOLVDWLRQ&RUVHWWL0HLHUDQG0OOHU
Even after two years of the recovery, the unemployment 2012). Yet, Latvia was pressured by the International
rate remains high at 13.8% in the third quarter of 2012 Monetary Fund, and Swedish and other European banks
&6% )XUWKHUPRUH WDNLQJ LQWR DFFRXQW WKH QXPEHU to adopt the bad policy (otherwise, Latvia would not have
of people who left Latvia searching for better life in been disbursed the international loan but by devaluing
UHDFKLQJ DERXW SHRSOH +D]DQV the lat, foreign banks would lose millions of euro, since

ISSN 1691-3078
the largest part of the issued loans was in euro) (Weisbrot in the country (indicated by 46% of the surveyed) and
and Ray, 2011). The devaluing of the Latvian lat would unemployment (indicated by 33% of the employed).
DOVR KDYH WKURZQ WKH KRSH WR DFFHVV WKH (XUR]RQH WR The situation had dramatically affected population’s
distant future. If the government of Latvia would have satisfaction with life and over one and a half year it had
chosen other ‘softer’ tools for economy stabilisation, the dropped by 5% and reached a low of 58%. Nevertheless,
crisis period could have been shorter and less destructive the average value of the EU-27 concerning satisfaction
for the inhabitants of Latvia (Weisbrot and Ray 2011). of the quality of life had risen by 1% reaching 78%
Subjective well-being of Latvia’s inhabitants. (Eurobarometer, 2009).
As a result of the economic crisis, the subjective life The Eurobarometer data on Latvia’s population
HYDOXDWLRQ RI /DWYLD¶V SRSXODWLRQ KDV EHHQ VLJQL¿FDQWO\ satisfaction with life show that during the crisis this
affected. Just before emergence of the crisis, the data indicator reduced considerably (Figure 2). Also the
from the survey conducted by the Eurobarometer Happiness index of Latvia’s population outlined changes
revealed that the population of Latvia had been mostly of the value exactly during years of the crisis; the index
FRQFHUQHGDERXWWKHKLJKLQÀDWLRQDQGWKHSULFHVKLNHDV was estimated by the research centre SKDS, and it was
told by 71% of the population surveyed. Life satisfaction calculated on basis of Latvia’s population answers to the
RIWKHSRSXODWLRQGXULQJWKH¿UVWKDOIRIKDGUHDFKHG question ‘Do you feel happy in general?’, and which can
63%, in comparison with the EU-27 average value of be within the limits from -100 to +100 (Figure 3).
77% (Eurobarometer 2008a). The research conducted The data of Figure 2 allow concluding that in 2011 the
by the Eurobarometer during the second half of 2009 VSHFL¿FZHLJKWRI/DWYLD¶VLQKDELWDQWVZKRZHUHVDWLV¿HG
revealed that the following problems had prevailed with their life decreased a little in comparison with 2010;
among the population of Latvia – the economic situation WKRXJK DOUHDG\ WKH ¿UVW HFRQRPLF UHYLWDOLVDWLRQ VLJQV
Source: author’s construction based on Eurobarometer Source: author’s construction based on SKDS 2012
DEDEDEDEDE
Fig. 2. Trends in life satisfaction of Fig. 3. Dynamics of the value of the
Latvia’s inhabitants (% of total inhabitants) Happiness
index in Latvia
Source: SKDS 2012a
Fig. 4. /HYHORIKDSSLQHVVRI/DWYLD¶VLQKDELWDQWVZKHQDQVZHULQJWKHTXHVWLRQ
“Do you feel happy in general?” (total inhabitants, %)

ISSN 1691-3078
Source: SKDS 2012b, author’s interpretation
Fig. 5. Evaluation of the methods of crisis combating from the point of view of
inhabitants of Latvia (total inhabitants, %)
were observed at that time. On the contrary, the lowest the increase of the government’s expenditure during
value of the happiness index was reached in 2010, and WKH HFRQRPLF FULVLV FRXOG KDYH EHHQ DQ HI¿FLHQW
later it started to increase gradually (Figure 3). This tool for stabilisation of the economy. However, the
difference is explained by the fact that the economic government of Latvia, taking the decision about the
ZHOOEHLQJLQÀXHQFHVSHRSOH¶VOLIHVDWLVIDFWLRQPRUHWKDQ implementation of the internal devaluation policy,
the feeling of happiness, because satisfaction with life is ZDVLQÀXHQFHGE\WKH,QWHUQDWLRQDO0RQHWDU\)XQG
more sensitive to changes of the economic conditions. and Swedish and other European banks.
Happiness is an immediately gained feeling; it is directly 2. Objective consequences of the economic crisis:
related with a people group’s solidarity, religiosity, and from 2007 to 2010, the GDP decreased by 21.2%,
QDWLRQDO SULGH ,QJOHKDUW )RD 3HWHUVRQ :HO]HO 2008). the rate of unemployment grew up to 18.7%,
The fastest recovery and balance of Latvia’s economy employment reduced by 15.9%, the number of
could be observed during 2011 – including an increase people who emigrated from the country reached
of export amounts, a slight decrease of unemployment 80,000 people, the real salary costs decreased by
rates, and budget income increase. Data of the surveys 26.4%, the poverty risk index grew up to 10.2%,
conducted by the Eurobarometer in Latvia in May 2012 DQG WKH LQKDELWDQWV¶ ¿QDQFLDO DVVHWV GHFUHDVHG E\
SURYH WKDW RQO\ LQ WKH ¿UVW KDOI RI WKH SUHFULVLV 8.5%.
threshold (66%) of the inhabitants’ life satisfaction was 3. ,QÀXHQFH RI WKH HFRQRPLF FULVLV RQ WKH LQKDELWDQWV¶
overcome, which was 3% higher than the result of the subjective well-being: according to the
¿UVW KDOI RI ,Q DGGLWLRQ WKH UHVHDUFK FHQWUH RI Eurobarometer data, the situation has dramatically
SKDS shows that the economic rates of 2008 were only affected population’s satisfaction with life and over
achieved at the beginning of 2012, i.e. 69% of Latvia’s one and a half year it dropped by 5% and reached
population reported as being happy (Figure 4). a low of 58% in 2009. The Eurobarometer data
In May 2012, in the survey conducted amongst VKRZ WKDW RQO\ LQ WKH ¿UVW KDOI RI WKH SUH
inhabitants of Latvia on the issue how successfully Latvia crisis threshold of the inhabitants’ life satisfaction
was overcome, reaching 66%; yet, the research
had overcome the economic crisis and how successful
centre SKDS shows that the economic rates of
the chosen methods for crisis combatting had been,
2008 were only achieved in the beginning of 2012,
the research centre SKDS got the following results
i.e. 69% of Latvia’s population reported as being
(Figure 5).
happy.
Results of the survey show that 52.5% of inhabitants
4. The author of the article believes that the situation
believe that the way out of the crisis chosen by the
Latvia has gone through, when getting out of the
Latvian government was wrong and very destructive for
FULVLV FDQQRW GH¿QLWHO\ EH FRQVLGHUHG /DWYLD¶V
WKH FRXQWU\ 2QO\ HYHU\ ¿IWK LQKDELWDQW WKLQNV
success story, which is widely advertised in mass
that Latvia has overcome the crisis very successfully and
media. World famous economists, when analysing
the chosen method was very good.
methods of combatting the economic crisis in Latvia,
drew a conclusion that there could have been ‘softer’
Conclusions possibilities for economy recovery. Moreover, using
1. In 2008-2010, when implementing the ‘internal other tools for stabilising economy, the crisis period
devaluation’ policy for combating the economic could have been shorter. Also according to the SKDS
crisis, international mass media named Latvia an data, 52.5% of Latvia’s inhabitants think that the
example of successful macroeconomic policy. Some Latvian government’s chosen methods for struggling
ZRUOGIDPRXVHFRQRPLVWVDI¿UPWKDW/DWYLDGLGQRW with the crisis were wrong and destructive for the
implement the internal devaluation policy as such, country.
rather, that the economic recovery resulted from the 5. However, the author cannot completely disclaim
JRYHUQPHQW QRW DGRSWLQJ ¿VFDO WLJKWHQLQJ IRU some known achievements: in 2011, with dynamic
as well as an expansionary monetary policy caused UHFRYHU\ RI HFRQRP\ DOUHDG\ LQ WKH ¿UVW KDOI RI
E\ ULVLQJ LQÀDWLRQ (FRQRPLVWV RI WKH ,QWHUQDWLRQDO 2012, Latvia’s population evaluation of subjective
Monetary Fund in their survey drew a conclusion that well-being achieved the pre-crisis level, indicating

ISSN 1691-3078
that despite not a very humane policy of combating 12. Easterlin, R.A. (1995). Will Raising the Incomes
the economic crisis, inhabitants of Latvia were of All Increase the Happiness of All? Journal
able to go through it and are facing the future RI (FRQRPLF %HKDYLRU DQG 2UJDQL]DWLRQ ,
hopefully. pp. 35-47.
13. Easterlin, R.A, Angelescu, L. (2012). Modern
(FRQRPLF *URZWK DQG 4XDOLW\ RI /LIH &URVV
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Money Doesn’t Buy Happiness… Or Does It? A People Happier after a Decade and a Half? Paper
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:HDOWK ,QFRPH DQG &RQVXPSWLRQ ,=$ GLVFXVVLRQ International Association for Research in Income
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lv/. Access: 20.12.2012. about-latvia.html Access: 20.12.2012.

ISSN 1691-3078
A. Baer-Nawrocka, A. Sapa Processes of Convergence/Divergence of Labour Productivity in
Agriculture of Selected Regional Trade Agreements
PROCESSES OF CONVERGENCE/DIVERGENCE OF
LABOUR PRODUCTIVITY IN AGRICULTURE OF
SELECTED REGIONALTRADE AGREEMENTS1
Agnieszka Baer-Nawrocka+, PhD

Department of Economics and Economic Policy in Agribusiness
Faculty of Economics and Social Sciences
3R]QDQ8QLYHUVLW\RI/LIH6FLHQFHV
Ul. Wojska Polskiego 28
3R]QDQ
Agnieszka Sapa++, PhD
Department of Macroeconomics and Food Economy
Faculty of Economics
3R]QDQ8QLYHUVLW\RI(FRQRPLFV
Al. Niepodleglosci 10
3R]QDQ
Abstract. The main feature of the contemporary world economy and international relations is a proliferation of regional
trade agreements. One of economic reasons to become a member of regional trade agreements is improvement of
HFRQRPLFHI¿FLHQF\DQGZHOIDUHLQLQWHJUDWLQJFRXQWULHV7KHUHIRUHWKHPHPEHUVKLSLQDUHJLRQDOWUDGHDJUHHPHQWFDQ
LQÀXHQFHDOVRDJULFXOWXUDOSURGXFWLYLW\RIWKHPHPEHUFRXQWULHVDVVXPLQJWKDWWKHFRQYHUJHQFHSURFHVVDFFRPSDQ\LQJ
the regional integration can occur. The main aim of this paper is to identify if there is convergence or divergence process
in the agricultural labour productivity within selected regional trade agreements. Six regional trade agreements – the
&$&0WKH&$1WKH($&WKH()7$0(5&2685DQGWKH1$)7$±DUHDQDO\VHG7KHDQDO\VLVLVEDVHGRQGDWDWKH
value added in agriculture per worker and employment in the sector of agriculture during 1980-2010 derived from the
:RUOG'HYHORSPHQW,QGLFDWRUVGDWDEDVH7KHDXWKRUFDOFXODWHGWKHFRHI¿FLHQWıFRQYHUJHQFHIRUHDFKUHJLRQDOWUDGH
agreement and performed evaluation of the convergence process. The research reveals that it cannot be clearly stated
WKDWPHPEHUVKLSLQWKHDQDO\VHGUHJLRQDOWUDGHDJUHHPHQWVLQÀXHQFHGWKHSURFHVVHVRIFRQYHUJHQFHRIDJULFXOWXUDO
labour productivity among the members. The tendencies to eliminate spatial disparities were noticeable only in relation
WR WKH ()7$ DQG 0(5&2685 FRXQWULHV 7KHUH ZDV DQ LQFUHDVH LQ DJULFXOWXUDO ODERXU SURGXFWLYLW\ LQ WKH PDMRULW\ RI
PHPEHU FRXQWULHV RI WKH &$&0 WKH &$1 WKH ($& DQG WKH 1$)7$ +RZHYHU WKH SDFH RI WKLV SURFHVV YDULHG IURP
country to country, thus disproportions in labour productivity in agriculture within a particular grouping were often
increasing.
Key words:agricultural labour productivity, convergence,regional trade agreement
JEL code: F15, R10, R11, Q12
Introduction contribution to economic development, and improvement

Proliferation of regional trade agreements is the of the food security level (World Bank, 2008).The
main feature of the contemporary world economy and PHPEHUVKLSLQDUHJLRQDOWUDGHDJUHHPHQWFDQLQÀXHQFH
international relations. On 15 January 2013, there DJULFXOWXUDOJURZWKLQPHPEHUFRXQWULHV&]WHUQDVW\:
ZDV UHJLRQDO WUDGH DJUHHPHQWV LQ IRUFH QRWL¿HG 6PHG]LN . *U]HODN$ %UHOLN $DVVXPLQJ
by the GATT/WTO. The countries create or associate that the convergence process accompanying the regional
to the existing groupings because of economic and integration can occur. The concept of convergence covers
non-economic reasons. One of economic reasons is the problem of assessment of the scale and the reasons
LPSURYHPHQW RI HFRQRPLF HI¿FLHQF\ DQG ZHOIDUH LQ WKH for inter-regional differences as well. This concept is
integrating countries, however the achievement of these XVHG LQ PDQ\ VFLHQWL¿F ¿HOGV LQWHU DOLD ELRORJLFDO
goals is determined by structural, technological, and economic, humanistic, or technical ones. Despite the fact
economic factors (Misala J., 2001). Accordingly, building WKDW FRQYHUJHQFH KDV D GLIIHUHQW VLJQL¿FDQFH LQ HDFK RI
of regional trade groupings can be important in the WKHVH¿HOGVWKHLUFRPPRQGHQRPLQDWRULVLGHQWLI\LQJWKH
FRQWH[WRIDJULFXOWXUH7KHDJULFXOWXUDOVHFWRULVVLJQL¿FDQW convergence with the process of becoming similar to each
particularly for the developing countries because of other. In social sciences, this concept usually refers to the
considerable agriculture share in the GDP, its positive categories such as the GDP per capita, level of household
___________________________
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+
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++
E-mail addressDJQLHV]NDVDSD#XHSR]QDQSO

ISSN 1691-3078
income, indicators referring to the labour market, economic cooperation between the developed and
the level of technological advance, and the capacity developing countries (on certain conditions such as an
to create innovations etc. The process of divergence, active participation in the global economy or possessing
ZKLFK LV RSSRVLWH WR FRQYHUJHQFH LV LGHQWL¿HG ZLWK D the capital that enables the initiation of economic growth)
multidirectional, divergent development that causes the ZLOOOHDGWRWKHHTXDOL]DWLRQRIOLYLQJFRQGLWLRQVLQWKRVH
lack of cohesion in the level of regional development countries (Fiedor %.RFLV]HZVNL K. 2010). Early theories
(Fiedor %.RFLV]HZVNL K. 2010). of regional development are based on neoclassical
Assuming that the convergence process comes with theories of international trade and economic growth.
the regional trading groups, it is interesting to analyse 7KRVHWKHRULHVHPSKDVL]HGWKDWRYHUWLPHWKHGLVSDULWLHV
KRZLWLQÀXHQFHVWKHDJULFXOWXUHLQWKHPHPEHUFRXQWULHV in labour cost and in other factors will be decreasing
Agricultural output and agricultural income per capita between the regions, and they will exhibit a tendency
are determined by the productivity of labour resources. to converge. There are differences between national and
Moreover, effective use of production factors, including regional economies, since the latter are far more open
labour, determines the competitiveness of agriculture than national economies, within which they are situated.
DWLQWHUQDWLRQDOOHYHO3RF]WD3RF]WDHWDO Regional economies are usually more developed than
Apart from socio-economic system, economic policy and national economies, since there is a duty-free, inter-
SRVVLELOLW\ RI WR LQÀXHQFH WKH LQWHUQDWLRQDO HFRQRPLF regional and international trade as well as similar culture
environment, the most important factors determining and customs. The great majority of theories derived from
the competitive capacity of the economy and its sectors the understanding of tendencies in home economies may
LQFOXGH WKH VL]H TXDOLW\ DQG VWUXFWXUH RI SURGXFWLYH be increasingly applied to the regions in the countries
UHVRXUFHV DQG HI¿FLHQF\ RI WKHLU XVH >*U]HODN $ ORFDWHGLQUHJLRQDOWUDGHJURXSLQJV/D]QLHZVND E., et al.,
&]\]HZVNL$.XO\N3@7KHPDLQJRDORIWKLVSDSHU 2011)
is to identify if the spatial discrepancies in agricultural In the following years, there was a dynamic
labour productivity among countries within the selected development of research on convergence, which is
regional trade agreements are reducing or increasing. UHÀHFWHG LQ QXPHURXV LQWHUSUHWDWLRQV RI WKLV FRQFHSW
In other words, identify if there is a convergence or a (Sala-i-Martin X., 1996, Boldrin 0 &DQRYD )
divergence process in the agricultural labour productivity The analysis of the literature on convergence shows
in groupings. The member countries of six regional trade that there are two basic concepts: betaǃFRQYHUJHQFH
DJUHHPHQWV ± WKH &$&0 WKH &$1 WKH ($& WKH ()7$ and sigma ı FRQYHUJHQFH 7KH ¿UVW FRQFHSW DVVXPHV
0(5&2685DQGWKH1$)7$2 – are analysed. The analysis that the countries with lower initial income level are
is based on data: the value added in agriculture per worker FKDUDFWHUL]HGE\IDVWHUJURZWKSDFHWKDQULFKHUFRXQWULHV
and employment in the sector of agriculture derived ZKLFKLQWXUQOHDGVWRWKHHTXDOL]DWLRQRILQFRPHOHYHOper
from the World Development Indicators database. The capita among economies analysed. Beta convergence can
DXWKRUFDOFXODWHGWKHFRHI¿FLHQWıFRQYHUJHQFHIRUHDFK be divided into unconditional (absolute) or conditional
regional trade agreement 3 and performed evaluation of convergence. Absolute beta convergence assumes
the convergence process. that all economies aim for the same income level per
capita, whereas the idea of conditional beta convergence
Research results and discussion is that each economy strives for its own prosperity
1. Methodical approac that depends on its internal characteristics. Sigma
7KHFRQFHSWRIFRQYHUJHQFHHPSKDVL]HGE\HFRQRPLF convergence, on the other hand, indicates scattering
KLVWRULDQV VXFK DV .X]QHWV *HUVFKHQNURQ (dispersion) of the examined characteristic in the group
(1962) and Gomulka (1986). They all note that backward of economies analysed (countries, regions). Depending
countries tend to grow faster than rich countries. This on the direction of sigma convergence, the indicators
conception derives from the standard neoclassical theory, changing the convergence or the divergence process can
as this is formulated by Solow(1956). In neoclassical EHLGHQWL¿HGZLWKLQWKHFRQVLGHUHGSHULRG7KHVWDQGDUG
growth models, the regions will converge towards a deviation of the log of agriculture value added per worker
FRPPRQ´VWHDG\VWDWH´LIWKHJURZWKUDWHRIWHFKQRORJ\ KDV EHHQ XVHG LQ RUGHU WR YHULI\ ı FRQYHUJHQFH ,W LV
investment, and labour force are identical across the described by the formula (Fiedor % .RFLV]HZVNL K.,
¦ (log yi (t ) y (t )
regions. The growth rate per capita tends to be inversely 2010):
V (t )
related to the starting level of output or income per
capita– the poor economies grow faster than rich ones. 1 n 2
This concept is also described by J. Tinbergen, who is
considered to be the progenitor of the convergence
ni1
theory in economic sciences. Tinbergen noted that where:
___________________________
2
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accession. &$&0&HQWUDO$PHULFDQ&RPPRQ0DUNHWLQFOXGHV&RVWD5LFD(O6DOYDGRU*XDWHPDOD+RQGXUDVDQG
1LFDUDJXD &$1 $QGHDQ &RPPXQLW\ HPEUDFHV %ROLYLD &RORPELD (FXDGRU DQG 3HUX ($& (DVW $IULFDQ
&RPPXQLW\ LQFOXGHV´ %XUXQGL .HQ\D 8JDQGD 7DQ]DQLD DQG 5ZDQGD EFTA (European Free Trade Association).
PHPEHUV DUH ,FHODQG /LHFKWHQVWHLQ 1RUZD\ 6ZLW]HUODQG 0(5&26850HUFDGR &RPXQ GHO &RQR 6XU PHPEHUV
DUH $UJHQWLQD %UD]LO 3DUDJXD\ 8UXJXD\ 1$)7$ 1RUWK $PHULFDQ )UHH 7UDGH $JUHHPHQWLQFOXGHV &DQDGD
Mexico and United States.
3
The empirical analysis of convergence in agriculture have been proposed by, inter alia, Soares and Ronco (2000),
Liu et al. $OH[LDGLV(VSRVWL*U]HODN$%UHOLN$%DHU1DZURFND$0DUNLHZLF]1
(2012).

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Source: authors’ construction based on the World Development Indicators
Fig. 17KHOHYHORIıFRQYHUJHQFHFRHI¿FLHQWRIDJULFXOWXUHYDOXHDGGHGSHUZRUNHULQVHOHFWHGUHJLRQDO
trade agreements in 1980-2010
¦ log yi (t )
Mexico. The growth of labour productivity occurred in
1 n all above-mentioned countries, however it was far more
y (t ) FRQVLGHUDEOH LQ &DQDGD DQG WKH 86$ WKDQ LQ 0H[LFR
ni1 It was caused not only by the growth of agricultural
V (t )
value added, but also by the decreasing number of the
- dispersion of agriculture value added per worker HPSOR\HGLQDJULFXOWXUDOVHFWRUVRI&DQDGDDQGWKH86$
in the group of all regional trade agreements in It resulted in growing differences in labour productivity
the year t when compared with agriculture in Mexico, where the
number of people employed increased. In the 80s, the
yi(t) - agriculture value added per worker in the regional value added in agriculture per worker in the agricultural
trade agreement i in the period t sector of Mexico was eight times lower than in agricultural
y (t ) - average agriculture value added per worker in VHFWRUV RI &DQDGD DQG WKH 86$ ZKHUHDV ZLWKLQ WKH
the period t. years 2000-2010, this difference was fourteen times
bigger. Therefore, it can be stated that in that case the
7KH GHFUHDVLQJ YDOXH RI FRHI¿FLHQW ı LQ WKH SHULRG process of divergence occurred. At the same time, labour
considered indicates reducing disproportions in the level SURGXFWLYLW\ OHYHOV LQ &DQDGD DQG $PHULFD DJULFXOWXUH
of characteristics analysed, so there is a convergence show the catching up trend that may indicate the process
process. In the opposite situation, when sigma of convergence.
indicator increases, the divergence occurs (Barro R., The process of sigma divergence in terms of labour
Sala-i-Martin X., 1992, Malaga K., 2004) productivity in agriculture is especially visible from the
In order to assess changes of number of the PLG V LQ WKH FRXQWULHV IRUPLQJ WKH ($& ,Q WKHVH
employed in agriculture and agriculture value added per countries, labour productivity is extremely low when
worker observed in particular countries, the formula to compared to countries from other analysed groupings.
calculate the average pace of changes on the basis of all Moreover, there is just a slight growth in labour
values of characteristic has been applied in the research productivity in the period concerned or its decline in case
(Wysocki F., Lira J., 2003). of Kenya and Burundi. In the majority of these countries,
the increase in agricultural value added was accompanied
6LJPD FRQYHUJHQFH FRHI¿FLHQW LQ VHOHFWHG by an increase in the number of workers employed in
grouping DJULFXOWXUDOVHFWRUWKDWLVUHÀHFWHGLQa positive rate of
The data on the average labour productivity in change. A very low labour productivity is determined
particular countries among the analysed trade associations by a large share of employment in agriculture of these
in the period from 1980 until 2010 are presented in countries, low capital endowment of agricultural worker
Table 1, and Figure 1 shows sigma FRHI¿FLHQW ZKLFK DVZHOODVGLI¿FXOWQDWXUDOFRQGLWLRQV
has been calculated on this basis. The growth of sigma Although the convergence processes are limited, they
FRHI¿FLHQWFDQEHQRWLFHGDPRQJJURXSLQJVVXFKDVWKH can be noticed in the ()7$ DQG 0(5&2685 JURXSLQJV
1$)7$DQGWKH($&ZKLFKLQGLFDWHVWKHJURZWKRIVSDWLDO The EFTA consists of highly developed countries with
discrepancies between the countries of these groupings high GDP per capita and well developed agricultural
in terms of labour productivity in agriculture. In case sector. In the period concerned, labour productivity
of the NAFTA, it is caused by the growing differences was increasing among the countries constituting both
LQ ODERXU SURGXFWLYLW\ DPRQJ &DQDGD WKH 86$ DQG groupings. Among the the EFTA members the growth

ISSN 1691-3078
Table 1
Annual average of agriculture value added per worker and its changes in the
selected regional trade agreements in 1980-2010 (constant 2000 USD; %)
Regional trade Annual average (constant 2000 USD) Change 2000-2010/

agreements 1980-1989 1990-1999 2000-2010 1980-1989 (%)
CACM
&RVWD5LFD 2 498.8 3 581.0 4 820.7 193
El Salvador 1 765.9 1 792.1 2 274.8 129
Guatemala 2 213.8 2 592.0 2 780.2 126
Honduras 1 008.8 1 279.7 1 754.1 174
Nicaragua . 1 532.8 2 251.6 .
CAN
Bolivia 679.3 719.4 721.8 106
&RORPELD 2 463.9 2 764.7 2 662.5 108
Ecuador 1 769.0 1 395.0 1 735.1 98
Peru 990.6 997.0 1 382.8 140
EAC
Burundi 164.7 146.9 102.7 62
Kenya 399.9 348.1 354.7 89
Uganda 202.1 191.8 212.3 105
7DQ]DQLD . 220.8 265.1 .
Rwanda 186.1 195.9 211.1 113
EFTA
Iceland 44 201.2 47 711.4 54 442.8 123
Liechtenstein . . . .
Norway 14 535.8 24 134.1 35 425.7 244
6ZLW]HUODQG 22 232.5 19 484.3 23 121.4 104
MERCOSUR
Argentina 6 633.2 7 933.0 10 476.1 158
%UD]LO 1 325.5 1 863.5 3 214.3 242
Paraguay 1 389.5 1 749.6 2 105.6 152
Uruguay 5 348.3 6 601.7 7 931.1 148
NAFTA
&DQDGD 18 990.5 32 741.0 44 312.9 233
Mexico 2 225.4 2 333.8 2 920.9 131
United States 15 813.2 23 185.6 42 652.5 270
Source: authors’ calculations based on World Development Indicators database.
was more determined by the decrease in the number the sigma convergence tendency in terms of agricultural
of agriculture employees rather than by the increase in labour productivity among the countries of the EFTA and
agricultural YDOXH DGGHG H[FHSW 6ZLW]HUODQG $PRQJ 0(5&2685LQWKHWLPHFRQVLGHUHG
0(5&2685 FRXQWULHV RQ WKH RWKHU KDQG an increase ,QWKH&$&0DQG&$1FRXQWULHVLQWXUQWKHUHZHUHQR
in agricultural value added was larger but it was usually considerable changes in the convergence indicator level,
DFFRPSDQLHG H[FHSW LQ %UD]LO E\ D VOLJKWO\ LQFUHDVLQJ which shows that disproportions in agricultural labour
involvement of labour force in the production process. productivity among these countries are not increasing
In case of both groupings, it can be stated that countries nor decreasing. Therefore, the tendency to maintain
with a relatively lower agricultural labour productivity in differentiations was stable in the time considered. In
a particular grouping are gradually becoming similar to the majority of countries that belong to these regional
the countries with higher productivity of labour factor in trade agreements, there was an increase in agricultural
agriculture. Therefore, it can be concluded that there was value added per worker, although greater changes in

ISSN 1691-3078
Table 2
Changes of agriculture value added and employment4 in agricultural sector in the
selected regional trade agreements in 1980-2010 (%)
Agricultural value added Employment in agricultural sector

Regional Annual average changes Changes Annual average changes Changes
trade 2000- 2000-
agreements 1980- 1990- 2000- 2010/ 1980- 1990- 2000- 2010/
1989 1999 2010 1980-1989 1989 1999 2010 1980-1989
CACM
&RVWD5LFD 0.02 0.04 0.02 214.5 0.01 0.00 0.00 111.4
El Salvador -0.03 0.01 0.02 125.5 0.00 0.01 -0.01 97.9
Guatemala 0.00 0.02 0.02 172.8 0.02 0.00 0.03 137.4
Honduras 0.02 0.02 0.03 180.0 0.00 0.01 -0.01 104.0
Nicaragua . . 0.02 . . . -0.01 .
CAN
Bolivia 0.00 0.03 0.03 173.8 0.01 0.02 0.02 163.3
&RORPELD 0.02 -0.02 0.02 111.0 0.00 0.01 0.00 102.7
Ecuador 0.03 -0.07 0.04 118.9 0.00 0.01 0.00 121.6
Peru 0.03 0.03 0.03 204.3 0.02 0.02 0.01 146.2
EAC
Burundi 0.03 -0.01 -0.01 92.3 0.03 0.01 0.03 150.3
Kenya 0.03 0.00 0.03 164.4 0.03 0.03 0.02 185.2
Uganda . 0.03 0.03 188.7 . 0.01 . .
7DQ]DQLD . 0.03 0.04 . . 0.02 0.02 .
Rwanda 0.01 0.00 0.05 146.7 . . . .
EFTA
Iceland 0.01 -0.01 0.00 111.9 0.02 -0.01 -0.01 91.2
Liechtenstein . . . . . . . .
Norway 0.01 0.04 0.02 154.7 -0.01 -0.02 -0.02 62.3
6ZLW]HUODQG -0.03 -0.02 -0.01 83.8 0.00 -0.01 -0.02 79.7
MERCOSUR
Argentina 0.01 0.03 0.02 163.02 0.01 0.00 0.00 103.3
%UD]LO 0.03 0.02 0.04 190.09 -0.01 0.00 -0.01 78.8
Paraguay 0.03 0.03 0.05 216.29 0.02 0.02 0.01 142.2
Uruguay -0.01 0.04 0.01 148.87 0.00 0.01 -0.01 100.5
NAFTA
&DQDGD 0.02 0.00 0.00 125.35 -0.03 -0.02 -0.01 52.6
Mexico 0.01 0.01 0.02 134.64 0.01 0.14 -0.01 102.8
United States 0.04 0.02 0.01 194.62 0.00 0.11 -0.02 72.7
Source: authors’ calculations based on the World Development Indicators database.
WKLVPDWWHURFFXUUHGLQWKH&$&0FRXQWULHV'HVSLWHWKH Conclusions
positive changes, agriculture in these countries is still 1. On the basis of the conducted analyses it cannot
FKDUDFWHUL]HG E\ D ORZ ODERXU SURGXFWLYLW\ ,W VKRXOG EH be clearly stated that membership in regional trade
noted that an increase in agricultural value added was DJUHHPHQWVLQÀXHQFHGWKHSURFHVVHVRIFRQYHUJHQFH
simultaneous with an increase in the number of people of labour productivity in agriculture among countries
employed in agricultural sector (positive rate of change). constituting a particular grouping. The tendencies
Quite a considerable growth in labour force potential to eliminate spatial disparities between countries
RFFXUUHGHVSHFLDOO\LQDJULFXOWXUHRIWKH&$1FRXQWULHV± in terms of labour productivity, expressed as
in extreme cases this growth reached 50-60% when agricultural value added per worker, were noticeable
compared to the beginning of the time considered. RQO\LQUHODWLRQWRWKH()7$DQG0(5&2685FRXQWULHV
___________________________
4
Employment by sections and divisions-employed in agriculture, hunting, and forestry.

ISSN 1691-3078
Moreover, beta convergence is also visible in case of support systems. Book Series: Economic Science
ERWKJURXSLQJVZKLFKLVUHÀHFWHGLQDIDVWHUJURZWK for Rural Development, Issue: 20, Jelgava: Latvia
in agricultural labour productivity in countries with University of Agriculture, pp. 126-132.
lower initial level of this factor. 6. &]\]HZVNL$.XO\N37KH5HODWLRQVKLSRI
2. There is an increase in agricultural labour productivity Macroeconomic Environment and Economic Policy to
LQ WKH PDMRULW\ RI PHPEHU FRXQWULHV RI WKH &$&0 $JULFXOWXUHLQ'HYHORSHG&RXQWULHVDQG3RODQGLQWKH
WKH&$1WKH($&DQGWKH1$)7$+RZHYHUWKHSDFH years 1991-2008. Ekonomista, No 2, pp. 189-214.
of this process varied from country to country, thus 7. (VSRVWL 5 &RQYHUJHQFH DQG GLYHUJHQFH LQ
disproportions in labour productivity in agriculture regional agricultural productivity growth: evidence
within a particular grouping were often increasing. from Italian regions. 1951–2002. Agricultural
The changes rate in this matter differs, which is a Economics, 42(2011), pp. 153-169.
consequence of considerable disparities in the level 8. *U]HODN$%UHOLN$3URFHV\NRQZHUJHQFML
of economic development, socio-economic policy, F]\ G\ZHUJHQFML Z ]DNUHVLH GRFKRGRZ JRVSRGDUVWZ
and, accordingly, agricultural development among rolnych w Polsce w regionach FADN po integracji
the members of a particular grouping, both in the w UE? &RQYHUJHQFH RU GLYHUJHQFH SURFHVVHV LQ
production structure as well as in an access to the farm incomes in FADN regions of Poland after the
means of production and the possibility to replace EU integration?)Prace Naukowe Uniwersytetu
labour work with capital. (NRQRPLF]QHJR ZH :URFODZLX 6FLHQWL¿F 3DSHUV
3. The main reason of growing agricultural labour of Wroclaw University of Economics). Polityka
productivity within the groupings comprising highly HNRQRPLF]QD :URFODZ :\GDZQLFWZR 8QLZHUV\WHWX
developed countries was mainly an increase in (NRQRPLF]QHJRZH:URFODZLXSS
agricultural value added that was accompanied by 9. .X]QHWV 6 (FRQRPLF *URZWK DQG ,QFRPH
the decrease in the number of workers in agricultural Inequality. American Economic Review, Vol. 45,
sector. However, the changes in agricultural value pp.153-169.
added were faster than changes in agricultural labor 10. /LX < 6KXPZD\ & 5 5RVHQPDQ 5 %DOO 9 (
resources. At the same time, it should be noted (2008). Productivity growth and convergence in
that these changes were already taking place when U.S. agriculture: New co-integration panel data
there was a high initial level of labour productivity in results. Working Paper Series, WP 2008–4, School
agriculture. A reverse phenomenon can be observed of Economic Sciences, Washington State University,
in less developed countries, namely an increase in pp.2-36.
the number of agriculture employees. As a result, 11. 3RF]WD:3DZODN.&]XEDN:3URGXFWLRQ
despite an increase in agricultural value added, and income situation in Polish agriculture after
the growth in labour productivity was low or even accession to the European Union. Berichte Uber
Landwirtschaft, Volume: 90, Issue:1, pp.133-158.
decreased. Relatively low productivity of labour
12. 6DODL0DUWLQ ; 5HJLRQDO &RKHVLRQ
resources prevailing in these countries proves the
Evidence and Theories of Regional Growth and
need for further changes in this matter. It is especially
&RQYHUJHQFH (XURSHDQ (FRQRPLF 5HYLHZ 9RO
vital in the context of agricultural competitiveness of
pp.1325-1352.
these countries in the international market.
13. Soares, F., Ronco, R. (2000). Agricultural Income and
3URGXFWLYLW\LQWKH(XURSHDQ8QLRQ&RQYHUJHQFHRU
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1. $OH[LDGLV 6 &RQYHUJHQFH LQ $JULFXOWXUH pp.1-20.
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of Different Types of Individual Farms in Poland, intensywnosci i efektywnosci (Relationships
(in:) U. Ivans (ed.), Economic Science for Rural farm marketin Polandafter 1990. An attempt to
'HYHORSPHQW ¿QDQFHV WD[HV LQYHVWPHQW DQG determinethe intensity and effectiveness) 3R]QDQ

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:\GDZQLFWZR $NDGHPLL (NRQRPLF]QHM Z 3R]QDQLX HNRQRPLF]QHM (Modern theories of international

3R]QDQ 3XEOLVKLQJ +RXVH RI WKH 8QLYHUVLW\ RI trade and foreign economic policy) 6]NROD *ORZQD
(FRQRPLFVLQ3R]QDQ, pp.221-236. +DQGORZDZ :DUV]DZLH :DUVDZ :DUVDZ 6FKRRO RI
5. /D]QLHZVND(*RUHFNL7&KPLHOHZVNL5 Economics) , p. 348.
.RQZHUJHQFMD UHJLRQDOQD 5HJLRQDO &RQYHUJHQFH 8. 3RF]WD : 5ROQLFWZR SROVNLH Z SU]HGHGQLX
3R]QDQ:\GDZQLFWZR8QLZHUV\WHWX(NRQRPLF]QHJR LQWHJUDFML ] 8QLD (XURSHMVND 3ROLVK $JULFXOWXUH LQ
Z 3R]QDQLX 3R]QDQ 3XEOLVKLQJ +RXVH RI WKH the Day before of Integration with the European
8QLYHUVLW\RI(FRQRPLFVLQ3R]QDQ, pp.12-26. 8QLRQ :\G $5 Z 3R]QDQLX 3R]QDQ 3XEOLVKLQJ
6. 0DODJD . .RQZHUJHQFMD JRVSRGDUF]D Z +RXVHRI$JULFXOWXUDO8QLYHUVLW\LQ3R]QDQ3R]QDQ
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in the Light of the Aggregate Growth Models)3R]QDQ $JULFXOWXUHIRU'HYHORSPHQW:DVKLQJWRQ'&
:\GDZQLFWZR $NDGHPLL (NRQRPLF]QHM Z 3R]QDQLX pp. 26-52.
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ISSN 1691-3078
A. Matuszczak, A. Brelik Situation in The Agricultural Regions of The EU Depending
on Their Level of Development
SITUATION IN THE AGRICULTURAL REGIONS OF THE EU DEPENDING

ON THEIR LEVEL OF DEVELOPMENT1
Anna Matuszczak2+, economics/PhD; Agnieszka Brelik++, economics/PhD

+
3R]QDQ8QLYHUVLW\RI(FRQRPLFV++:HVW3RPHUDQLDQ8QLYHUVLW\RI7HFKQRORJ\6]F]HFLQ
Abstract. The purpose of this article is to consider the interdependence between the level of regional development
and agricultural development. First, the authors distinguished economic and social factors that were important for the
level of regional development. Then the authors indicated the determinants playing a key role in the development of
regions concentrated most similar to each class. Next, the authors researched relationship between disposable income
RIKRXVHKROGVDQGWKHIDPLO\IDUPLQFRPH7KHDXWKRUVQRWLFHGVLJQL¿FDQWGLIIHUHQFHVEHWZHHQWKHUHJLRQVRIQHZO\
DFFHGHGFRXQWULHV(8LQDQGWKH³ROG´(8FRXQWULHV
Key words: economic and social development, regions EU-25, diversity.
JEL code: R10, R11, R58, Q10
Introduction the development of agriculture in the analysed regions

The article is based on assessing the level of regional of the EU-25.
development of the EU-253, separated according to
the FADN methodology, which gives a division of Factors of growth in theory
the 122 research objects into classes. This assessment Evaluation of the regions mentioned above was
was made synthetically and on two levels - economic carried out according to four criteria. First of them was
and social.4 A method involving the reduction of WKHPDWHULDOFDSLWDO0&ZKLFKLQFOXGHG
space by analysing multitrait principal components — disposable income of households (in purchasing
based on separation of regions (made in earlier SRZHU SDULW\ EDVHG RQ WKH ¿QDO FRQVXPSWLRQ ±
studies) connected with the concentration of objects this is an important feature due to the fact that
(regions) by the most similar to each of the analysed WKH OHYHO RI ¿QDO FRQVXPSWLRQ LV FORVHO\ OLQNHG
characteristics of the total (Ward’s cluster analysis5) ZLWK WKH OHYHO RI ¿QDO GHPDQG DQG WKH ODVW RQH LV
ZDV XVHG LQ WKH DQDO\VLV RI IDFWRUV LQÀXHQFLQJ WKH correlated positively with the production capacity
GLIIHUHQW OHYHOV RI UHJLRQDO GHYHORSPHQW 7KH ¿UVW of the economy, including regional and produced
class could include the regions of Scandinavia, value added);
the UK, Ireland, Germany, and Austria; the second - — GDP growth in the region;
)UDQFHWKHWKLUG3RODQGWKH&]HFK5HSXEOLF6ORYDNLD — VWUXFWXUH RI JURVV ¿[HG DVVHWV GLYLGHG E\ GHJUHH
and Hungary; the fourth - Lithuania, Latvia, Estonia, of their attraction to the sector: services, industry,
3RUWXJDO*UHHFHDQG6SDLQDQGWKH¿IWK,WDO\ agriculture);
Material capital, and innovation and technology — employment structure of the population (which
were assigned to the economic factors which have an includes the following occupational groups:
LQÀXHQFH RQ WKH GHYHORSPHQW OHYHO RI UHJLRQV ZKLOH IDUPHUV DQG ¿VKHUPHQ RSHUDWLQJ PDFKLQHU\ DQG
human and social capital - to the social factors. Each of mechanics, artisans and merchants, vendors of
the factors is the result of several other variables that JRRGV DQG VHUYLFHV RI¿FLDOV WHFKQLFLDQV VNLOOHG
GHVFULEH LW 6FLHQWL¿F SUREOHP RI WKLV VWXG\ LV ¿UVW WR ZRUNHUVSURIHVVLRQDOV MXGLFLDO VWDII RI¿FLDOV
identify the relationship between the pro-growth factors DQG VHQLRU PDQDJHUV PLOLWDU\ RI¿FHUV DQG
of distinguished classes in clusters and GDP and second – unskilled workers; it may also show the nature of the
to show the level of regional development consistent with region’s economy).
___________________________
1
$UWLFOHLVZULWWHQZLWKLQWKHIUDPHZRUNRIWKHSURMHFWIXQGHGE\WKH1DWLRQDO6FLHQFH&HQWUHDZDUGHGRQWKHEDVLV
RIWKHQXPEHURIGHFLVLRQV'(&%+6
2
E-mail address: DQQDPDWXV]F]DN#XHSR]QDQSO and DEUHOLN#]XWHGXSO
3
The research was done based on the available statistical data of the Eurostat till 2007 (http://epp.eurostat.
ec.europa.eu/portal/page?_pageid=1996,39140985&_dad=portal&_schema=PORTAL&screen=detailref&language=
en&product=REF_TB_regional&root=REF_TB_regional/t_reg/t_reg_eco/tgs00026) 20.08.2009
4
0RUH LQIRUPDWLRQ DERXW WKLV FODVVL¿FDWLRQ PD\ EH IRXQG LQ WKH DUWLFOH RI $ 0DWXV]F]DN Socio-economic
Determinants of Regional Development in the EU-255]HV]RZLQSUHVV
5
Ward’s cluster analyses considered regional features connected with land, employment and capital factor in
the average agricultural farm of the region. The analysis led to separating of 122 regions of the EU-25 into
FODVVHVDFFRUGLQJWRWKHPHWKRGRIDJJORPHUDWLRQFODVVL¿FDWLRQ6WDQLV]7KHVWXGLHVREMHFWVDUHDUUDQJHG
KLHUDUFKLFDOO\DQGGLYLGHQGLQWR¿YHFODVVHV0DWXV]F]DND

ISSN 1691-3078
Table 1
5HJUHVVLRQHTXDWLRQVGHVFULELQJWKHLPSDFWRIIDFWRUVRIVRFLRHFRQRPLFOHYHORIWKHGHYHORSPHQWRI
agricultural regions of the EU-25
Class (TXDWLRQ &RHI¿FLHQWRIGHWHUPLQDWLRQ52

1 GDP = 24 906.3 – 3277.5*HR
per capita
R2 = 36%
2 GDP = 20 893 + 959*HR
per capita
R2 = 30%
3 GDP per capita
± 0&± ,7 +5 R2 = 94%
4 GDP = 20 832 + 3476*MK – 5370*IT
per capita
R2 = 35%
5 GDP per capita
± ,7 6& R2 = 93%
Source: authors’ calculations
However, the next factor – the innovation Literature assumes that it includes the norms, values, and
and technology (IT) feature outlines the following social activity and creates conditions for the development
characteristics: RIHQWUHSUHQHXUVKLS&KXUVNL3HUGDO7KHUHIRUH
— expenditure on research and development (measured social capital in its operationalisation is considered as
by the share of GDP); a professional and social activity of people living in a
— employment in the sectors of high technology (in region. Meanwhile, for the purpose of this analysis it was
high-tech manufacturing industries and high-tech assumed that it creates:
services); — employment (in the age group of 15-64 years, and
— HRST (human resources in science and technology, separately in the group of 55-64 years);
understood as the share of professionally active — level of unemployment and long-term unemployed;
persons aged 15-74 years who have either higher — average number of inhabitants in a region and
education - completed the third phase of training - or population density.
DUHHPSOR\HGLQWKHSRVLWLRQZKHUHVXFKTXDOL¿FDWLRQ
is required; these people are perceived as creators of Diversity of regional development in the
innovation and progress);
EU-25
— number of people having access to the Internet at
Diversity of regional development in the EU-25
KRPHQRGRXEWUHÀHFWLQJWHFKQRORJLFDOGHYHORSPHQW
is associated with the level of income available by
of the region);
residents of the region, which is a major hallmark of the
— number of people who have never used a computer.
region’s wealth and opportunities. Hence, in assessing
According to the modern concepts of regional
GHYHORSPHQW GLYHUVL¿FDWLRQ RI DJULFXOWXUDO UHJLRQV
development, the quality of human resources (HR) the level of GDP per capita was dependent on the four
may be indicated consistent with the most important highlighted above factors (main components).6 Multiple
determinants of socio-economic development. The factors regression models (stepwise regression) for each class
forming human capital can include many features; yet of regions (Table 1) were estimated searching for factors
the following ones were enumerated for the purposes of having the greatest impact.
this study: As might be supposed, the most important factor
— education (the higher educated residents, the HQKDQFLQJ WKH *'3 JURZWK LQ PRVW UHJLRQV RI ³WKH
greater their wealth and opportunities for the growth ROG´ (8 UHJLRQV RI )UDQFH *HUPDQ\ %ULWLVK 6ZHGHQ
and development of the country or region); Finland, Belgium, Denmark, Austria, the Netherlands, and
— number of students (measured in a population of Ireland) is human capital. This corresponds with the
people aged 20-24, may be regarded as a measure latest theories where the most important factor of
of regional potential which will be the driving force economic growth is just the human capital. Its high quality
for the economy for several years); FRXSOHG ZLWK ¿QDQFLDO FDSLWDO GHWHUPLQHV LQQRYDWLRQ RI
— number of primary care physicians (per correct the economy, and is conducive to increasing wealth of
number of residents); the inhabitants.
— number of hospital beds (feature is very similar to A model referring to the regions of Poland, Hungary,
the number of primary care physicians); 6ORYDNLD DQG WKH &]HFK 5HSXEOLF GHVFULELQJ DOPRVW
— QXPEHURIURDGWUDI¿FYLFWLPV perfectly dependence of the level of development
— mortality rate (properly re-measured, it can be on the level of human capital, material capital and
assumed that the higher the ratio of higher drain of economic innovation, is also very interesting. Similar,
human capital). KLJK PHDVXUH RI JRRGQHVV RI ¿W RI WKH PRGHO LV
7KH ODVW IDFWRU ± VRFLDO FDSLWDO 6& ± LV D UHODWLYHO\ characterised by the regions of Italy where the degree
new category having an impact on regional development. of regional development depends primarily on the level
___________________________
6
The method of principal components analysis gives the possibility to create new variables (components) which
can then be treated as independent variables explaining the variation in the dependent variable. This is useful when
independent variables taken into the analysis are highly correlated with each other, or the number of these
YDULDEOHV LV HTXDO WR RU H[FHHGV WKH QXPEHURI WHVW FDVHV DQG FDOOV IRU WKHLU UHGXFWLRQ 6WDQLV] $ VLPLODU
DQDO\VLVZDVFRQGXFWHGE\&KXUVNL3DQG3HUGDO5H[DPLQLQJWKHLPSDFWRIWKHH[WUDFWHGSULQFLSDOFRPSRQHQWV
RQWKHOHYHORI*'3SHUFDSLWDLQWKHUHJLRQ&KXUVNL3HUGDO

ISSN 1691-3078
of innovation and social capital. This may be due to 7KXVDVLPSOHUHTXHVWIDUPHUVEHQH¿WIURPWKHHIIHFWV

the fact that the values of variables included in these of economic growth is limited. In addition, a research on
two traits may show the greatest differentiation in the the relationship between general economic boom and
examined cluster. agricultural boom showed that it was possible to translate
the general economic situation of the pulses sector to
DQ DQQXDO GHOD\ 6SHFL¿FDOO\ WKLV VLWXDWLRQ FRQFHUQHG
Interdependence between the level of
the GDP growth and agricultural price scissors but
regional development and agricultural XQIRUWXQDWHO\ LW ZDV VWDWLVWLFDOO\ LQVLJQL¿FDQW +RZHYHU
development it was known that agriculture due to its characteristic
The conducted analysis of the differences in the features such as long production period, a slower return
economic and social development of regions of the on invested capital, or dim the mobility of factors of
(8RXWOLQHGDVLJQL¿FDQWO\GLYLGHG(XURSH$WWKHVDPH SURGXFWLRQLVQRWDEOHWRDGMXVWVXFKVL]HDQGVWUXFWXUH
WLPHWKLVREVHUYDWLRQHQWLWOHGWKHYHUL¿FDWLRQRIDQRWKHU of production to the changing market environment
K\SRWKHVLVQDPHO\¿QGLQJWKDWWKHRYHUDOOGHYHORSPHQW much faster. Based on the observed situation in the EU
of the region (primarily measured by the income in the 1990s (after the reform of MacSharry), it can be
level determined by various factors discussed above) concluded that the agri-food sector is not experienced to
positively affects the development of agriculture. The GDWHLHLQDSDUWLFXODU\HDUEHQH¿WIURPWKHHFRQRPLF
theory of agricultural economics provides considerations JURZWK *'3 &]\]HZVNL 3RF]WD :DZU]\QLDN
on the impact of proximal and distal environment This relationship can be explained in other ways - the
IRU DJULFXOWXUDO GHYHORSPHQW &]\]HZVNL DQG more developed regions generally experience lower
&]WHUQDVW\ &]\]HZVNL PHDVXUHG E\ LQFRPH economic growth but at the same time, there is relatively
level even from the family farm. Naturally, discussion high agricultural income, resulting primarily from the
is this measure but if one assumes that the purpose of agricultural policy which pursues the goal of providing
the entity is the performance of the necessities of life, adequate standard of living for agricultural population,
then consequently raising the level of life is the most primarily by increasing the individual earnings of persons
common way to achieve this goal through the generation employed in agriculture.
of income on the appropriate level. Second, the positive relationship between higher
Several independent variables adopted for the
education in the region and the family farm income
analysis characterise the state of socio-economic
FDQ EH H[SODLQHG LQ WZR ZD\V ¿UVW SUREDEO\ D KLJKHU
development of a region and the variables on the
OHYHO RI HGXFDWLRQ LQ WKH UHJLRQ LV DOVR UHÀHFWHG LQ WKH
agricultural sector7 to which these factors may have
higher educated farmers who thanks to their knowledge
DQ LPSDFW 7KH VWURQJHVW VWDWLVWLFDOO\ VLJQL¿FDQW DQG
can manage their farms resulting in higher income. On
SRVLWLYH FRUUHODWLRQ LGHQWL¿HG WZR YDULDEOHV QDPHO\
the contrary, if the farms generate high returns (also
income from the family farm and disposable income
for other reasons), it probably gives an opportunity,
of households (Figure 1). It shall be born in mind that
in addition to satisfying basic needs, to ensure
this relationship is much stronger in the regions of the
education for family members. It is worth noting that
third class – newly admitted ones to the EU-15 (Poland,
rural areas which have undergone deep processes
+XQJDU\ WKH &]HFK UHSXEOLF DQG 6ORYDNLD ZKHUH WKH
RI FKDQJH LQ WKH ODVW GR]HQ \HDUV IDFH QXPHURXV
correlation is nearly 75%, while this compound is strongly
challenges. Impoverishment of the rural population,
ZHDNHU LQ WKH UHJLRQV RI WKH ³ROG´ (8 GXH WR D KLJKHU
high unemployment, an unfavourable structure of
observed correlation (almost full) between income from
employment, deep quantitative and qualitative changes
the family farm and subsidies of operational activity.
in agriculture, need to adapt to the new system of
Nevertheless, it can be concluded that the level
management, and need for multifunctional development
of regional development goes hand in hand with
SUR¿WDELOLW\ LQ WKH DJULFXOWXUDO VHFWRU +RZHYHU RQH represent the many levels of rural issues. The high level
should be aware that the variable disposable income of of education of the rural population may be a major
household explains only ¼ of variability income from the IDFWRU HQDEOLQJ HI¿FLHQW DQG HIIHFWLYH DGDSWDWLRQ WR WKH
family farm8. Other compounds, although statistically changing environmental conditions.
VLJQL¿FDQWZHUHFKDUDFWHULVHGE\DFRUUHODWLRQEHWZHHQ
medium and low. Conclusions
+RZHYHU LQWHUHVWLQJ WUHQGV DUH REVHUYHG WKH ¿UVW &RQVLGHULQJ WKH LQWHUGHSHQGHQFH EHWZHHQ WKH OHYHO
of them concerns the negative dependence of the GDP of regional development and agricultural development,
growth rate on the income of the family farm. This RQH FDQ VD\ WKDW WKHUH LV D VWDWLVWLFDOO\ VLJQL¿FDQW DQG
compound is known in the literature and results primarily relatively strong relationship between disposable income
from the right Engel. Namely, the share of spending on of households and the family farm income; however, it
basic goods (including such basic agricultural commodities LV GH¿QLWHO\ VWURQJHU LQ WKH UHJLRQV RI QHZO\ DFFHGHG
and food products) decreases with the increase of income. countries (EU-10 in 2004). The pace of development of the
___________________________
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$GRSWHG E\ WKH IROORZLQJ YDULDEOHV IRU DQDO\VLV WKH HFRQRPLF VL]H RI IDUP ODERXU LQSXW LQ WRWDO WKH DJJUHJDWH
production, the family farm income, total costs, the balance of payments and taxes on operating activities and
net investment
8
+RZHYHU RQH FDQ EULHÀ\ VD\ WKDW WKH DJULFXOWXUDO LQFRPH GHSHQGV ODUJHO\ RQ IDFWRUV RI SURGXFWLRQ DQG QRQ
production. The regression analysis indicated quite clearly the picture of total income in the regions. Namely, the
income of the family farm = 814.4 + 0.97 * Total production - Total cost of 0.98 * + 1.01 * balance of payments
and taxes, with R2=98.9%.

ISSN 1691-3078
region (expressed in the GDP growth rate) is negatively 3. &]WHUQDVW\ : &]\]HZVNL % Struktury
correlated with the family farm income. This regularity kierowania agrobiznesem w Polsce, (Agribusiness
provides on the one hand, the fact that the agricultural Management Structure in Poland). Wyd. Akademii
VHFWRUGRHVQRWJDLQVXI¿FLHQWEHQH¿WIURPWKHHFRQRPLF (NRQRPLF]QHMZ3R]QDQLX3R]QDQ
growth; yet, on the other hand it shows clearly that 4. &]\]Hwski, A. (2007). Makroekonomiczne
more developed regions where the economic growth is uwarunkowania rozwoju sektora rolnego,
inevitably lower, even at a higher level of development 0DFURHFRQRPLF &RQGLWLRQV IRU WKH 'HYHORSPHQW RI
RIWKHDJULFXOWXUDOVHFWRUUHÀHFWUHODWLYHO\KLJKHULQFRPH WKH $JULFXOWXUDO 6HFWRU ,Q &]\]HZVNL $ UHG
By contrast, in developed regions the growth rate of Uniwersalia polityki rolnej w gospodarce rynkowej;
general economic is relatively higher, while the revenues XMĊFLH PLNUR L PDNURHNRQRPLF]QH, (Universal
generated by the agricultural sector - lower. Agricultural Policy in a Market Economy, Tackling
Micro-and Macroeconomics), Wyd. Akademii
Bibliography (NRQRPLF]QHMZ3R]QDQLX
1. &]\]HZVNL $ 3RF]WD $ :DZU]\QLDN / 5. 0DWXV]F]DN $ Zasoby ziemi i pracy w
Interesy europejskiego rolnictwa w swietle rolnictwie regionow europejskich – proba okreslenia
globalnych uwarunkowan polityki gospodarczej; podobienstw i roznic (Resources of Land and Labour
model wahadla (The Interests of European in Agriculture Regions of Europe - an Attempt
Agriculture in the Face of Global Economic Policy to Identify the Similarities and Differences). In:
&RQGLWLRQDOLW\0RGHO3HQGXOXP). Roczniki Naukowe Sokolowska, S., Bisaga, A. (red.) Wies i rolnictwo
SERiAWRP9,,]HV]\W :DUV]DZD3R]QDQ w procesie zmian. Problemy transformacji rolnictwa
2. &KXUVNL 3 3HUGDO 5 Czynniki rozwoju europejskiego, (Rural Areas and Agriculture in the
VSRáHF]QRJRVSRGDUF]HJR Z XNODG]LH UHJLRQDOQ\P 3URFHVV RI &KDQJH 3UREOHPV 7UDQVIRUPDWLRQ RI
Unii Europejskiej (Socio-economic Factors of European Agriculture) wyd. Uniwersytetu opolskiego,
Development in the Regional Structure of the Opole.
European Union). In: 'RO]EODV]65DF]\N$UHG 6. 6WDQLV] $ Przystepny kurs statystyki z
Ä3U]HNV]WDOFHQLDUHJLRQDOQ\FKVWUXNWXUIXQNFMRQDOQR zastosowaniem STATI67,&$ 3/ QD SU]\NODGDFK
SU]HVWU]HQQ\FK (XURSD EH] JUDQLF QRZD MDNRVF ] PHG\F\Q\ $IIRUGDEOH 5DWH 6WDWLVWLFV 8VLQJ
SU]HVWU]HQL´ ,*L55 8QLZHUV\WHW :URFODZVNL 67$7,67,&$ 3/ ([DPSOHV RI 0HGLFLQH 7RP
Nr 4. $QDOL]\ZLHORZ\PLDURZH6WDWVRIW.UDNRZ

ISSN 1691-3078
I. Silinevica Implementation Problems of Development Strategies: Case Study of Dagda County
IMPLEMENTATION PROBLEMS OF DEVELOPMENT STRATEGIES:

CASE STUDY OF DAGDA COUNTY
Irena Silinevica1, Ing.sc.Dr., professor

)DFXOW\RI(FRQRPLFVDQG0DQDJHPHQW5H]HNQHV$XJVWVNROD
Abstract. Research of different strategical documents related to regional policy and development strategies at the
state, regional or local levels allows establishing a fact that their implementation encounters many problems. The set
REMHFWLYHVWKDWDUHGH¿QHGLQWKHVHGRFXPHQWVYHU\RIWHQDUHQRWDFKLHYHG7KHDLPRIWKLVUHVHDUFKLVWRDQDO\VH
potential implementation problems of county’s development strategies and make proposals for successful strategy
implementation mechanisms. This research is performed on the example of Dagda county, which is one of the 19 rural
FRXQWLHV LQ /DWJDOH 7KLV VWXG\ LQFOXGHV DQDO\VLV RI LPSOHPHQWDWLRQ PHFKDQLVP RI WKH VWUDWHJLFDO GLUHFWLRQ ³1DWXUH
7RXULVP'HYHORSPHQW´GH¿QHGLQ'DJGD&RXQW\6WUDWHJ\7KHDXWKRURIIHUVDQHZVFKHPHIRUVWUDWHJ\LPSOHPHQWDWLRQ
DQG D QHZ PDQDJHPHQW PRGHO IRU WKH LPSOHPHQWDWLRQ RI RQH RI WKH 'HYHORSPHQW 6WUDWHJ\¶V GLUHFWLRQV ± ³1DWXUDO
7RXULVP 'HYHORSPHQW´ 7KH RIIHUHG 6WUDWHJ\ LPSOHPHQWDWLRQ PRGHO ZDV GHYHORSHG E\ WDNLQJ LQWR DFFRXQW VXSSRUW
systems for development of distinctive competencies. Hypothesis of this research: it is possible to implement strategy
only by establishing appropriate strategy implementation mechanism taking into account the major role of human
UHVRXUFHVGHYHORSPHQW5HVHDUFKREMHFWGHYHORSPHQWVWUDWHJLHV5HVHDUFKVXEMHFWIDFWRUVLQÀXHQFLQJWKHVWUDWHJ\
implementation. To accomplish the objectives of this study, the following research methods were used: content
analysis, analysis and synthesis, and logical and abstract constructive methods.
Key words: regional development, human development, strategy implementation
Jel code: R110, O15, O2
Introduction more DQG EHWWHU MREV DQG EHWWHU VRFLDO FRKHVLRQ´ 2QH
Economic development in rural studies is closely of the principal weaknesses of the Lisbon Strategy was
related to theories of economic development in rural the absence of a clear and targeted implementation
regions focusing on how rural development policy can PHFKDQLVPIURPWKHYHU\EHJLQQLQJ7KHUHIRUHLWV¿QDO
stimulate economic growth in rural regions. Different analysis revealed that there was achieved only a public
VWXGLHV LOOXVWUDWH WKH SURFHVV UHÀHFWLQJ WKH ZD\ LQ agreement with the Lisbon Strategy, yet nothing was
ZKLFKVHOHFWHGLQLWLDWLYHVFDQLQÀXHQFHWKHGHYHORSPHQW GRQH WR VXSSRUW LW &RQVHTXHQWO\ WKH LQWURGXFWLRQ RI
patterns, growth of population, and quality of life in a ´HDUPDUNLQJ´ ZKHQ WKH VWUDWHJ\ ZDV UHQHZHG LQ
county. Taking into account the wide changes in the undoubtedly enhanced the implementation mechanism.
H[WHUQDO HQYLURQPHQW WKDW LQÀXHQFH the development If we deal with Latvia strategic documents related
SDWWHUQV RI HDFK RUJDQL]DWLRQ LW LV REYLRXV WKDW to regional policy and economics, we can establish
nowadays they are based on strategic management D IDFW WKDW WKH VHW REMHFWLYHV GH¿QHG LQ WKHVH
principles. It means that each administrative unit documents are not achieved because of implementation
should develop its own Development Strategy. The problems. Some examples:
VWUDWHJ\ LV GH¿QHG DV WKH LQWHQWLRQ WR GR VRPHWKLQJ The concept of Regional Development Policy (1996).
or as a project that tries to establish certain aims 7KH IROORZLQJ JRDOV GH¿QHG LQ WKLV GRFXPHQW ZHUH QRW
proceeding from the economic interests and achieved:
SRVVLELOLWLHV (YDQV 1 &DPSEHOO ' 6WRQHKRXVH * — to promote the development of required
,W KDV DOVR EHHQ GH¿QHG DV D GRFXPHQW WKDW infrastructure throughout Latvia taking into account
consists of things to achieve and ways of implementing regional disparities;
necessary actions to obtain the desired results. — to encourage changes in the economic structure by
7KHWHUULWRU\RI/DWYLDLVGLYLGHGLQWR¿YHUHJLRQV2QH creating positive business environment in all regions
of them is Latgale, which is divided into 19 rural counties. of Latvia.
Each of them has its Development Strategy. The vision, Regional Development Law (2002.) The following
targets for achieving this vision, and strategic directions JRDOVGH¿QHGLQWKLVGRFXPHQWVZHUHQRWDFKLHYHG
DUHGH¿QHGLQWKHVHVWUDWHJLHV — to promote and to ensure well-balanced and
Implementation of the strategy is one of the most sustainable development taking into account the
important parts in strategic management. Stavrakakis G. distinctions and opportunities of particular parts of
(Stavrakakis G.,2012) explained the implementation of Latvia and throughout it;
Strategy Europe 2020 as follows: measures to implement — to reduce disadvantaged distinctions between regions
the Lisbon Strategy have not succeeded in making Europe as well as maintain and develop the characteristic
´WKH PRVW FRPSHWLWLYH NQRZOHGJHEDVHG HFRQRP\ LQ features and potential of the development of nature
the world, capable of sustained economic growth with and culture environment for each territory.
___________________________
1
&RUUHVSRQGLQJDXWKRUE-mail address: irena.silinevica@ru.lv, tel +37129103480

ISSN 1691-3078
Source: Evans N., Campbel D., Stonehouse G., 2010
Fig. 1. Implementation and the strategic process
7KH DXWKRU KDV VWXGLHG ¿YH FRXQWLHV¶ GHYHORSPHQW Successful strategy selection and implementation relies
VWUDWHJLHV LQ /DWJDOH UHJLRQ 5H]HNQH /XG]D 3UHLOL RQ WKH SUHVXSSRVLWLRQ WKDW WKH RUJDQL]DWLRQ KDV FDUULHG
'DJGDDQG%DOYL7KHVSHFLDOLVDWLRQLQWRXULVPLVGH¿QHG out a meaningful strategic analysis and consequently
in each of these strategies. This study deals with issues is aware of its internal strengths, weaknesses, and its
related to the implementation of strategies. external opportunities and threats. The process leading
The aim of this research is to analyse potential to the strategy implementation is shown in Figure 1.
implementation problems of county’s development The main parts of this process are as follows: strategic
strategies and develop proposals for successful strategy analysis, strategic choice, and strategic implementation.
implementation mechanisms. Strategy implementation refers to how a company
This study was performed on the illustration of one of VKRXOGFUHDWHXVHDQGFRPELQHRUJDQL]DWLRQDOVWUXFWXUH
the rural counties in Latgale region – Dagda county, control systems, and culture to pursue strategies that lead
because similar problems exist in other counties, to a competitive advantage and superior performance
too. +LOO &KDUOHV :/ -RQHV *5 )DFWRUV WKDW DUH
To achieve this aim several objectivesDUHGH¿QHG included in the process of strategy implementation are
— to interpret the theoretical aspects of the shown in Figure 2.
implementation of development strategies; 7KH GHVLJQLQJ RI RUJDQL]DWLRQDO VWUXFWXUH LV XVHG
— WR VWXG\ VRPH DVSHFWV RI WKH 'DJGD &RXQW\ WR DVVLJQ RUJDQL]DWLRQDO PHPEHUV WKH WDVNV DQG
Development Strategy; connect the activities of different people and functions.
— to carry out analysis about the implementation &KDUOHV :/+LOO DQG *DUHWK 5-RQHV +LOO &KDUOHV :/
RSSRUWXQLWLHV RI WKH VWUDWHJLF GLUHFWLRQ ´1DWXUDO Jones G.R., 2010) pointed out that there are three
7RXULVP 'HYHORSRPHQW´ GH¿QHG LQ WKH 6WUDWHJ\ of basic choices involved when managers design an
Dagda county. RUJDQL]DWLRQ¶VVWUXFWXUH
— to create the management model to implement the 1. How to group tasks into functions best to create
VWUDWHJLFGLUHFWLRQ´1DWXUDO7RXULVP'HYHORSRPHQW´ distinctive competencies and pursue a particular
Hypothesis of the research: it is possible to strategy?
implement the strategy only by establishing appropriate 2. How to allocate authority and responsibility to these
strategy implementation mechanism. functions?
Research object: development strategies of the 3. How to increase the level of coordination or
counties. integration between functions?
Research subject IDFWRUV LQÀXHQFLQJ WKH The purpose of a control system is to provide managers
implementation of the strategy. with: 1) a set of incentives to motivate employees to
To accomplish the objectives of this research, the ZRUN WRZDUG LQFUHDVLQJ HI¿FLHQF\ TXDOLW\ LQQRYDWLRQ
following research methods were used: content DQGUHVSRQVLYHQHVVWRFXVWRPHUVVSHFL¿FIHHGEDFNRQ
analysis, analysis and synthesis, and logical and abstract KRZZHOODQRUJDQL]DWLRQDQGLWVPHPEHUVDUHSHUIRUPLQJ
constructive methods. and building a competitive advantage.
2UJDQL]DWLRQDO FXOWXUH LV D VSHFL¿F FROOHFWLRQ RI
values, norms, beliefs, and attitudes shared by people
Research results and discussion DQGJURXSVLQDQRUJDQL]DWLRQWKDWFRQWUROWKHZD\WKH\
1. Some theoretical aspects about the interact with each other and with stakeholders outside
implementation of development strategies WKHRUJDQL]DWLRQ
It is necessary to enable the use of available instruments An important part of the strategy implementation is
that contribute to the strategy implementation. PRQLWRULQJ ± WDNLQJ D SHULRGLF ORRN DW ³KRZ LW¶V JRLQJ´

ISSN 1691-3078
Source: Hill Charles W.L, Jones G.R.,2010
Fig. 2. Implementing strategy
Source: author’s construction
Fig. 3. Strategy implementation
Monitoring of the implementation of a strategic plan is process, the author offers the following strategy
important for a number of reasons (Birnbaum B., 2010) implementation scheme (Figure 3).
listed below.
— It helps to assure that your efforts conform to the 2. Some aspects of Dagda County Development
plan that you are actually performing and the action
Strategy
VWHSV\RXLQWHQGHGDQGWKDW\RXDUH´RQWUDFN´
Dagda is the youngest small town in Latvia located
— You have to be sure the results you achieve align
in the South Eastern part of Latvia – Latgale. Dagda
ZLWK \RXU TXDQWL¿HG REMHFWLYHV DQG WKDW \RX DUH
is embossomed in scenic hills and lakes. Dagda is
accomplishing what you intended to accomplish.
connected with Riga (267 km), Daugavpils (89 km),
— Monitoring allows taking a corrective action for
5H]HNQHNPDQG.UDVODYDNPE\PRWRUZD\V
making the necessary changes along the way.
— Since monitoring is a part of a control process, Dagda is the centre of Dagda county. Dagda town,
it encourages improved performance. The fact as the centre of frontier county, is located 267 km
that employees know that they will be measured from the capital of Latvia – Riga. It takes six hours to
stimulates them to do the job better. JHW WKHUH E\ SXEOLF EXV 'DJGD5LJD RU ¿YH KRXUV E\
— Monitoring provides an essential link between the car. Five or six hour drive is not appropriate for such
written plan and the day-to-day operation of your a distance. This fact does not promote development
EXVLQHVV7KHVHDFWLRQVHQVXUHWKDW³\RXDUHUHDOO\ opportunities of Dagda county.
PDQDJLQJ WKH EXVLQHVV DFFRUGLQJ WR \RXU SODQ´ 'DJGD &RXQW\ 'HYHORSPHQW 3URJUDPPH
Monitoring the plan makes your entire planning effort was approved in 2012. The vision of Dagda county is
a tangible reality rather than once-a-year academic GH¿QHGLQWKH6WUDWHJLF3DUWRIWKH3URJUDPPHIXUWKHU±
exercise. 6WUDWHJ\DVIROORZV³'DJGDFRXQW\LVDPXOWLIXQFWLRQDO
7DNLQJ LQWR DFFRXQW WKH PDMRU UROH RI RUJDQL]DWLRQDO county in Latgale region where people are active and
culture and monitoring in the strategy implementation VDWLV¿HG ZLWK WKHLU OLIH 7KHUH DUH ZHOO GHYHORSHG VPDOO

ISSN 1691-3078
Source: Hill Charles W.L., Jones G. R.,2010
Fig. 4. Development of a new nature tourism product
businesses, processing agricultural products with high KXQWHUV DQJOHUV DQG RWKHU HFRWRXULVWV´ 'DJGD FRXQW\
YDOXHDGGHGDQGQDWXUDOWRXULVPLQWKLVFRXQW\´ encompasses a wide range of nature tourism resources
7KHUH DUH WKUHH VWUDWHJLF WDUJHWV ZKLFK DUH GH¿QHG DV 5D]QD 1DWLRQDO 3DUN LQFOXGHV PDQ\ ODNHV ULYHUV
in the programme: hills, forests, biodiversity, and ecosystem diversity.
1. Pleasant life space (The inhabitants are active and &XOWXUDO ODQGVFDSH URDGV 3 3 3 3 DQG 3
VDWLV¿HG &RXQW\¶V LQIUDVWUXFWXUH LV ZHOO RUJDQL]HG via Dagda are important tourism resources for nature
and beautiful; well being is provided for tourists and tourism development. They are valuable for creation
guests as well). of cycle tracks. Dagda county offers unique cultural
2. 4XDOLWDWLYHGLYHUVL¿HGDQGDFFHVVLEOHVHUYLFHV heritage, rich history of crafts, and revival of crafts
3. Valuable economical environment. traditions etc.
7KH IROORZLQJ VSHFLDOLVDWLRQ RI WKH FRXQW\ LV GH¿QHG Implementation of the strategy depends on the
in Dagda County Development Programme 2013- existing and accessible resources, on the management
2019: Nature tourism, Agriculture, and Processing of of strategy and its supporting structures. In order to
agricultural products. 7KLV VSHFLDOL]DWLRQ LV MXVWL¿HG E\ LPSOHPHQW D VWUDWHJ\ VXFFHVVIXOO\ DQ RUJDQL]DWLRQ
SWOT analysis. needs resources. Resources are the key input into the
Further analysis is related to one of the county’s implementation of any strategy. Kamalanabhant T.
specialisation – Nature tourism. and Nagaraj I. (Kamalanabhant T., Nagaraj I., 2003)
underlined that human capital is a relevant source of
3. Analysis of the implementation economic growth. Human resources should have the
opportunities of the strategic direction valuable distinctive competencies with aim to create a
´1DWXUH 7RXULVP 'HYHORSRPHQW´ GH¿QHG LQ competitive advantage and to ensure all the processes
Dagda County Development Programme in strategic management. The development of a new
Natural resources and physical cultural resources are QDWXUH WRXULVP SURGXFW +LOO &KDUOHV :/ -RQHV *5
important assets for regional competitiveness. There is a 2010) is shown in Figure 4.
close link between environmental resources and regional The major challenges for the tourism business were
development and between the regional development GH¿QHG E\ &RRSHU & HW DO &RRSHU & HW DO
strategy and regional competitive advantage. In the challenges facing the tourism industry will only
accordance with the spatial structure of Latgale region, be met successfully by a well-educated, well-trained,
Dagda county is included in the tourism development bright, energetic, multi-lingual, and enterpreneurial
WHUULWRU\´(]HU]HPH´ 7DNLQJ LQWR DFFRXQW ULFK QDWXUDO workforce who understand the nature of tourism and
UHVRXUFHVLQWKHFRXQW\1DWXUH7RXULVPLVGH¿QHGDVRQH have professional training. A high quality of professional
of the county’s economic specialisation (at the regional, human resources in tourism will allow enterprises to gain
state, and European level). a competitive edge and deliver value added with their
The following explanation of a developed nature service.
tourism concept is provided in the Development The major role in the strategy implementation
3URJUDPPH RI 'DJGD &RXQW\ ´'HYHORSHG belongs to human resources. It means that successful
nature tourism is a fully used potential of nature, which implementation of any strategy depends on personnel
is formed by beautiful landscapes with many lakes and NQRZOHGJHVNLOOVDQGFRPSHWHQFLHV2UJDQL]DWLRQVKRXOG
WHUULWRU\ ORFDWHG LQ 5D]QD 1DWLRQDO 3DUN 7KH VHUYLFHV ensure the required level of personnel competencies by
of active recreation are widely accessible in Dagda managing this process. It is necessary to enable the use
county. Green tourism is very popular in the county: a of available instruments and sources that contribute to
lot of activities are offered for nature friendly tourists, the strategy implementation.

ISSN 1691-3078
Source: author’s construction based on Hill Charles W.L.Hill, Jones G.R., 2010
Fig. 5. Model of implementation a new nature tourism product
7KH ¿QGLQJV RI WKH DQDO\VLV RI Dagda County Conclusions, proposals,
Development Programme 2013-2019 are as follows:
recommendations
the Programme includes action plans related to each 1. 2UJDQL]DWLRQDO FXOWXUH DQG PRQLWRULQJ KDYH D
strategic direction. The action plan related to the tourism very important place in the process of strategy
development includes development of guesthouses, implementation.
farmsteads that offer different rural activities, 2. Successful implementation of county’s strategy
DQJOLQJ VHUYLFH WKH FUHDWLRQ RI ERDWV DQG ÀRDWV¶ requires well educated and highly skilled
routes, watching of domestic animals, food services, human resources who are involved in the
Latgale culinary heritage, winter tourism services, implementation of county’s development strategy.
nature trails, craftsmen service, and involvement of 3. The analysis of counties’ Development Strategies
local enthusiasts as tour guides throughout the county in Latgale region leads to the following
etc. Analysis of the action plan related to Nature ¿QGLQJV
Tourism shows that it does not contain any activity — each county has its own economic specialisation,
related to ensuring human resources development in which among other directions tourism is also
for the tourism industry. In other words, this action mentioned;
plan does not include any activities related to human — development strategies do not include human
resources management. Nevertheless, the creation resources development and management
of new tourism products with high competitiveness related to counties’ specialisation;
requires performers with new knowledge and new — in the relatively poor areas of Latgale
skills. It means that the successful implementation of region, action plans focus more heavily on
the county strategy reguires well educated and high socio-economic development, promotion of
skilled human resources involved in the implementation employment, and quality of life.
of county’s strategy. To develop people’s knowledge, 4. 7KH DQDO\VLV RI 'DJGD &RXQW\ 'HYHORSPHQW
skills, and experience, the action plan should involve 3URJUDPPHUHÀHFWVWKHIROORZLQJ
activities, which provide them. The creation and — there is the following specialisation of the
development of these factors build the base for county: nature tourism, agriculture, and
qualitative and sustainable development of tourism processing of agricultural products;
products. Taking into account the above-mentioned facts, — one of the Programme’s priorities is
the following model of implementation a new nature LPSURYHPHQW DQG GLYHUVL¿FDWLRQ RI WRXULVP
tourism product is offered by the author in Figure 5. products;
Support systems (Fig.5) are related to human — 1DWXUH 7RXULVP ZDV GH¿QHG DV RQH RI WKH
resources engaged in a new tourism product specialisation directions of Dagda county;
development. The aim of support systems is to ensure — the action plan of this programme does not
the distinct competencies of people who develop new forsee any education activities related to the
tourism products. tourism development;
Support systems should include the following: — the Development Strategy does not forsee
— human resources development programme; improvement of county’s competitiveness
— SDUWQHUVKLSZLWKWRXULVPVFLHQWL¿FFHQWUHVUHVHDUFK by human resources management related
and education institutions; to people who are involved in the Tourism
— education and training programmes for providing Development Programme;
UHTXLUHGTXDOL¿FDWLRQVIRUWRXULVPVSHFLDOLVWV — the author offers the model for strategy
— improvement of research skills for people who are implementation taking into account
engaged in the development of tourism products. RUJDQL]DWLRQDOFXOWXUHDQGPRQLWRULQJ

ISSN 1691-3078
5. The author offers a model of implementation of 5. &RRSHU & )OHWFKHU - *LOEHUW ' :DQKLO 6
a new nature tourism product taking into account (1998). Tourism, Principles and Practice. London:
support systems related to people who are involved Pitman. p.458.
in creation of new tourism products. Support systems 6. 'DJGDV QRYDGD DWWŝVWŝEDV SURJUDPPD
should provide knowledge, skills, and experience Retrieved: http://dagda.lv/uploads/media/Dagdas_
development for these people. Support systems AP-1redakcija.pdf. Access:12.10.2012
should ensure competitiveness of tourisms products 7. 1LJHO (YDQV 1 'DYLG &DPSEHOO ' *HRUJH
in total. Stonehouse G. (2010). Strategic Management
6. Education opportunities related to tourism for Travel and Tourism. UK:Oxford:Butterworth
VSHFLDOL]DWLRQ DUH QRW RIIHUHG LQ 'DJGD FRXQW\ Heinemann. p.289.
Nevertheless, tourism education opportunities are 8. Hill, Charles W.L., Jones, G. R. (2010). Strategic
RIIHUHGLQ5H]HNQHV$XJVWVNRODNPIURP'DJGD Management: an integrated approach. 6-th edition.
at the bachelor and master’s levels. It is necessary 2[IRUG+RXJKWRQ0LIÀLQ¶VS
to strengthen cooperation between Dagda county 9. Kamalanabhant, T., Nagaraj, I. (2003). Impact of
DQG 5H]HNQHV $XJVWVNROD ZLWK WKH DLP WR SUHSDUH strategic human resource practices-on organisational
KLJKO\ VNLOOHG VSHFLDOLVWV LQ WKH ¿HOG RI WRXULVP IRU performance. Australian Journal of Psychology —
the implementation of Dagda county development Supplement p.132.
strategy. 10. /XG]DV QRYDGD DWWŝVWŝEDV SURJUDPPD
7. It is necessary to develop human resources’ Retrieved: ZZZOXG]DVSLOVOY"FDW ODQJ OY.
development plan in compliance with each county’s Access: 10.12.2012
VSHFLDOL]DWLRQ7KLVSODQVKRXOGZRUNDVDSDUWRIWKH 11. 0HFKDQLVP IRU LPSOHPHQWLQJ WKH µ´(XURSH ´
support system to implement county’ s development strategy. Question for written answer to the
strategy. &RPPLVVLRQ 5XOH *HRUJLRV 6WDYUDNDNLV
Retrieved: http://www.europarl.europa.eu/sides/
Bibliography getDoc.do?pubRef=-//EP//TEXT+WQ+P-2010-
1. Baggio, R. , 0RWWLURQL &, &RULJOLDQR 0$ '2&;0/9(1 ODQJXDJH /9. Access:
(2011). Technological aspects of public tourism 20.12.2012
communication in Italy. Journal of Hospitality 12. 3UHLŨX QRYDGD DWWŝVWŝEDV SURJUDPPD
and Tourism Technology,. Volume 2, Issue 2, 2017. Retrieved: http://www.preili.lv/image/
pp. 105-119. upload/dokumenti1/20110622_attistibas_
2. %DOYX QRYDGD DWWŝVWŝEDV SURJUDPPD programma_11_17.pdf. Access:10.12.2012
Retrieved: EDOYLOY¿OHV/HPXPLSLHOLNXPL 13. 5HŕLRQŅOŅV DWWŝVWŝEDV OLNXPV 5HWULHYHG
attistibas. Access: 09.12.2012 http://www.likumi.lv/doc.php?id=61002http://
3. Birnbaum, B. (2010). Monitoring the Implementation www.likumi.lv/likumi.php. Access: 01.12.2012
of Your Strategic Plan. Retrieved: http://www. 14. 5HŕLRQŅOŅV DWWŝVWŝEDV SROLWLNDV NRQFHSFLMD
birnbaumassociatees.com/monitoring.htm. Retrieved: www.am.gov.lv/lv/?id=. Access:
Access:12.12.2012 01.12.2012
4. &KDQGUD $ ,GULVRYD $ &RQYHQWLRQ RQ 15. 5ŋ]HNQHV QRYDGD DWWŝVWŝEDV SURJUDPPD
Biological Diversity: A review of national challenges 2018. Retrieved: ZZZUH]HNQHVQRYDGVOYUHV
and opportunities for implementation. Biodiversity content2/33/33641813179769794.pdf. Access:
and Conservation, 20 (14), pp. 295-316. 11.12.2012

ISSN 1691-3078
E. Gaule, G. Zilinskas E-Governance Development External Factors Analysis:
Lithuanian Municipalities on Rural-Urban Divide
E-GOVERNANCE DEVELOPMENT EXTERNAL FACTORS ANALYSIS:

LITHUANIAN MUNICIPALITIES ON RURAL-URBAN DIVIDE
Egle Gaule1, Dr., assoc., professor

Kaunas University of Technology
Gintaras Zilinskas2, Dr., assoc., professor
Kaunas University of Technology
Abstract. E-governance is the public sector’s use of information and communication technologies for communication.
Therefore, the usability of public organisations websites’ is a critical factor for this interaction. While a conceptual
framework, technological innovation, services measurement, and management of e-governance have been studied
extensively, its driving factors have not been well understood. The aim of the article is to identify the external
factors that determine disparities of development level of the websites in Lithuanian rural and urban municipalities.
The correlation between 22 external economic, social, geographic, cultural, and political factors and development
indexes of municipalities’ websites was investigated in this study. Disparities of the external factors were analysed
and compared between the groups of rural, urban, and total municipalities. Results of the study show that geographic
IDFWRU±DSRSXODWLRQGHQVLW\±KDVDVLJQL¿FDQWLPSDFWRQWKHGHYHORSPHQWOHYHORIZHEVLWHVLQUXUDOPXQLFLSDOLWLHV
VWURQJDQGZHDNUXUDOLW\ZKLOHRWKHUH[WHUQDOIDFWRUVDUHQRWVLJQL¿FDQW7KHFRPSOH[RIH[WHUQDOHFRQRPLFVRFLDO
DQGJHRJUDSKLFIDFWRUVKDVDVLJQL¿FDQWLPSDFWRQWKHGHYHORSPHQWOHYHORIZHEVLWHVLQWKHJURXSVRIWRWDODQGXUEDQ
municipalities. One cultural factor – the number of colleges and universities – has an impact on the development of
ZHEVLWHVLQWKHJURXSRIWRWDOPXQLFLSDOLWLHV9RWHUWXUQRXWWRORFDOFRXQFLOVWKHSROLWLFDOIDFWRUGLGQRWVLJQL¿FDQWO\
determine the development of municipal websites. The major challenge remains to not only increase the overall level
of e-service usage but go for the e-communication. The internal factors analysis is required for the comprehensive
evaluation of driving factors impact.
Key words: e-governance, municipal websites, urban and rural municipalities, Rutgers index, e-governance
development factors.
JEL code: O180, R520
websites and the external factors in the groups of rural,

Introduction
urban and total municipalities; and d) to reason the
E-governance is the public sector’s use of information
external factors impact on the development of municipal
DQG FRPPXQLFDWLRQ WHFKQRORJLHV ,&7 ZLWK WKH DLP
websites. The research object is the external factors that
WR LQFUHDVH WKH HI¿FLHQF\ RI JRYHUQPHQW RSHUDWLRQV
strengthen democracy, enhance transparency, and have impact on the development level of municipalities’
SURYLGHEHWWHUDQGPRUHYHUVDWLOHVHUYLFHVWRFLWL]HQVDQG websites.
EXVLQHVVHV7KH,&7DUHEHFRPLQJLQFUHDVLQJO\LPSRUWDQW 5HVHDUFKPHWKRGVWKHDQDO\VLVRIVFLHQWL¿FOLWHUDWXUH
in the communication between local governments and comparative and logical analysis, methods of induction
stakeholders, which makes the usability of municipal and generalisation, and correlation analysis using
websites a critical factor in the government–stakeholder statistical program SPSS. Information sources used in this
communication. Municipal websites may be used for the article: the data on the development level of Lithuanian
dissemination of information to stakeholders, delivery municipal websites of January 2012 estimated by the
of public e-services, and participatory democracy methodology of Rutgers E-Governance Performance
(e-participation) implementation on the local level. Index and municipal data of Lithuanian Department of
Many international and national studies on the municipal Statistics.
websites development assessment and ranking
(considering the quality of the website itself) have been 1. E-governance on the local level:
carried out. However, the factors that determine the level LGHQWL¿FDWLRQDQGH[SORUDWLRQ
RIZHEVLWHVGHYHORSPHQWDUHQRWVXI¿FLHQWO\LQYHVWLJDWHG (JRYHUQDQFH LV WKH SXEOLF VHFWRU¶V XVH RI ,&7 ZLWK
yet. the aim of improving information and service delivery,
The aim of the article is to identify the factors that HQFRXUDJLQJ FLWL]HQ SDUWLFLSDWLRQ LQ WKH GHFLVLRQPDNLQJ
determine disparities of Lithuanian municipal websites process and making government more accountable,
in urban-rural division. The tasks of the research: WUDQVSDUHQW DQG HIIHFWLYH 81 7KH ,&7 JLYHV
a) to identify the external factors of e-governance twenty-four hours a day, seven days a week availability
GHYHORSPHQW E WR ¿QG WKH FRUUHODWLRQV EHWZHHQ WKH interactions.
development indexes of websites and the external E-government encompassing information and
factors in Lithuanian municipalities; c) to compare transactions is evolving into e-governance – more
the correlations between the development indexes of complex interactions going to the agenda setting and
___________________________
1
E-mail address: egle.gaule@ktu.lt
2
E-mail address:JLQWDUDV]LOLQVNDV#NWXOW

ISSN 1691-3078
policy determination (Marche and McNiven, 2003). In LQÀXHQFHG E\ WKH GHJUHH RI GHPDQG IRU LPSURYHG
VRPH FDVHV HJRYHUQDQFH DQG WKH EURDGHU GH¿QLWLRQV FRPPXQLFDWLRQZLWKWKHJRYHUQPHQWIURPFLWL]HQVDQG
of e-government are used synonymously, since the the government structural attributes.
EURDGHU GH¿QLWLRQV RI HJRYHUQPHQW XQGHUOLQH WKH The environment (stability of society, economy and
change of internal and external government operations JRYHUQPHQW ,&7 LQIUDVWUXFWXUH KXPDQ FDSLWDO WKH
through technology, electronic public services, and attitude towards government (trust or distrust in the
electronic participation (Schellong, 2009; Nordfors L. government), and the government scope (scope of
et al, 2006). However, e-government is the provision of the government’s services) are distinguished as core
the routine governmental information and transactions dimensions (Roadmapping eGovernment …, 2007;
XVLQJ WKH ,&7 PHDQV DQG HJRYHUQDQFH LV WKH ,&7 6LQJK HW DO DQG µFXOWXUDO GLYHUVLW\¶ DQG µFLWL]HQ
PHGLDWHGUHODWLRQVKLSEHWZHHQFLWL]HQVDQGJRYHUQPHQW involvement’ are drawn as the most uncertain variables
for communication, policy evaluation, and expression with the largest impact (The Future of eGovernment ....,
RI FLWL]HQ ZLOO 0DUFKH DQG 0F1LYHQ 7KHUHIRUH 2007).
the governmental websites have evolved quickly to Summarising, the external e-governance development
provide more sophisticated and complex administrative factors are as follows:
services, and furthermore, they began to expand — geographic: the area, status of the territory: urban/
beyond the mere delivery of government services rural, special (municipality, port, depressed areas);
and administrative transactions over the Internet to the remoteness and population density;
include functions that enable online communication — social WKH VL]H RI SRSXODWLRQ DQG LWV VWUXFWXUH
EHWZHHQ FLWL]HQV DQG WKH JRYHUQPHQW $KQ (population by age / gender / education / family
2011). VWDWXV WKH QXPEHU RI UHFLSLHQWV RI VRFLDO EHQH¿WV
/RFDOJRYHUQPHQWVDUHFORVHWRFLWL]HQVDQGFRQVWLWXWH the birth rate);
for many the main representation of the government as — economic: the level of economic development and
WKHUHODWLRQVKLSRIFLWL]HQVDQGORFDODXWKRULWLHVWHQGVWR its structure (GDP per capita; number of enterprises;
be based on proximity concerning public services, urban GDP of the main economic sectors; foreign direct
development, local politics etc. Especially in countries investment; household income (the average wage);
with a federal government structure, the most public unemployment rate);
VHUYLFHV UHOHYDQW WR FLWL]HQV DUH SURGXFHG RIIHUHG DQG — political: the concentration of social elite; the
used on the local level (Schellong, 2009). Hence, on the level of political participation; the level of trust in
ORFDOOHYHOLWLVWKDWWKHLPSDFWRI,&7RQWKHUHODWLRQVKLS government;
EHWZHHQJRYHUQPHQWVDQGFLWL]HQVFDQEHPRVWHIIHFWLYH — cultural: the level of literacy and education of
(UN, 2012). Therefore, the municipal websites become the population (literacy rate, number of libraries
the main channel for interactions between governments and (higher) education institutions, enrolment of
DQGFLWL]HQV students in (higher) education institutions), the
While the important issues from the conceptual FXVWRPHUV¶FLWL]HQV¶ YLHZ RQ WKH XVHIXOQHVV DQG
framework, technological innovation, services success of public organisations websites (cultural
measurement, and management of e-governance have resistance);
been studied extensively, its driving factors have not — technological: WKH ,&7 LQIUDVWUXFWXUH FDSDFLW\
EHHQZHOOXQGHUVWRRG7KH¿QGLQJVRIVXFKUHVHDUFKPD\ (telecommunications and network infrastructure)
be used twofold: to explain the differences and to provide DQGWKHHUHDGLQHVVDFFHVVWRWKH,&7DQGFRPSXWHU
projections on the development of public organisations literacy);
(e.g. municipalities) websites. — legal – regulatory: E-government legitimation
(legislation on e-procurement, e-voting, e-survey,
2. Theoretical framework for the analysis of digital signature);
e-governance development factors — institutional – organisational: the structure
E-governance encompasses three components of public administration system (centralised-
expressing three main goals of the development of decentralised system and/or the local government
public organisations websites (especially municipal): the model), the stakeholders binding to interests
information (e-inclusion), public services (e-government), representing groups (business, environmental
and public consultation, decision making (e-participation), groups, communities, local action groups
LHDELOLW\RIWKHJRYHUQPHQWDQGVWDNHKROGHUVFLWL]HQV etc.).
and businesses) to communicate to each other in an
HI¿FLHQWDQGHOHFWURQLFPDQQHUOLNHSURYLGLQJLQIRUPDWLRQ 3. Materials and methods
posting of forms and registrations, e-payment, e-voting In January 2012, Lithuanian scientists assessed
etc. the development level of municipal websites of the
$KQ GH¿QHV IDFWRUV LQÀXHQFLQJ WKH DGRSWLRQ Republic of Lithuania on the basis of municipal websites
of e-service and e-communication applications. E-service survey instrument, developed by E-Governance
factors shaped by the economic rationale include the Institute at Rutgers University (USA) and the Global
government’s general capacity in providing services e-Policy e-Government Institute at Sungkyunkwan. The
(government organisational capacity) and the perceived development level of municipal websites was estimated by
demand for e-service applications (demographic factors). using the methodology as of 2011 Rutgers E-Governance
E-communication applications shaped by the political Performance Index. The websites of all 60 Lithuanian
UDWLRQDOHDUHLQÀXHQFHGE\WKUHHNH\IDFWRUVWKHQDWXUH municipalities were assessed according to 104 factors. All
of e-communication applications, political environment factors were divided into 5 groups (privacy and security;

ISSN 1691-3078
Table 1
Typologies of Lithuanian local municipalities by rurality
No. Groups of local municipalities Number

1. Strong rurality 7
2. Medium rurality 20
3. Weak rurality 18
4. Semi urban 8
5. Urban 7
6. Total 60
Source: authors’ construction based on Melnikiene R. et al., 2011
XVDELOLW\ FRQWHQW VHUYLFHV DQG FLWL]HQ SDUWLFLSDWLRQ middle rurality, and weak rurality). This analysis helped
(Domarkas et al., 2012). ¿QG SDUWLFXODULWLHV RI WKH H[WHUQDO IDFWRUV LPSDFW RQ
Twenty-two external factors that may have impact the different development level of rural municipalities’
on the development of municipal websites in Lithuania websites.
were selected on the basis of the results of analysis of
VFLHQWL¿F OLWHUDWXUH 7KH IDFWRUV DSSOLHG LQ WKLV UHVHDUFK 4. Results
present factors from 5 groups (Table 2). Other groups of According to the correlation analysis (Table 2), the
factors are not relevant as all municipalities operate in development indexes of websites of all municipalities
the same legal conditions. One of the main limitations in (N=60) and the major external factors were statistically
the analysis of development level of municipal websites is VLJQL¿FDQWO\UHODWHG7KHGHYHORSPHQWLQGH[HVRIZHEVLWHV
associated with the lack of data about municipalities. For ZHUH FORVHO\ DVVRFLDWHG ZLWK IDFWRUV S
example, there are no data about households that have Furthermore, the correlations between Rutgers index
personal computers and Internet access, and persons of municipal websites and even 13 factors were highly
who use information and communication technologies VWDWLVWLFDOO\VLJQL¿FDQWS$OORIWKHVHFRUUHODWLRQV
(computer and Internet) in each municipality. except one (the rural population), were positive.
7KHUHIRUH LW LV QHFHVVDU\ WR ¿QG FRPSURPLVH EHWZHHQ The economic and social factors were found to
the present data on the external factors and the be the most common factors that have impact on the
factors of the development of municipal websites. development of websites. The development level of
The research made use of the data on 60 Lithuanian municipal websites increases with the increase of foreign
municipalities from Lithuanian Department of Statistics GLUHFW LQYHVWPHQW UV S WKH QXPEHU RI
as of 2011 and 2012 (Lietuvos statistikos departamentas, HPSOR\HG SHUVRQV UV S DQG XQHPSOR\HG
2012). SHUVRQVUV SRSHUDWLQJHFRQRPLFHQWLWLHV
The grouping of Lithuanian municipalities according UV S WRXULVWV UV S DQG WKH
to their level of rurality was used by dividing them into DYHUDJH QHW PRQWKO\ HDUQLQJV UV S 7KH
5 groups (Table 1). The typology based on rurality authors noticed a medium strong positive correlation
dimension has these criteria: a) the remoteness of the between all economic factors and the development
territory; b) the density of population; and c) the number indexes of websites, and a weak positive correlation
of residents in the centre of the territory. These criteria between the average net monthly earnings and the
are stable enough at a long time and characterise the number of tourists. A medium strong positive correlation
VSHFL¿FVRIPXQLFLSDOLW\ is observed between the development level of websites
The development of websites of Lithuanian and some of the social factors: the number of population
PXQLFLSDOLWLHV LV LQÀXHQFHG E\ YDULRXV IDFWRUV 7KH UV S ZRUNLQJ DJH SRSXODWLRQ UV
correlation analysis is a useful method, which can help SPDOHVUV SDQGIHPDOHVUV
reveal the factors that may determine differences in S 1XPEHU RI UHFLSLHQWV RI WKH VRFLDO DVVLVWDQFH
the development of municipalities’ websites. The aim EHQH¿WUV SDIIHFWVWKHGHYHORSPHQWOHYHO
RI WKH FRUUHODWLRQ DQDO\VLV ZDV WR ¿QG UHODWLRQ EHWZHHQ of websites weakly.
the development index of municipal websites and the The impact of geographic factors on the development
22 external factors. The statistical analysis was level of websites is not as clear as the impact of economic
performed with the software SPSS Windows 13.0 and and social factors. A medium strong correlation is noticed
Excel 2003 7KH 6SHDUPDQ FRHI¿FLHQW ZDV HVWLPDWHG between the development level of municipal websites and
XVLQJ WKH FRUUHODWLRQ DQDO\VLV LQ RUGHU WR ¿QG WKH the living place: the higher number of urban population
relations and their strength; p value of <0.05 was in municipalities is related with the higher development
FRQVLGHUHGVWDWLVWLFDOO\VLJQL¿FDQW LQGH[HVRIZHEVLWHVUV S2QWKHFRQWUDU\
The correlation between the development index the smaller is the number of rural population in
of websites of all municipalities and the 22 selected municipalities, the higher is the development index of
H[WHUQDO IDFWRUV ZDV HVWLPDWHG ¿UVW $IWHUZDUGV WKHVH ZHEVLWHV UV S 7KRXJK WKLV UHODWLRQ LV
relations were analysed by grouping municipalities YHU\ZHDN7KHSRSXODWLRQGHQVLW\UV SLV
into three groups (rural, semi urban, and urban) and weakly related with the development of websites: when
dividing three rural municipal subgroups (strong rurality, the population density is greater, then the development

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Table 2
Correlation between Lithuanian Municipal Website Development Factors and Rutgers E-Governance
3HUIRUPDQFH,QGH[DVRI-DQXDU\6SHDUPDQFRHI¿FLHQW
Rutgers index in local municipalities

Factors groups
Medium rurality
Strong rurality
Weak rurality
(N=45) 1-3
(N=60) 1-5
Semi urban
(N=20) 2
(N=18) 3
(N=7) 5
1
(N=8) 4
No.
Urban
Rural
Total
Website development factors
1. Foreign direct investment (2010) -0.11 -0.36 -0.34 0.16 -0.54 0.78* 0.55**
2. Employed persons (2011) -0.17 -0.21 -0.21 0.32 -0.04 0.33* 0.57**
Economic
3. Registered unemployed (2011) 0.09 -0.26 -0.18 0.36 -0.15 0.87 *

0.55**
4. Average net monthly earnings (2011) -0.25 -0.04 0.37 0.18 -0.03 0.61 0.31*
5. Operating economic entities (2012) 0.21 -0.24 -0.31 0.31 -0.01 0.84 *
0.59**
6. Tourists (2011) 0.61 -0.18 -0.18 0.18 0.10 0.70 0.48**
7. Population (2012) 0.07 -0.22 -0.28 0.35 0.02 0.85 *
0.56**
8. Working age population (2012) 0.05 -0.24 -0.27 0.35 0.02 0.84* 0.56**
9. Retirement age population (2012) 0.21 -0.07 -0.22 0.34 0.06 0.85 *
0.58**
Social
10. Males (2012) 0.06 -0.22 -0.29 0.35 0.04 0.84* 0.56**
11. Females (2012) 0.07 -0.21 -0.27 0.35 0.01 0.85 *
0.58**
12. 5HFLSLHQWVRIVRFLDODVVLVWDQFHEHQH¿W 0.15 0.22 -0.17 0.39 -0.14 0.90 *
0.48**
13. Live births (2011) -0.12 -0.08 -0.46 0.30 0.02 0.54 -0.06
14. Population density (2012) -0.78* -0.14 0.54* 0.24 0.26 0.36 0.35**
Geographic
15. Area -0.72 -0.11 -0.27 -0.08 -0.15 0.78* -0.12

16. Urban population (2012) 0.15 0.38 0.17 0.36 0.11 0.85* 0.60**
17. Rural population (2012) -0.03 -0.31 -0.39 -0.09 -0.12 0.75 -0.29*
18. &ROOHJHVDQGXQLYHUVLWLHV - -0.31 -0.05 0.34 0.33 0.74 0.54**
&XOWXUDO
19. Libraries (2011) 0.27 0.09 -0.24 0.31 0.02 0.50 0.09
20. &XOWXUDOFHQWUHV 0.21 -0.06 -0.09 -0.11 -0.13 0.12 -0.05
21. Museums (2011) 0.62 -0.29 -0.23 0.24 -0.08 0.49 -0.02
Political
22. Voter turnout to local councils (2011) -0.04 -0.13 0.12 -0.06 -0.41 0.27 -0.03
&RUUHODWLRQLVVLJQL¿FDQWDWWKHOHYHO
&RUUHODWLRQLVVLJQL¿FDQWDWWKHOHYHO
Source: authors’ calculations based on the Statistics Lithuania data
index of municipal websites is higher. Analysis results level of websites in rural and urban municipalities.
revealed that the development of municipal websites was 6WDWLVWLFDOO\ VLJQL¿FDQW VWURQJ SRVLWLYH FRUUHODWLRQ ZDV
not related with their area. found between the development level of websites and
This study showed that a medium strong positive these economic factors: the foreign direct investment
correlation was noticed only between one of the cultural UV SWKHQXPEHURIXQHPSOR\HGUV
factors – the number of colleges and universities – and S DQG HFRQRPLF HQWLWLHV UV S LQ
WKH GHYHORSPHQW OHYHO RI ZHEVLWHV UV S urban municipalities (N=7). The correlation between the
,W LV HVWLPDWHG WKDW WKHUH DUH QR VWDWLVWLFDO VLJQL¿FDQW number of employed persons and Rutgers index is weak
correlation between the development level of websites UV S6RFLDOIDFWRUVKDYHELJJHULPSDFWRQ
and the number of libraries, cultural centres and the development of municipal websites. Strong correlation
PXVHXPV7KHUHDUHDOVRQRVWDWLVWLFDOVLJQL¿FDQWUHODWLRQ is noticed between the development level of websites and
between the development level of websites and the voter WKHQXPEHURISRSXODWLRQUV SZRUNLQJDJH
turnout to local councils (the political factor). SRSXODWLRQUV SUHWLUHPHQWDJHSRSXODWLRQ
The results of this study showed clear differences UV S PDOHV UV S IHPDOHV
between the factors that have impact on the development UV S DQG UHFLSLHQWV RI VRFLDO DVVLVWDQFH

ISSN 1691-3078
EHQH¿W UV S $QDO\VLV RI WKH JHRJUDSKLF DIIRUGHGE\WKH,&7DQGIDFHIHZHUFKDOOHQJHV/LWKXDQLD

IDFWRUVVKRZHGDVLJQL¿FDQWO\VWURQJFRUUHODWLRQEHWZHHQ meets these criteria partly and has the 29th rank out of
the development of municipal websites and their area 193 of E-government index (UN, 2012). Lithuania has
UV S 7KLV FRUUHODWLRQ LV QRWLFHG RQO\ LQ Internet penetration of almost 70 per cent in e-service
the group of urban municipalities. The number of urban usage but two-thirds (66 per cent) of the country’s
SRSXODWLRQ UV S KDV D VLJQL¿FDQW VWURQJ residents have never used e-government services
impact on the development level of municipal websites in (Pavilenene, 2011).
WKLVJURXS+RZHYHUWKHUHZDVQRVLJQL¿FDQWFRUUHODWLRQ Geographic factors – the population number and
between the political and cultural factors and the density, the urbanisation level – have controversial
development level of websites in urban municipalities. impact on e-governance development. Individuals in
The same tendency is noticed in rural municipalities. urban locations and highly populated areas are more
The correlation between the development level likely to use the Internet than those in rural and low
of websites in subgroups of rural municipalities - populated areas, while some cross-country studies
strong rurality, medium rurality, weak rurality – and ¿QG D QRQVLJQL¿FDQW RU QHJDWLYH HIIHFW RI XUEDQLVDWLRQ
the 22 external factors was analysed in this study. A DQG SRSXODWLRQ GHQVLW\ RQ WKH ,&7 DGRSWLRQ 9LFHQWH
VLJQL¿FDQW FRUUHODWLRQ ZDV IRXQG RQO\ ZLWK RQH IDFWRU et al., 2011). This effect is observed in this study too – a
The development level of websites was related with negative correlation is seen in the case of strong rurality
the population density in the groups of strong rurality municipalities, and positive – in the case of weak rurality
1 DQG ZHDN UXUDOLW\ 1 ,Q WKH ¿UVW FDVH WKLV and total municipalities group. This can be explained
UHODWLRQ LV QHJDWLYH DQG VWURQJ UV S DQG by the economic factors impact. The income gap in the
it means that the development index of websites is ,&7 SHQHWUDWLRQ LV QRWLFHG RQ WKH UXUDOXUEDQ GLYLGH DV
higher when the population density is smaller. In the most of the world’s poor people live in rural areas, and
second case, the correlation is positive and medium most of the world’s rural populations tend to be poor
strong: the development index of websites is higher (UN, 2012). Seeking for local economic development
when the population density is bigger. This study growth, the information and e-services provision is
showed that all the other factors had no correlations used to crate business friendly environment and reduce
between the development level of websites in the groups WKH EXUHDXFUDWLF EXUGHQ WKXV IDFWRUV ± WKH VL]H RI
of strong rurality (N=7) and weak rurality (N=18). foreign direct investments and the number of operating
0RUHRYHUWKHUHZDVHVWLPDWHGQRVWDWLVWLFDOO\VLJQL¿FDQW entities – have high impact on websites development.
correlation between the development of websites and This conclusion is supported by the results of research in
the 22 external factors in the group of municipalities total and urban municipalities groups.
of medium rurality (N=20). The correlation analysis Social factors impact is controversial. A country
ZDV DOVR DSSOLHG LQ RUGHU WR ¿QG WKH UHODWLRQ EHWZHHQ with a very large population should provide many more
the development indexes of websites and the economic, RQOLQH DFFHVV SRLQWV WR LWV FLWL]HQV WKDQ D FRXQWU\ ZLWK
social, geographic, cultural, and political factors in all a small population (UN, 2012). The bigger number of
UXUDOPXQLFLSDOLWLHV1 8QIRUWXQDWHO\QRVLJQL¿FDQW people in vulnerable groups (the number of unemployed,
relations were found. retirement age population, recipients of social assistance
&OHDU GLIIHUHQFHV ZHUH QRWLFHG DFFRUGLQJ WR EHQH¿WVKRXOGHQFRXUDJHWKHGHYHORSPHQWRIPXQLFLSDO
comparative analysis of the development indexes of websites as these people are the users of many public
websites and the economic, social, geographic, cultural, VHUYLFHV5HVXOWVRIWKLVUHVHDUFKFRQ¿UPWKLVHVSHFLDOO\
and political factors in groups of total, urban, and rural in the group of urban municipalities.
municipalities. The development level of municipal 5HVXOWVRIWKLVUHVHDUFKFRQ¿UPWKDWRQO\RQHcultural
ZHEVLWHV LV VLJQL¿FDQWO\ PHGLXP VWURQJO\ WKH PRVW factor – the number of education institutions – has a high
common) related with the economic and social factors LPSDFW RQ WKH ,&7 SHQHWUDWLRQ DV WKH\ ZHUH RQH RI WKH
in the group of total municipalities. The impact of the ¿UVWRUJDQLVDWLRQVFRQQHFWHGWR,QWHUQHW1RUULV
JHRJUDSKLF IDFWRUV LV OHVV VLJQL¿FDQW 7KH LPSDFW RI The evidence of other cultural factors impact is weak
cultural factors on the development level of websites because of data limitations (Vicente et al., 2011).
is very weak. The political factor has no relation with Political factors impact is limited as the focus of
the development of municipal websites. A complex WKH ,&7 DSSOLFDWLRQV FRQFHQWUDWHV WHFKQRORJLHV RQ WKH
of economic, social, and geographic factors plays an management and delivery of services rather than on
important role in the development of websites in urban other areas. The democratic potential of e-government
municipalities. The economic and social factors do is mostly underutilised (Ahn, 2011) as the Internet is not
QRW VLJQL¿FDQWO\ LPSDFW UXUDO PXQLFLSDOLWLHV¶ ZHEVLWHV yet running as effective medium facilitating democratic
development level, except the population density as inputs into the policymaking process (Torres et al., 2006).
the economic and social indicators of Lithuanian rural This can be presumed that the dominant stakeholder in
municipalities which are much lower than the urban development is the bureaucratic administration rather
municipalities’ indicators as well as the small sample of rural WKDQ FLWL]HQV RU SROLWLFLDQV DV LQ 1RUZD\ )ODN HW DO
municipalities. &LWL]HQVSHUFHLYHPRGHUDWHYDOXHLQHJRYHUQPHQW
for knowledge acquisition and communication, while little
5. Discussion as a vehicle of democratic engagement (as in the UK)
The UN (2012) research shows that countries endowed (Kolsaker and Lee-Kelley, 2008). However, the USA
with a high income per capita, a small population, municipalities analysis show that the greater political
HVWDEOLVKHG ,&7 DQG HGXFDWLRQ LQIUDVWUXFWXUHV DQG WKH FRPSHWLWLRQDVZHOODVWKHKLJKOHYHORIFLWL]HQLQYROYHPHQW
high level of human capital can easily utilise advantages and the interest in politics increase the e-governance

ISSN 1691-3078
development as enables online communication with the not only to increase the overall level of e-service
HOHFWHGRI¿FLDOVDQGDOORZVFLWL]HQVWRRYHUVHHWKHFRXQFLO usage but go for the more complex transactions of
activities (Ahn, 2011). e-communication. The internal factors analysis is
A major challenge for policymakers and managers required for comprehensive evaluation of driving
remains not only to increase the overall level of e-service factors impact.
usage but go for the more complex transactions such as
e-consultation. In Lithuania (as well as in Australia), the
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the development indexes of websites in rural pagal kaimiskuma tinkamumas regioninei politikai
municipalities. (Typolopgies of Lithuanian Regions by Rurality for
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JHRJUDSKLF IDFWRUV KDYH VLJQL¿FDQW LPSDFW RQ WKH kaimo verslu ir ju infrastrukturos pletrai, Volume 5,
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ISSN 1691-3078
L. Simanskiene et al. How to Select The Rates of Sustainable Development in Rural Territories:
The Insights to Methodological Approach
HOW TO SELECT THE RATES OF SUSTAINABLE DEVELOPMENT

IN RURAL TERRITORIES: THE INSIGHTS TO
METHODOLOGICAL APPROACH
Ligita Simanskiene*, prof. dr.; Audrius Kutkaitis 1, dr.; Angelija Buciene 2, prof. dr.
1
Management Department of Klaipeda University
2
Social Geography Department of Klaipeda University
Abstract. The integration of rural territories into contemporary development processes has lately been an undoubtedly
popular subject of researcher discussions. A large area of rural territories, a relatively small number of population in
them, and a high percentage of senior people make a certain impact on the economic development of countries and
encourage different kinds of research aiming to motivate faster development. Rapid development at a merely economic
level does not any longer comply with contemporary issues as the national strategies of regional development of most
countries give priority to sustainable regional development, with the attention focussed on environmental protection
and social security of population. The paper discusses the factors of rural territory development and the environmental
DQG VHFXULW\ FULWHULD FRYHULQJ GLIIHUHQW VSKHUHV 7KH SULRULWLHV DQG ZD\V RI LGHQWL¿FDWLRQ VXVWDLQDEOH GHYHORSPHQW
rates of rural territories are discussed, and the prerequisites and factors that affect sustainable development and the
assessment of its situation are established. A methodological approach is presented, which can be applied both for the
assessment of rural territory development in one country and for the comparison of sustainable development of rural
territories in border regions of several countries.
Key words: rural territories, security factors, sustainable development rates, methodological approach.
JEL code: R58
Introduction recommendations for the improvement of the EIA system

The principal provisions of sustainable development and for the increasing of the effectiveness of strategic
have been regularly discussed and developed in a planning. Yet, he did not disclose in what way and which
number of countries of the world. Quite a few European rates it could be possible to indicate the evolution of SD
countries have included the provisions of sustainable DW D FHUWDLQ VSHFL¿F SHULRG RI LWV VWXGLHV &LHJLV 5 DQG
development into their national development strategies Ramanauskiene J. (2011) tried to identify the principles
(Lithuania, Belgium, Poland, Austria, Latvia, Estonia of assessment of Lithuania‘s SD and to assess the
etc.) and have been developing them at a national development of Lithuania in terms of sustainability. The
level. The very conception of sustainable development above quoted and similar papers prove that the subject is
has been thoroughly discussed all over the world. topical and has been regularly addressed by researchers;
+RZHYHU D WRSLFDO LVVXH WKDW KDV UHFHLYHG LQVXI¿FLHQW yet, the analysis of SD processes and the methodology
researchers’ attention is a practically targeted application RI HVWDEOLVKPHQW RI VSHFL¿F UDWHV WKDW LGHQWLI\ FHUWDLQ
of methodologies of sustainable development that processes have not been developed well enough.
would provide appropriate information about the The present paper analyses different approaches and
assessment of sustainable development with regard provides recommendations for more effective application
WR D VSHFL¿F SURFHVV 6RPH UHVHDUFK SDSHUV KDYH of the principles of existing methodologies for the
dealt with sustainable development at a regional level LGHQWL¿FDWLRQRIVSHFL¿FUDWHVRIVXVWDLQDEOHGHYHORSPHQW
&LHJLV 5 HW DO D E 1DYLFNDV . DQG in rural territories.
Tamosiunas T., 2008; Navickas K., 2009); however, The aim of the paper is to analyse the national SD
WKH\ KDYH QRW VXI¿FLHQWO\ GLVFORVHG RU MXVWL¿HG WKH strategy, the papers of Lithuanian and foreign researchers,
PHWKRGRORJ\ RI UDWHV LGHQWL¿FDWLRQ - 6WDQLVNLV HW DO the opinions of experts, and to work out a methodological
(2005) studied the problems of sustainable development schema that would enable to establish the rates and their
of industry and assessed different aspects of clean combinations best identifying sustainable development of
production and pollution prevention in industry. The rural territories.
PHWKRGV RI UDWHV LGHQWL¿FDWLRQ WXUQHG RXW WR EH The object of the research is the selection of
rather abstract, and their practical application – quite conditions and factors of the development of rural
FRPSOLFDWHG)UHTXHQWO\WKHLGHQWL¿HGUDWHVRIVXVWDLQDEOH WHUULWRULHVDQGRIWKHUHÀHFWLQJUDWHVDQGWKHLUDVVHVVPHQW
development (hereinafter: SD) had the characteristics of in terms of sustainability.
qualitative properties and, thus, could be measured in The methods of the research include the analysis of
HYHU\VSHFL¿FFDVH VFLHQWL¿F OLWHUDWXUH WKH SULQFLSOHV RI JHQHUDO DQG ORJLFDO
R. Dapkus (2007) analysed the Lithuanian system of analysis, the methods of comparison and summary as
HQYLURQPHQWDOLPSDFWDVVHVVPHQW(,$DQGLWVLQÀXHQFH well as abstraction, and the studies of expert opinions
on sustainable regional development and provided and their survey by means of a questionnaire.
___________________________
*
E-mail address: ligita_simanskiene@yahoo.com

ISSN 1691-3078
Fig. 1. Security factors of the development of rural territories
Research results and discussion activities in rural territories, but have also offered a general
3UHUHTXLVLWHV IRU WKH UXUDO WHUULWRU\ DQG XQVSHFL¿HG RSLQLRQ WKDW VHDUFKLQJ IRU DFWLYLWLHV
development alternative to agricultural ones play an important role in
The development of rural territories is undoubtedly of the rural development. Quoting Astromskiene A. et al.
JUHDWVLJQL¿FDQFHIRUWKHGHYHORSPHQWRIWKHFRXQWU\DQG (2012), such rapid development of alternative businesses
is included in the long-term development strategies of the in the country could be accounted for primarily by the
Republic of Lithuania. In 2002, the Seimas (Parliament) HFRQRPLF UHVWUXFWXUL]DWLRQ WKH ZLVK WR RYHUFRPH WKH
of the Republic of Lithuania approved the National Long- structural disparities of production, and its too great
Term Strategy until 2015 DQG LGHQWL¿HG WKUHH SULRULWLHV concentration that came into being during the period
for the country: the knowledge society, secure society, of administrative-command economy. In Lithuania, the
and competitive economics, with a special attention to emergence of activities alternative to agricultural ones
the development of agriculture and rural territories. and the improvement of the infrastructure to support
As laid out in the strategy, two directions of farming their development have became the most promising
GHYHORSPHQW ZHUH SODFHG LQ WKH IRUHIURQW VSHFLDOL]HG ¿HOGVIRUWKHRFFXSDQF\RIQDWLRQDOUXUDOSRSXODWLRQDQG
intensive commodity farming operating in the market of restructuring of the market. The research in Latvia has
raw materials and farms that produced natural, organic, shown that the decrease in employment in agribusiness
and non-traditional products and operated in niche might provoke the decrease also in other sectors of
markets. economic activity, especially sectors of services in rural
$%DOH]HQWLVUHODWHGWKHGHYHORSPHQWRIUXUDO space (Krievina A. et al., 2012).
territories to the factors of landscaping, farmsteads, The analysis of the present socio-cultural and
and their arrangement. Referring to O. Stripeikis and P. economic situation in rural settlements of Lithuania and
Zukauskas (2004), small and medium businesses are the condition of their historically developed environment
prerequisites for the development of national economy, demonstrates that both analysed aspects have been
create new jobs, raise the level of the region development, exposed to downward trends (Karvelyte-Balbieriene V.
and reduce the disparities in its development. The et al., 2009). However, the examples of other countries
analysis of the global experience leads to the conclusion having renewed and re-used their historically developed
that an economic system could neither normally function, environment of their rural depopulated areas show the
nor improve without the market of small and medium enhanced and improved quality of social and economic life
businesses. there (Rypkema D. et al., 2011). Therefore, it would be
J. Ramanauskas and A. Gargasas (2011) related the worth to transfer such a practice to our rural territories in
development of rural territories to the development of order to enhance the entrepreneurship, heritage tourism,
WRXULVP LQGXVWULHV 7KH SDSHU HPSKDVL]HG WKH JURZLQJ and even innovations making country‘s rural settlements
public interest in rural tourism over the recent decades, more attractive places.
thus pointing out that it is necessary to maintain and The factors of rural development described in research
support the business. In the researchers‘opinion, certain papers can function separately or in interrelation: it is
attention from the national Government and governmental just important to prevent the competition among the
institutions had been noticed regarding the rural tourism factors responsible for sustainable development of rural
business in the form of adoption of special legal acts and territories; moreover, their interrelation should have a
SURYLVLRQRI¿QDQFLDOVXSSRUWIURPWKHVWDWHEXGJHWDQG synergetic character and ensure security. Security factors
the EU structural funds. of the development of rural territories are presented in
As observed, some researchers have not only Figure 1. The security of the infrastructure and the use of
LQVXI¿FLHQWO\ HPSKDVL]HG WKH GHYHORSPHQW RI VSHFL¿F the existing engineering networks could be named as the

ISSN 1691-3078
second factor in the development of different activities in can serve as a basis for the establishment of enterprise
rural territories. The safety of the infrastructure should VXVWDLQDELOLW\FDQEHMXVWL¿HGE\VSHFL¿FLQVWUXPHQWVXVHG
be related to evaluation of network capacity with the aim for the analysis of services and processes. In our case,
of making no harm to the already existing users, to the LQ UXUDO WHUULWRULHV WKH LQGLFHV UHÀHFWLQJ WKH VRXUFHV RI
development of the road network and appropriate use waste or pollution and their condition can be established
of the existing roads, proper maintenance of the road DVZHOODVWKHUDWHVUHÀHFWLQJHFRQRPLFRXWFRPHVRUWKH
surface etc. Protectionist security means observation LQGLFHVGH¿QLQJWKHVRFLDOOHYHO
of national interests and coordination of the activities
laid out in the national development strategies. Legal ,GHQWL¿FDWLRQRISULQFLSDOVXVWDLQDELOLW\OHYHOV
VHFXULW\GH¿QHVOHJDOFRQGLWLRQVIRUWKHSURYLVLRQRIWKH and rates in rural territories
development of rural territories, ensuring the legitimacy, As noted at the beginning of the paper, three principal
DQGSURSHUIRUPDOL]DWLRQRIDFWLYLWLHVLQDFFRUGDQFHZLWK levels of sustainable development are mainly described
the laws of the Republic of Lithuania. in sources of literature: ecological, economic, and
The most important holistic security requirement VRFLDO 7KH VLJQL¿FDQFH RI WKH WKUHH FRPSRQHQWV LQ WKH
is the prevention of making harm to other factors that context of sustainable development are referred to by
affect the development of rural territories, i.e. human a number of authors (Becker J., 2010; Ballou R.H. and
safety, technologies, transport systems, environment, $QGHUVVRQ'(+LFNIRUG$-DQG&KHUUHWW7-
economic indicators etc. According to the authors‘ point 2007; Barrera-Roldan A. and Saldivar-Valdes A., 2002;
RI YLHZ VRFLDO VHFXULW\ LV D YHU\ VLJQL¿FDQW IDFWRU LQ Jabareen Y.R. , 2004, Moldan B. and Dahl A.L., 2007).
the development of rural territories. That is a factor of The major and the most frequently faced problem is the
equal value to others – in seeking the security of people, GLI¿FXOW\WRDSSURSULDWHO\FRPELQHWKHDERYHPHQWLRQHG
infrastructure, economy etc. – to involve the subjects- groups of conceptions of sustainable development and
participants of the process. the use of them as a general instrument of sustainable
Basing on the model of change management in an development which would contribute to the pursuit
RUJDQL]DWLRQSURYLGHGE\5&LHJLVDQG5*UXQGD of sustainable development. All the components of
p. 23) and some other statements of the aforementioned sustainable development are to be assessed equally.
DXWKRUVZHFDQGH¿QHWKHDVVHVVPHQWSURFHGXUHRIWKH It is important to establish the indices of sustainability
sustainability of different processes. The conception of as that is a responsible process predetermining the
sustainable development applied to a process is divided VXFFHVV RI WKH UHVHDUFK 3URSHU LGHQWL¿FDWLRQ RI UDWHV
into stages when one perceives what sustainability and further collection of accurate data accounts for the
is, how to become sustainable, and what indicates development of the concept of assessment of sustainable
VXVWDLQDELOLW\ &LHJLV 5 *UXQGD 5 2Q WKH development of rural territories. In that case, logical
basis of the above mentioned sequence, the authors of combination of qualitative and quantitative data is a
WKH SDSHU GLYLGH WKH SURFHVV RI WKH UDWHV LGHQWL¿FDWLRQ
QHFHVVLW\DVPHUHLGHQWL¿FDWLRQRITXDOLWDWLYHLQGLFHVIRU
of rural territories’ sustainable development into three
WKH FKDUDFWHUL]DWLRQ RI VXVWDLQDEOH GHYHORSPHQW PD\
stages: the understanding of sustainable development of
lead to a question how to obtain some of the data and
UXUDO WHUULWRULHV GH¿QLQJ KRZ WKH GHYHORSPHQW RI UXUDO
WR YHULI\ WKHP IRU D VSHFL¿F UHJLRQ ,Q WKH VWDJH RI WKH
WHUULWRULHV FDQ EH PDGH VXVWDLQDEOH DQG YHUL¿FDWLRQ
outcome assessment, it is assessed whether the activity
of what proves the sustainable development of rural
or the processes taking place comply with the planned
territories and how it can be measured. In Stage 1,
standards at all the levels of sustainability.
the understanding of sustainable rural environment is
To identify ecological indices, one can use the reports
GHYHORSHGZKLFKZRXOGUHÀHFWWKHWKHRUHWLFDOFRQFHSWLRQ
RI HQYLURQPHQWDO PRQLWRULQJ 7KH UHSRUWV UHÀHFW WKH
RI VXVWDLQDELOLW\ ,Q RXU FDVH LW ZRXOG FKDUDFWHUL]H
principal environmental protection (ecological) rates
the ecological, economic, and social environments of
UXUDO WHUULWRULHV WKHRUHWLFDOO\ HVWDEOLVK DQG GH¿QH WKH VLJQL¿FDQWIRUWKHDFWLYLW\LQUXUDOWHUULWRULHV7KHLQGLFHV
VLJQL¿FDQFH RI WKH HQYLURQPHQWV IRU WKH GHYHORSPHQW of environmental protection are measured and assessed
of rural territories, and identify the level, which the each year. The measurements aim to establish whether
implementers should deal with. In Stage 2, it is necessary the activities carried out in rural territories are not
to establish the principal components of sustainability of detrimental to the environment.
rural territories. In our case, it is necessary to identify Economic indicators in the development of rural
WKH SULQFLSDO FULWHULD WKDW ZRXOG UHÀHFW WKH HFRORJLFDO territories, just like in many other developmental
economic, and social development. Their intensity SURFHVVHV DUH DOVR RI JUHDW VLJQL¿FDQFH 6LQFH WKH
and distribution should be equal, and their summary Lithuanian strategy of sustainable development was
expression should be one, or the general intensity should drafted as a European Integration Strategy, the
EH&LHJLV5HWDOD assessment of the achievements and problems of
In Stage 3, it is necessary to develop an understanding Lithuania sustainable development mainly focused on the
of what will indicate the sustainability of rural territories, rate of convergence with the old EU member states and
i.e. the testing of the selected criteria. The (non) referred to the basic aspiration of the National Strategy of
sustainability of the development of rural territories will Sustainable Development: in accordance with the rates of
be indicated by the non-compliance of the components economic and social development and the effectiveness
of sustainability with the above mentioned summary of the use of resources, to reach the average of the old EU
expression and intensity (33.3% individually for each member states of 2003 before 2020; in accordance with
of the components of sustainability). As stated by the rates of the environmental pollution, Lithuania sought
K. Navickas and N. Navickiene (2009), the criteria that not to exceed the norms allowed in the EU and to observe

ISSN 1691-3078
Fig. 2. Schema of rural territory development and selection of the rates of sustainable development
the requirements of the international conventions limiting territories (in the paper, they were named as experts who
environmental pollution and the impact on the global conducted expert survey) were presented a questionnaire
climate (Juknys R., 2012). DQG DVNHG WR DVVHVV UDWHV E\ FKDUDFWHUL]LQJ KRZ
The assessment of economic rates takes place important the measured rates were for the development
HYHU\ \HDU ZLWK WKH DLP WR HVWDEOLVK ¿QDQFLDO EHQH¿W of rural territories. The individuals, named as specialists
the taxes payable to the state, and the tasks of the of the development of rural territories, knew the
LPSOHPHQWHGSURWHFWLRQLVWSROLF\,QWKHLGHQWL¿FDWLRQRI VSHFL¿FLW\ RI WKH GHYHORSPHQW RI UXUDO WHUULWRULHV DQG
WKH UDWHV EHVW UHÀHFWLQJ HFRQRPLF DFWLYLW\ ZH ZLOO XVH were informed of what was important for rural regions.
national activity reports and the Eurostat statistical data 7KH UHVSRQGHQW VSHFLDOLVWV LGHQWL¿HG LWHPV RXW
on the activities carried out in the country. The indices RI DV WKH PRVW VLJQL¿FDQW RQHV IRU WKH GHYHORSPHQW
GH¿QLQJWKHVRFLDOOHYHORIVXVWDLQDELOLW\ZLOOEHLGHQWL¿HG of rural territories and the ones to be used in the
by adaptation of the rates of the National Strategy of assessment of sustainability. By Action 5, named in the
Sustainable Development of the Republic of Lithuania. SDSHUDV³H[SHUWVXUYH\´WKHUDWHVLGHQWL¿HGE\WKH
By combining the methodologies of different authors for rural territory development specialists were presented
WKHLGHQWL¿FDWLRQRIVXVWDLQDEOHGHYHORSPHQWZHZLOOEH to specialists of sustainable development. SD specialists
DEOH WR HVWDEOLVK DXQLTXHVHTXHQFHIRULGHQWL¿FDWLRQ RI involved in the research were people knowledgeable
the rates of assessment of sustainable development of DERXW WKH VSHFL¿FLW\ RI VXVWDLQDEOH GHYHORSPHQW DQG
rural territories. The sequence covers seven individual WKHPVHOYHV ZHUH ZRUNLQJ LQ WKH ¿HOG 7KH DERYH
steps, whose consistent implementation can lead to the mentioned experts, who were issued different kinds
establishment of the rates identifying the sustainable of questionnaires, were asked to assess the rates
development of rural territories (Figure 2). VLJQL¿FDQW IRU WKH GHYHORSPHQW RI UXUDO WHUULWRULHV LQ
$V WKH LGHQWL¿FDWLRQ RIWKH UDWHV IRUWKH DVVHVVPHQW terms of sustainable development. The survey included
of the sustainable development of rural territories is 26 principal rates. Within the aforementioned rates,
RI VSHFLDO VLJQL¿FDQFH WKH SURFHVV RXJKW WR JHW WKH WKH 6' VSHFLDOLVWV QDPHG UDWHV VLJQL¿FDQW IRU WKH
JUHDWHVWDWWHQWLRQ7KHWRWDOSURFHVVRIWKHLGHQWL¿FDWLRQ development of rural territories in terms of sustainable
of the rates of development of rural territories can be development identifying the development of rural
FKDUDFWHUL]HGE\WKHIROORZLQJ¿JXUHV%\ territories at the levels of sustainability. By Action 6, we
$FWLRQ )LJXUH DOO WKH UDWHV WKDW FKDUDFWHUL]H WKH performed sensitivity analysis of the 14 selected rates.
development of rural territories are established; they Sensitivity analysis is a research method during which
identify three levels of sustainability. They disclose WKH UDWHV LGHQWL¿HG E\ H[SHUWV DUH FRPSDUHG WR YHULI\
the factors that affect ecological, economic, and social whether the given rates do not indicate the same state
SURFHVVHV WDNLQJ SODFH LQ DQ RUJDQL]DWLRQ 7KH UDWHV of the environment only in a different way of expression.
establishing the sustainability of the rural territory In our case, the testing of the rates was performed by
GHYHORSPHQWZHUHLGHQWL¿HGEDVHGRQWKHDERYHQDPHG observing their distribution in different environments.
sources (document analysis, interviews with specialists A matrix acceptable for the research was elaborated,
DQGFRQVXOWDQWVLQDUHVSHFWLYH¿HOGHWF,QWKHDFWLYLW\ ZKLFKUHÀHFWHGWKHWKUHHVHOHFWHGOHYHOVRIVXVWDLQDELOLW\
of rural territory development, they should meet the ecological, economic, and social and the environments,
criteria that predetermine the technological development ZKLFK ZHUH LGHQWL¿HG E\ WKH UDWHV JHQHUDO WKH UDWH
of rural territories and the factors of security, and are to related to other subjects, and individual efforts of the
comply with one of the sustainability levels (ecological, developers of rural territories. Among the 14 initial rates,
economic, or social). By Action 4, the specialists of rural 12 were selected for the further research: we noticed

ISSN 1691-3078
WKDW DW WKH HFRORJLFDO OHYHO WKH UDWHV LGHQWL¿HG ERWK E\ 5. Becker, J. (2010). Use of backcasting to integral
the specialists of rural territory development and SD indicators with principles of sustainability.
indicated the same condition of the environment. In International Journal of Sustainable Development &
the authors’ opinion, such outcome did not really meet World Ecology, Vol. 17 (3), pp. 1-74.
the requirements of the research as two rates out of 10 6. &LHJLV5*UXQGD5,PRQŏVWUDQVIRUPDYLPR
were related to the same environment of rural territories. i darnia imone procesas (Strategic Management
Therefore, the two rates identifying the same condition Process of Business Transformation into Sustainable
were removed from the research. An assumption was Business). 2UJDQL]DFLMX YDG\ED VLVWHPLQLDL
made that the basic rates representing sustainable tyrimai (Management of Organisations: Systematic
development were of equal value and complied with the Research), Nr. 44, Kaunas, pp. 19-34.
UHVHDUFKVDPSOHVLQFHWKHLGHQWL¿HGUDWHVVHOHFWHGIRUWKH 7. &LHJLV 5 5DPDQDXVNLHQH - ,QWHJUXRWDV
research were tested by two expert surveys. Sensitivity darnaus vystymosi vertinimas: Lietuvos
assessment of the selected SD rates was performed. The atvejis (Integrated Assessment of Sustainable
PHDVXUHPHQWRIWKHVXVWDLQDELOLW\UDWHZDVVWDQGDUGL]HG 'HYHORSPHQW/LWKXDQLDQ&DVH. Vadybos mokslas ir
in accordance with the EU Directive (ISO 2010 ISO studijos – kaimo verslu ir ju infrastrukturos pletrai
26 000). The described methodological approach is (Management theory and studies for rural business
intended to be transferred for the assessment and and infrastructure development), Nr. 2 (26),
strengthening of regional development policy in the cross- Klaipeda, pp. 39–49.
border rural territories of few neighbouring countries: 8. &LHJLV 5 5DPDQDXVNLHQH - 6LPDQVNLHQH /
Poland, Russia (Kaliningrad region), and Lithuania. (2010a). Lietuvos regionu darnaus vystymosi
vertinimas (Assessment of sustainable development
of Lithuanian regions), KU, p.148.
Conclusions
9. &LHJLV 5 7DPRVLXQDV 7 5DPDQDXVNLHQH -
1. All the factors of sustainable development in scope
Navickas, K. (2010b). Darnaus industriniu zonu
RI UXUDO WHUULWRU\ GHYHORSPHQW KDYH WR UHÀHFW
vystymosi vertinimas (Assessment of sustainable
security criteria: human security, protectionist
development of industrial zones), Siauliai: SUL,
security, infrastructural security, social security,
p. 344.
ecological security, legal security, economic
10. Dapkus, R. (2007). Poveikio aplinkai vertinimo
security, technological security, and structural
sistema ir darni regiono pletra. Management
security.
Theory and Studies for Rural Business and
2. The rates of rural territory development have been
Infrastructure Development. Vadybos mokslas
established at three levels of sustainability. Their
ir studijos - kaimo verslu ir ju infrastrukturos
intensity in each component is uniform, and the
SOHWUDL PRNVOR GDUEDL /LHWXYRV ]HPŏV XNLR
summary expression is equal to one. Sustainable
universitetas (Management theory and studies for
development, in scope of the development of
rural business and infrastructure development).
rural territories, as a complex multidimensional
Kaunas, Akademija : LZUU Leidybos centras., 11(4)
structure, can be stimulated by regulated, planned,
pp. 20-28.
or spontaneous interventions caused by the
11. ISO 2010 ISO 26 000: Guidance on social responsibility.
environment.
,QWHUQDWLRQDO 2UJDQL]DWLRQ IRU 6WDQGDUGL]DWLRQ
3. In order to ensure sustainable development of rural
*HQHYD 6ZLW]HUODQG 5HWULHYHG http://www.iso.
territories, it is necessary to identify the sources of
org/iso/iso_catalogue/management_standards/
ZDVWH DQG SROOXWLRQ DQG WKH LQGLFHV UHÀHFWLQJ WKHLU
social_responsibility.html. Access: 10.01.2013.
FRQGLWLRQ WKH UDWHV UHÀHFWLQJ HFRQRPLF RXWFRPHV
12. +LFNIRUG $ - &KHUUHWW 7 - :0
DQGWKHUDWHVFKDUDFWHUL]LQJWKHVRFLDOOHYHO
Developing innovative and more sustainable
approaches to reverse logistics and the collection,
Bibliography recycling and disposal of waste products from urban
1. Astromskiene, A., Ramanauskiene, J., Adamoniene, R. centres. Green Logistics, pp. 107-123.
(2012). Alternatyvios veiklos kaimo vietovese pletros 13. Jabareen, Y. R. (2004). Knowledge map for describing
perspektyvos (Development Factors of Alternative YDULHJDWHG DQG FRQÀLFW GRPDLQV RI VXVWDLQDEOH
Activity in Rural Areas). Management theory and development. Journal of Environmental Planning and
studies for rural business and infrastructure, Management, Vol. 47, No. 4, pp. 632–642.
Nr.2 (31), pp. 6-14. 14. Juknys, R. (2012). Nacionalines darnaus vystymosi
2. %DOH]HQWLV$.DLPRYLHWRYLXUDLGDLUPRGHOLDL VWUDWHJLMRV šJ\YHQGLQLPR P DWDVNDLWD
GDUQDXV Y\VW\PRVL SR]LXULV (The Evolution and (Report on the implementation of national
Models of Rural Areas: a Sustainable Development sustainable development strategy for 2008-2010).
Approach). Management theory and studies for Aplinkos ministerija, Vilnius.
rural business and infrastructure development. 15. Karvelyte-Balbieriene, V., Mlinkauskiene, A.,
Nr. 2 (26), pp.31-38. *UD]XOHYLFLXWH9LOHQLVNH , 7KH SUHVHQW
3. Ballou, R. H., Andersson, D. E. (2005). Business state of the built historic environment of Lithuanian
Logistics Management. Logistics and Supply Chain rural settlements and its potential for sustainable
Management&KDSWHU7KH:RUOG%DQN VRFLRHFRQRPLF GHYHORSPHQW &DVH RI 6XGRYLD
4. Barrera-Roldan, A, Saldivar-Valdes, A. (2002). region). Rural development 2009, Proceedings of
Proposal and application of a sustainable development WKH)RXUWK,QWHUQDWLRQDO6FLHQWL¿F&RQIHUHQFH
index. Ecological Indicators, 2, pp. 251–256. October, 2009, Lithuanian University of Agriculture,

ISSN 1691-3078
Vol. 4, book 1, Akademija, Kaunas region, Lithuania, vadyba: aktualijos ir perspektyvos (Economics and
pp. 61-67. management: current issues and perspectives),
16. Krievina, A., Leimane, I., Miglavs, A. (2012). The Nr. 4 (13), pp. 313–320.
Role of Agribusiness in Maintenance of Future 21. Ramanauskas, J., Gargasas, A. (2011). Kaimo
Rural Employment in Latvia. Proceedings of Latvia WXUL]PR VRG\EX YHLNORV YHUWLQLPDV GDUQDXV
University of Agriculture, 28 (323), pp. 29-38. vystymosi aspektu (Assessment of Rural Tourism
17. 0ROGDQ % 'DKO $ / &KDOOHQJHV WR Farmsteads by Sustainable Development Aspect).
Sustainable Indicators. In: T. Hak, B. Moldan, Management theory and studies for rural business
A. L. Dahl. (eds). Measuring progress towards and infrastructure development. Nr. 2 (26),
sustainability: assessment of indicators: a Project pp.186- 192.
RI 6&23( WKH 6FLHQWL¿F &RPPLWWHH RQ 3UREOHPV RI 22. 5\SNHPD ' &KHRQJ & 0DVRQ 5
WKH (QYLURQPHQW RI WKH ,QWHUQDWLRQDO &RXQFLO IRU Measuring economic impacts of historic
6FLHQFH:DVKLQJWRQ'&SS± SUHVHUYDWLRQ $ 5HSRUW WR WKH $GYLVRU\ &RXQFLO RQ
18. 1DYLFNDV.2UJDQL]DFLMRVGDUQRVYHUWLQLPR Historic Preservation, University of Pennsylvania,
modelio kurimas (Developing of model of assessment School of Design, Historic Preservation Program.
of sustainable organisation). Darnaus vystymosi Retrieved: http://www.achp.gov/docs/economic-
strategija ir praktika (Strategy and practice of impacts-of-historic-preservation-study.pdf. Access:
sustainable development). Vilnius: MRU, pp. 43–52. 15.12.201.
19. Navickas, K., Navickiene, R. (2009). Darnios 23. 6WDQLVNLV - 6WDQLVNLHQH = -DVFK &K (2005).
RUJDQL]DFLMRV PRGHOLR NXULPDV Developing the Assessment of environmental costs for sustainable
Model of a Sustainable Organisation). Ekonomika ir industrial development. Kaunas: Technologija,
vadyba: aktualijos ir perspektyvos (Economics and p. 260..
management:current issues and perspectives), Nr. 2 24. Stripeikis, O., Zukauskas, P. (2004). Smulkaus ir
(15), pp. 192–201. vidutinio verslo aplinka Lietuvos ir ES rinkose (Small
20. Navickas, K., Tamosiunas, T. (2008). Darniu and medium business environment in the markets of
LQGXVWULQLX ]RQX NXULPRVL JDOLP\EHV 6LDXOLX PLHVWH /LWKXDQLDDQG(82UJDQL]DFLMXYDG\EDVLVWHPLQLDL
(The Development Possibilities of Sustainable W\ULPDL 0DQDJHPHQW RI RUJDQL]DWLRQV V\VWHPLF
,QGXVWULDO =RQHV LQ âLDXOLDL &LW\ (NRQRPLND LU research). Kaunas, VDU, Nr. 31, pp. 209-227s)
Acknowledgements
7KLV SDSHU LV ZULWWHQ XVLQJ GDWD IURP WKH 3URMHFW ³6XSSRUW DQG GHYHORSPHQW RI UXUDO HQWUHSUHQHXUVKLS IURP ORFDO
H[SHULHQFHWRFURVVERUGHUFRRSHUDWLRQ´*UDQW&RQWUDFWQXPEHU,/35

ISSN 1691-3078
K. Krzyzanowska Corporate Social Responsibility: A Case Study of a Logistics Company
CORPORATE SOCIAL RESPONSIBILITY: A CASE STUDY OF A

LOGISTICS COMPANY
Krystyna Krzyzanowska1, PhD, professor in SGGW

Warsaw University of Life Sciences (SGGW)
Abstract. The aim of the study was to examine the respondents’ knowledge of the concept of corporate social
UHVSRQVLELOLW\ &65 WKH EHQH¿WV RI &65 LPSOHPHQWDWLRQ LQ '% 6FKHQNHU DQG WR LGHQWLI\ WKH UHDVRQV DQG W\SHV RI
socially responsible activities undertaken by this logistics company. The article uses primary and secondary sources
and refers to the literature on the subject. The study shows that the vast majority of DB Schenker employees were
IDPLOLDU ZLWK WKH FRQFHSW RI &65 EXW WKHLU XQGHUVWDQGLQJ RI LW ZDV GLIIHUHQW <RXQJHU ZRUNHUV LGHQWL¿HG FRUSRUDWH
VRFLDOUHVSRQVLELOLW\ZLWKDFWLRQVE\FRPSDQLHVWRZDUGVVRFLHW\DQGWKHHQYLURQPHQW7KHROGHUHPSOR\HHVGH¿QHG&65
mainly as transparency and legal compliance in business operations. According to the respondents, DB Schenker takes
socially responsible actions in the following areas: towards the local community (88.2%), the environment (74.1%),
the employees (51.8%), and the market (28.2 %).
Keywords: corporate social responsibility, DB Schenker.
JEL code: M 14
Introduction empirical studies on 85 employees, members of the

Until recently, it was widely believed that executive board of DB Schenker. The respondent group
FRPSDQLHV RSHUDWH VROHO\ LQ RUGHU WR PDNH D SUR¿W consisted of 61% of women and 39% of men. The
Few entrepreneurs and managers could see the need largest group of respondents (46%) were middle-aged
to link business activities with ethics and in particular (36 - 45 years), 25% of respondents were under the
with social responsibility and the natural environment age of 36, and 30% were respondents over 45 years of
protection. Nowadays an increasing number of business age. The vast majority of these people were very well
entities show interest in the management concept, educated as 95% were university degrees holders.
which involves activities deliberately oriented on
broadly understood social and environmental interests The idea of corporate social responsibility
:RORV]\Q - 6WDZLFND ( 0 5DWDMF]DN 2QH
could say that the idea of a socially responsible company
in literature
&RUSRUDWH VRFLDO UHVSRQVLELOLW\ LV GH¿QHG E\ WKH
starts to penetrate the reality of Polish business.
(XURSHDQ &RPPLVVLRQ DV D YROXQWDU\ LQWHJUDWLRQ RI
Therefore, it seems valuable to address the issue,
identify the areas and scope of such initiatives, assess environmental and social considerations into business
WKHEHQH¿WVWKH\EULQJDQGGHWHUPLQHZKRPWKH\VHUYH operations, over and above legal requirements
The purpose of the study was to examine the and contractual obligations. The implementation of
respondents’ knowledge of the concept of corporate the concept of corporate social responsibility was
social responsibility and identify the reasons and supported by the European Parliament resolution of
scope of the activities undertaken by the logistics 13 March 2007, which states the following:
company DB Schenker. The object of the study was — the increasing social and environmental responsibility
WKH ERDUG RI¿FH VWDII '% 6FKHQNHU RQ FRUSRUDWH by business, linked to the principle of corporate
social responsibility. In the study, the following accountability, represents an essential element of
hypotheses were formulated: the European social model and Europe’s strategy for
1) HPSOR\HHV DUH PRUH DZDUH RI &65 VWUDWHJ\ E\ sustainable development;
the company to the local communities and the — &65VKRXOGWDFNOHQHZDUHDVVXFKDVOLIHORQJOHDUQLQJ
environment than to employees; the organisation of work, equal opportunities, social
2) understanding of the nature of corporate social inclusion, sustainable development, and ethics;
responsibility depends on the age of employees; — there is a link between corporate social responsibility
3) employees, when choosing an employer, pay more (including activities to eliminate inequality and
DWWHQWLRQ WR WKH SURIHVVLRQDO EHQH¿WV WKDW FDQ EH promote fair wages policy) and the competitiveness
achieved, than engage in social activities. of the company.
To explore the issue of corporate social responsibility $FFRUGLQJ WR - $GDPF]\N FRUSRUDWH VRFLDO
concept a diagnostic survey method was used, which responsibility can be interpreted as a commitment
FRQVLVWHG RI WKUHH WHFKQLTXHV VXUYH\ E\ VWDQGDUGL]HG to transparent and ethical business according to the
questionnaire, participant observation, analysis of the principles of sustainable development and the pursuit of
OLWHUDWXUH DQG ,QWHUQHW VRXUFHV ,Q $ /HRQWRZLF] social welfare, taking into account the expectations of
under the supervision of the author carried out the stakeholders, but in compliance with the law and norms
___________________________
1
(PDLODGGUHVVNU\VW\QDBNU]\]DQRZVND#VJJZSO

ISSN 1691-3078
Table 1
The idea of corporate social responsibility according to the respondents (in %)
No. 6SHFL¿FDWLRQ Total Age (in years)

N=85 % <25 25-35 36-45 46-55 >55
1. Engagement in social activities 61 71.8 6.5 27.9 32.8 27.9 4.9
2. Environmental protection 57 67.1 7.0 29.8 43.9 15.8 3.5
3. Respect for workers’ rights 53 62.4 7.5 17.8 30.2 32.1 13.2
4. Marketing tool 33 38.8 12.1 33.3 21.2 18.2 15.2
5. &RPSOLDQFHZLWKWKHODZ 19 22.4 5.3 10.5 15.8 31.6 36.8
6. Transparent business operations 17 20.0 5.9 11.8 17.6 23.5 41.2
*The respondent could give more than one answer
Source: author’s research
of behaviour. Taking into account the expectations of W\SHRIDQRUJDQL]DWLRQ±VHUYLFHSURYLGHUVFRPPHUFLDO

stakeholders and creating value for them leads to social FRPSDQLHV SXEOLF LQVWLWXWLRQV HWF 2FLHF]HN :
stability, which is necessary to reduce uncertainty in *DMG]LN%
EXVLQHVV RSHUDWLRQV - $GDPF]\N 7KH FRQFHSW Social responsibility of a company implies the
of social responsibility is considered a tool for the commitment to take action in different areas. There were
creation of competitive advantage on the market where fears that if a company is responsible for a particular
customers, employees, and investors regard social values ¿HOG LW FDQ KDYH LQÀXHQFH RYHU LW 6WRQHU - $ )
as increasingly important. Freeman R. E, Gilbert D. G., 1997). Therefore, P. Drucker
According to A. Paliwoda-Matiolanskia, corporate warned that companies should limit their responsibility
VRFLDO UHVSRQVLELOLW\ LV ³DQ HIIHFWLYH EXVLQHVV only to those areas where they have competence
management process, which by responding to the (Drucker, P., 1994). These concerns are particularly
LGHQWL¿DEOH H[SHFWDWLRQV RI VWDNHKROGHUV FRQWULEXWHV MXVWL¿HGLQWKHFDVHRISKLODQWKURSLFDFWLRQVDVWKH\PD\
to the increased competitiveness, ensuring the stability EHWDNHQLQRUGHUWRJDLQLQÀXHQFH7KHUHIRUHWKHFRQFHSW
and sustainable development of the company, while of corporate social responsibility has both proponents
shaping favourable conditions for economic and social and opponents.
GHYHORSPHQW FUHDWLQJ ERWK VRFLDO DQG HFRQRPLF YDOXH³ The proponents of corporate social responsibility
(Paliwoda-Matiolanska A., 2009). HPSKDVL]H WKH QHHG IRU DQ\ HQWHUSULVH WR EHDU WKH
7KH FRPSOH[ FKDUDFWHU RI &65 LV ZHOO UHQGHUHG LQ consequences of its operations. It involves the necessity
the ISO 26000 standard published in November 2010. WR QHXWUDOL]H VXFK QHJDWLYH HIIHFWV RI WKHLU DFWLYLWLHV
$FFRUGLQJ WR ,62 GH¿QLWLRQ VRFLDO UHVSRQVLELOLW\ as pollution of the environment, exclusion due to
LV WKH UHVSRQVLELOLW\ RI DQ RUJDQL]DWLRQ IRU WKH LPSDFWV termination of employment, deterioration of material
of its decisions and activities on society and the VWDWXV DQG GHYHORSPHQW RI FLYLOL]DWLRQ GLVHDVHV $W WKH
environment through transparent and ethical behaviour same time, the social nature of company operations
that contributes to sustainable development, including implies its important role in the economy, involving
health and the welfare of society; takes into account not only the satisfaction of material needs, but also
the expectations of stakeholders; is in compliance with SDUWLFLSDWLRQLQWKHFLYLOL]DWLRQDQGFXOWXUDOGHYHORSPHQW
applicable law and consistent with international norms of of the society.
EHKDYLRXUDQGLVLQWHJUDWHGWKURXJKRXWWKHRUJDQL]DWLRQ The opponents of this idea argue that the extension
and practised in its relationships (Guidance on Social ..., of the interpretation of social responsibility may
2008). ISO 26000 standard alongside with the principles threaten the economy, distracting businesses from
RIVRFLDOUHVSRQVLELOLW\GH¿QHVVHYHQFRUHDUHDVRI&65 WKHLU EDVLF HFRQRPLF UROH ZKLFK LV WR PDNH D SUR¿W IRU
namely: corporate governance, human rights, labour WKH RZQHUV &RSHODQG 7 .HOOHU 7 =XUDZLQ -
practices, the environment, market practices, consumer Other arguments against social responsibility relate to
issues, and community involvement and development. WKH SRVVLELOLW\ RI D FRQÀLFW RI LQWHUHVWV EHWZHHQ YDULRXV
+DEHN 3 6]HZF]\N 3 ,W DLPV WR VXSSRUW groups of stakeholders. The social engagement of
RUJDQL]DWLRQV LQ WKH DUHD RI VRFLDO UHVSRQVLELOLW\ DQG enterprises is an opportunity to shape a positive image
provides practical guidance regarding the introduction RI WKH FRPSDQ\ DQG LQÀXHQFH SXEOLF RSLQLRQ +RZHYHU
of the concept, identifying stakeholders, improving PDQ\ RUJDQL]DWLRQV ODFN EXVLQHVV VNLOOV DQG H[SHULHQFH
WKH UHOLDELOLW\ RI UHSRUWV HQKDQFLQJ FRQ¿GHQFH LQ WKH necessary to assess the value and usefulness of various
RUJDQL]DWLRQ DQG DPRQJ VWDNHKROGHUV DQG GHYHORSLQJ social, mainly charitable, programmes.
corporate social responsibility awareness. The resulting In conclusion, it should be noted that the integration
standard is universal and consistent with other of social concerns into business operations is important
UHFRJQL]HG VWDQGDUGV LQ WKH DUHD RI FRUSRUDWH for the company, as it enhances the long-term
UHVSRQVLELOLW\ ZKLFK XVH WKH WHUP ³FRUSRUDWH VRFLDO development. Experience has shown that companies
UHVSRQVLELOLW\´ EHFDXVH LW KDV EHHQ FUHDWHG IRU DOO EHQH¿WIURPRSHUDWLQJLQDPDQQHUWKDWVRFLHW\FRQVLGHUV
RUJDQL]DWLRQV QRW MXVW IRU EXVLQHVVHV 7KLV VWDQGDUG LV responsible. Therefore, the idea of corporate social
a set of voluntary guidelines that can be used by any responsibility requires the recognition and acceptance of

ISSN 1691-3078
Table 2
The company’s activity towards the local community, in the opinion of the respondents (in %)
No. 6SHFL¿FDWLRQ Total

N=85 %
1. Employee volunteering 80 94.1
2. &RRSHUDWLRQZLWKORFDO1*2V 75 88.2
3. Integration of the needs and opinion of the local community 67 78.8
4. Initiating own social projects 60 70.6
5. Providing material assistance 55 64.7
6. Implementation of scholarship programs 50 58.8
7. 7UDQVIHURISDUWRIWKHSUR¿WIURPVDOHVRISURGXFWVDQGVHUYLFHV 44 51.8
8. Providing services, premises, or equipment free of charge 33 38.8
Table 3
CSR Initiatives implemented towards the environment, in the opinion of the respondents (in %)

N=85 %
1. Reducing waste production and promoting segregation 73 85.9
2. Monitoring and implementation of recommendations for saving paper, power water, 70 82.4
and recycling in the company
3. Promoting pro-environmental behaviour among the stakeholders 65 76.5
4. Offering environmentally friendly products 55 64.7
5. The use of environmentally friendly technology 53 62.4
the community so that the expectations of companies can on the age of the respondents. The younger employees
EHLGHQWL¿HGDQGWKHQPHW JHQHUDOO\ LGHQWL¿HG &65 ZLWK DFWLRQV WDNHQ WRZDUGV WKH
A collection of tools used to manage corporate social society and to protect the environment, while older
responsibility is considerable and closely linked to the ZRUNHUV RIWHQ LGHQWL¿HG &65 ZLWK FRPSOLDQFH ZLWK WKH
FRPSDQ\¶VRUJDQL]DWLRQDOFXOWXUHDVZHOODVLWVEXVLQHVV law and transparency of business operations.
SUR¿OH7KHPRVWFRPPRQDQGZLGHO\XVHGLQFOXGHSXEOLF 7KH VWXG\ VKRZV WKDW WKH PRVW LPSRUWDQW EHQH¿WV
awareness campaigns, socially engaged marketing, of implementing corporate social responsibility in
ethical programs for employees, corporate governance, the company include: better company image (32%),
corporate responsibility standards, eco-labelling competitive advantage (26%), employee development
and social-labelling, socially responsible investment (20%), environmental protection (11%), and increased
market, community involvement, and environmental customer loyalty (8%).
management (Flipp E., 2008). The aim of the study was to determine whether the
employees knew that the concept of social responsibility
Results and Discussion had been implemented in the company. It turned out that
The empirical study shows that 96.5% of respondents 64% of the respondents were aware of the practice, 5%
had heard before about the idea of corporate social were of the opposite opinion, and the others were not
responsibility, and only 3.5% were not familiar with able to answer clearly. Despite their familiarity with the
this concept. This shows the managers’ interest in WHUP³FRUSRUDWHVRFLDOUHVSRQVLELOLW\´HPSOR\HHVGLGQRW
QHZ LGHDV IRU D EHWWHU DQG PRUH HI¿FLHQW PDQDJHPHQW always perceive the manifestations of this strategy in
of the company. Their understanding of the concept their company.
of corporate social responsibility is presented in According to the respondents, DB Schenker initiates
Table 1. acts of corporate social responsibility in the following
More than two thirds of the surveyed employees areas: towards the local community (88.2%), towards
understood the concept of corporate social responsibility the environment (74.1%), towards the employees
mainly as the company’s engagement in social actions, (51.8%), and focused on the market (28.2 %). Data on
taking measures to protect the environment and respect the company’s engagement in activities towards the local
for workHUV¶ULJKWV'H¿QLQJWKHFRQFHSWRI&65GHSHQGHG community are presented in Table 2.

ISSN 1691-3078
Table 4
The actions taken by the company towards its employees in the opinion of the respondents (in %)

N=85 %
1. &RQGXFWLQJUHJXODUHPSOR\HHVDWLVIDFWLRQVXUYH\V 80 94.1
2. Offering training and professional development opportunities 77 90.6
3. Funding of sports and culture activities 72 84.7
4. Ensuring compliance with health and safety standards at work 70 82.4
5. &UHDWLRQRIHPSOR\PHQWRSSRUWXQLWLHVIRUSHRSOHZLWKGLVDELOLWLHVDQGRUSHUVRQV 67 78.8
over the age of 50
6. Good internal communication in the company 61 71.8
7. Following of equality and anti-discrimination policy 59 69.4
8. Ensuring favourable conditions for mothers and children 49 51.8
9 Assistance for employees made redundant 9 10.6
Table 5
CSR practices aimed at the market, in the opinion of the respondents (in %)

N=85 %
1. Implementing innovative technologies 77 90.6
2. Reliable after sales service 65 76.5
3. Reliable information about products and services 59 69.4
4. Fair advertising 50 58.8
5. Fair treatment and good communication with stakeholders 44 51.8
6. Transparent business reporting 33 38.8
7. Engaging customers in social activities 27 31.8
8. 9HUL¿FDWLRQRIFRQWUDFWRUVIRUWKHHWKLFDOFRQGXFWRIEXVLQHVV 13 15.3
Remunerati on 4,1
Prospects of development 3,6
Promotion opportunities 3,2
Atmosphere at work 2,8
Company bran d 2,5
Company size 2,2
Involvement in social activity 2,1
0 1 2 3 4 5
* The assessments were made on Likert’s scale (1 – unimportant, 2- not very important,
3- quite important, 4 – important, 5- very important)
Fig. 1. The criteria for selection of an employer by employees according to the respondents (in %)

ISSN 1691-3078
$PRQJ WKH PDQ\ &65 DFWLYLWLHV WRZDUGV WKH ORFDO 2. Employees noticed more practices aimed at local
community, the most visible was employee volunteering communities and the environment. This is due to the
and the collaboration with local NGOs (in the second large involvement of employees in volunteering and
position). The rarely perceived actions included the free RWKHUVRFLDODFWLYLWLHVRUJDQL]HGE\'%6FKHQNHUIRU
provision of premises, equipment, and services and the the local community and the environment.
WUDQVIHU RI SDUW RI WKH SUR¿WV IURP VDOHV RI SURGXFWV RU 3. The study shows that DB Schenker employees
services for social purposes. perceived a number of actions towards employees
The studied company had also taken socially as a part of corporate social responsibility. The most
responsible actions towards the environment. The commonly noted actions include: conducting regular
relevant data are presented in Table 3. employee satisfaction surveys, preparation of wide
Respondents noted that the company had initiated offer of professional development and funding of
activities aimed at the reduction of waste production sports and cultural activities. However, it would be
and promotion of waste segregation and monitoring as recommended for the company to expand the scope
well as had implemented recommendations for saving of assistance for employees who have been made
electricity, paper, and recycling. redundant.
Data on the actions taken towards employees are 4. When choosing the employer, employees rather
presented in Table 4. IRFXV RQ WKH SURIHVVLRQDO EHQH¿WV ZKLFK FDQ EH
The study shows that DB Schenker employees noted achieved by working for this particular company,
a number of actions towards employees as a part of than engagement in social activities.
corporate social responsibility. The most commonly
noticed include: conducting regular employee
Bibliography
satisfaction surveys, preparation of wide offer of
1. $GDPF]\N-6SROHF]QDRGSRZLHG]LDOQRVF
professional development, and funding of sports and
SU]HGVLHELRUVWZ7HRULDLSUDNW\ND(Corporate Social
cultural activities. The support for redundant workers
Responsibility. Theory and Practice) :DUV]DZD
was the least visible.
PWE. pp. 43 – 44.
The study also sought answer to the question:
2. &RSHODQG 7 .HOOHU 7 - 0XUZLQ -
what kind of socially responsible actions the company
:\FHQD PLHU]HQLH L NV]WDOWRZDQLH ZDUWRVFL ¿UP
aimed at the market? Detailed data is provided in
(Evaluation, Measuring and Creating Business
Table 5.
Value) :DUV]DZD :\GDZQLFWZR :,*3UHVV
As for the actions towards the market, the respondents
pp. 3 –5.
most often pointed to: innovative solutions and new
3. 'UXFNHU 3 3UDNW\ND ]DU]DG]DQLD (Practice
technologies in the production and sales (90.6%). Such
of Management) .UDNRZ :\GDZQLFWZR &]\WHOQLN
high awareness of this aspect results from the fact that
1RZRF]HVQRVF±$NDGHPLD(NRQRPLF]QDS
the study covered employees from the executive board,
4. )LOLSS ( 6SROHF]QD RGSRZLHG]LDOQRVF
WKHUHIRUH SHUVRQV FKDUDFWHUL]HG E\ KLJK FUHDWLYLW\ DQG
RUJDQL]DFML (Social Responsibility of
innovation. More than three-quarters of respondents said
2UJDQLVDWLRQ ,Q 1RZH NLHUXQNL Z ]DU]DG]DQLX
that the company provides consumers with fair conditions
(G 0 .RVWHUD :DUV]DZD :\GDZQLFWZD
of after-sales service and complaint procedures. The
Akademickie i Profesjonalne. p. 465.
OHDVW QRWLFHDEOH DFWLRQ ZDV YHUL¿FDWLRQ RI VXSSOLHUV IRU
5. Guidance on Social Responsibility 2008, p.7.
ethical business conduct and engaging customers in
Retrieved: http://www.csrconsulting.pl/docs/
social actions.
]DVREQLNBSOLNBBSGI. Access:
The main ways to inform stakeholder groups about the
20. 12. 2012.
company’s social practices included posting information
6. +DEHN 3 6]HZF]\N 3 6SROHF]QD
on the website, corporate brochures and publishing social
RGSRZLHG]LDOQRVF D ]DU]DG]DQLH MDNRVFLD Corporate
reports. The study also tested the importance of different
Social Responsibility and Quality Management).
criteria of selection of employer by the employees.
Gliwice: Wydawnictwo Politechniki Slaskiej.
Details on this are shown in Figure 1.
p. 36.
According to the respondents, the remuneration,
7. 2FLHF]HN : *DMG]LN % 6SROHF]QD
development prospects and promotion opportunities
RGSRZLHG]LDOQRVF SU]HGVLHELRUVWZ SURGXNF\MQ\FK
were the most important criteria for making a choice
(Corporate Social Responsibility of Production).
of an employer. The company’s engagement in social
Gliwice: Wydawnictwo Politechniki Slaskiej.
DFWLYLWLHV LWV VL]H DQG EUDQG ZHUH PRVWO\ PDUNHG ³QRW
pp. 94 –95.
YHU\LPSRUWDQW´
8. 3DOLZRGD0DWLRODQVND $ 2GSRZLHG]LDOQRVF
VSROHF]QDZSURFHVLH]DU]DG]DQLDSU]HGVLHELRUVWZHP
Summary (Social Responsibilty of the Business Management).
1. The vast majority of DB Schenker employees :DUV]DZD:\GDZQLFWZR&+%HFNS
ZHUH IDPLOLDU ZLWK WKH FRQFHSW RI &65 EXW WKHLU 9. Stoner, J. A. F. Freeman, R. E. Gilbert D. G. (1997).
understanding was different. The younger workers Kierowanie (Managing):DUV]DZD3:(S
LGHQWL¿HG FRUSRUDWH VRFLDO UHVSRQVLELOLW\ ZLWK WKH 10. :RORV]\Q - 6WDZLFND ( 5DWDMF]DN 0
company’s engagement in contribution to society 6SROHF]QD RGSRZLHG]LDOQRVF PDO\FK L VUHGQLFK
as well as the natural environment, while the older SU]HGVLHELRUVWZ DJUREL]QHVX ] REV]DURZ
HPSOR\HHV GH¿QHG &65 PDLQO\ DV WUDQVSDUHQF\ wiejskichSocial responsibility of small and medium-
in business operations and compliance with sized enterprises in rural agribusiness):DUV]DZD
applicable law. Wydawnictwo SGGW. pp. 5-7.

ISSN 1691-3078
A. Siedlecka 'H¿QLWLRQDQG0HDVXUHPHQWRI2EMHFWLYH4XDOLW\RI/LIH)RU$VVHVVLQJ
the Level of Sustainable Development of Rural Communities
DEFINITION AND MEASUREMENT OF OBJECTIVE QUALITY OF

LIFE FOR ASSESSING THE LEVEL OF SUSTAINABLE DEVELOPMENT
OF RURAL COMMUNITIES
Agnieszka Siedlecka1, doctor

Pope John Paul II State School of Higher Education in Biala Podlaska
Abstract. The aim of the paper is the operationalisation of objective quality of life by identifying its indicators in six
areas: economic activity, housing, children’s education, participation in culture, using health care system services, and
using social assistance. The different areas are described using characteristics available in the Polish public statistics
RIWKH&HQWUDO6WDWLVWLFDO2I¿FH6RPHLQGLFDWRUVFDQDOVREHXVHGWRVWXG\WKHOHYHORIVXVWDLQDEOHGHYHORSPHQWLQ
social area.
Key words: quality of life, objective quality of life, sustainable development.
JEL code: Q01
Introduction namely: the use of the natural environment, good health,

Talking about the quality of life can be based on VXFFHVV LQ OLIH VRFLDO VWDWXV ZHDOWK DQG FRQVXPSWLRQ´
three main criteria that describe it: economic, statistical, %\ZDOHF & 5XGQLFNL / 7KLV NLQG RI DSSURDFK
DQG SV\FKRORJLFDO 2VWDVLHZLF] : %DVHG RQ LQGLFDWHVDVLJQL¿FDQWUROHRIKRXVHKROGZHDOWKDVDIDFWRU
WKLV FODVVL¿FDWLRQ VHHNLQJ PHWKRGV WR PHDVXUH WKH determining the quality of life.
quality of life for local development one can focus &LWLQJ7%RU\VDQG35RJDODLWVKRXOGEHQRWHGWKDW
on economic and statistical criteria. The reference to the very concept of quality of life is not fully sorted out.
the characteristics of the quality of life in the context 7KLV LV D SHFXOLDU SUREOHP IRU WKH TXDQWL¿FDWLRQ RI WKH
of sustainable development is due to the fact that study indicators. The category of quality of life is one of
sustainable development directly and indirectly the many used in literature, apart from it there are such
LQÀXHQFHVWKHTXDOLW\RIOLIH terms as conditions of life, standard of living, standard
The aim of this study was to present some of life, living standard, and other (Borys T., Rogala P.,
indicators of objective quality that can be used in the 2008).
measurement of local sustainable development on The following criteria are included in the basics of
the level of municipalities. Variables obtained from typology of the quality of life - evaluation (assessment),
WKH SXEOLF VWDWLVWLFV FRQGXFWHG E\ WKH 3ROLVK &HQWUDO the range and number of aspects of quality of life,
6WDWLVWLFDO2I¿FHZHUHXVHGWRLOOXVWUDWHWKHSKHQRPHQRQ objectivity of quality of life measurement, the number
The paper was prepared within the research project of objects concerned; immediacy of research links with
1R '+6 HQWLWOHG ³(QYLURQPHQWDO the actual quality of life, sustainability of aspects of the
&RQGLWLRQV DQG )DFWRUV RI 'HYHORSPHQW RI WKH quality of life, and revealing the system of values in
Economic Functions of Valuable Natural Areas of Lublin quality of life (axiological criterion) (Borys T., Rogala P.,
9RLYRGHVKLSÍXQGHGE\WKH1DWLRQDO6FLHQFH&HQWUH 2008).
The subject of discussion in this paper is the third
FODVVL¿FDWLRQWKHFULWHULRQRIREMHFWLYLW\RIWKHTXDOLW\RI
7KH VWXG\ RI REMHFWLYH TXDOLW\ RI OLIH LQ life measurement).
Poland and abroad 2EMHFWLYH TXDOLW\ RI OLIH LV ³D VHW RI TXDOLWDWLYH
The issue of quality of life is an issue that is of interest objective facts (objective forms of satisfying human
to a number of disciplines: sociology, psychology, needs) describing various aspects of human life, that
economics, philosophy, and social statistics. This is, without a comparative or psychological assessment
extremely broad interdisciplinary nature of quality of life (Desk Research…, 2012). They mean the whole of
is associated with multi-faceted expression of human objective infrastructural conditions in which people,
VHOIUHDOLVDWLRQ %3RVNURENR GH¿QHG WKH TXDOLW\ RI OLIH social groups, households, or individuals exist (Rogala P.,
extremely vividly, as the relationships between values 2009). These conditions are mainly related with
and lifestyles as well as needs and living conditions. He material condition, existential safety, and protection
EHOLHYHV WKDW WKH FDWHJRU\ FDQ EH REMHFWL¿HG WKURXJK of individuals’ living environments (Slaby T., 2007).
physical and intangible indicators (Poskrobko B., 2007). Generally, available public statistics is used to determine
$QRWKHU DSSURDFK WR GH¿QLQJ WKH TXDOLW\ RI OLIH LV objective quality of life (Rogala P., 2009).
VKRZQ E\ &%\ZDOHF DQG /5XGQLFNL ZKR VXJJHVW WKDW Due to the complex nature it can be concluded that
³TXDOLW\ RI OLIH LV D VWDWH RI VDWLVIDFWLRQ KDSSLQHVV the quality of life is co-created by the following items:
contentment, coming from the whole of existence, environment, material wealth, goods in the possession
___________________________
1
&RUUHVSRQGLQJDXWKRU7HO
e-mail address: a.siedlecka@dydaktyka.pswbp.pl

ISSN 1691-3078
of the people, intangible wealth relating with the culture, the use of modern communication technologies,
access to education and culture, health and safety (in DQGPDQ\RWKHUV&]DSLQVNL-3DQHN7
the dimension of health – life threats, in the dimension - &]DSLQVNL SDUWLFLSDWLQJ LQ WKHVH VWXGLHV WRJHWKHU
of the loss of property – crime, natural disasters, in with the team, distinguished a group of areas where
the economic dimension – funds necessary for the one can speak about the objective quality of life:
existence), participation in building local community, economic activity (functioning in the labour market),
belonging, participation in the community, international income situation and the way of income management,
UHODWLRQVKLSVLQÀXHQFLQJGHFLVLRQVUHODWHGZLWKLQGLYLGXDO food, material wealth, housing, use of social assistance,
and collective life (Kusterka-Jefmanska M., 2010). children’s education, participation in culture and leisure,
In the UK, the analysis of quality of life on the local using health care system services, insurance and
OHYHO GLVWLQJXLVK WKH IROORZLQJ DUHD SUR¿OHV RI TXDOLW\ UHWLUHPHQWVDIHW\HFRORJLFDODWWLWXGHVHWF&]DSLQVNL-
of life: people and places, social cohesion and social Panek T., 2009).
engagement, public safety, culture and leisure, economic In addition to the above-mentioned studies, others
prosperity, education and lifelong learning, environment, are being carried out in order to test the quality of life
health and social conditions, housing, transport and in the country. Those include research conducted by the
availability, and other indicators (Local Quality of Life 3XEOLF 2SLQLRQ 5HVHDUFK &HQWUH WKH DLP RI ZKLFK LV WR
Indicators ..., 2005). analyse different aspects of society, directly or indirectly
As it has already been mentioned, the quality of related with the quality of life.
life can have an objective and a subjective dimension. The issue of quality of life is also the subject of
According to J. Rutkowski, the factors that shape the research carried out on the local level. Studies of this
objective dimension include objective reality in which W\SH ZHUH FDUULHG RXW LQ WKH FLW\ RI 3R]QDQ WKH ¿UVW LQ
people live and the socio-economic and demographic 2002, followed by others in 2003, 2004, 2006, 2008, and
VWUXFWXUHRIWKHVWXGLHGSRSXODWLRQ6NU]\SHN( 7KH\ ZHUH LQLWLDWHG E\ WKH &LW\ 2I¿FH DQG ZHUH
Objective assessment of quality of life focuses on initially carried out by the Faculty of Social Sciences at
statistical measurement of selected characteristics. They WKH$GDP0LFNLHZLF]8QLYHUVLW\LQ3R]QDQ7KH4XDOLW\RI
can include such variables as income, education, and /LIH5HVHDUFK&HQWUHZDVHVWDEOLVKHGLQWKHODWHUSHULRG
number of children (Kryk B.). ZZZSR]QDQSO 2WKHU FLWLHV WKDW KDYH FDUULHG RXW
In the group of objective indicators of quality of research on the quality of life of inhabitants are Sopot,
OLIH - 7U]HELDWRZVNL LQGLFDWHV PDWHULDO VWDWXV ¿QDQFLDO *OLZLFHDQG-DZRU]QR5RJDOD3
security, living and housing conditions, conditions
of treatment, environmental safety, social relations,
the system of social support, social activity, personal
Sustainable development and objective
development (education, work, participation in culture), TXDOLW\RIOLIH
RUUHFUHDWLRQDQGOHLVXUH7U]HELDWRZVNL- 'H¿QLQJ WKH WHUP VXVWDLQDEOH GHYHORSPHQW LV D
Measuring quality of life in the countries of the complex issue. In literature, there is a number of
European Union encompassed the usage of three GH¿QLWLRQV RI WKH WHUP DQG WKXV LW LV LPSRUWDQW WR
programmes. One of the programmes was the Urban UHDG WKHP FDUHIXOO\ 7KH ¿UVW GH¿QLWLRQ RI VXVWDLQDEOH
Audit investigating objective quality of life by using GHYHORSPHQW LV SUHVHQWHG LQ WKH UHSRUW ³2XU &RPPRQ
286 indicators of nine categories: demographics, )XWXUH´ NQRZQ DV WKH %UXQGWODQG 5HSRUW IURP WKH
social aspects, economic aspects, involvement/civic QDPHRIWKH3ULPH0LQLVWHURI1RUZD\WKH&KDLURIWKH
participation, education and training, environment, :RUNLQJ*URXS$FFRUGLQJWRWKLVGH¿QLWLRQ³VXVWDLQDEOH
travel and transport, information society, and culture and development is the development that meets the needs
recreation (Borys T., Rogala P., 2008). of the present without compromising the ability of
The Urban Audit programme was performed by IXWXUH JHQHUDWLRQV WR PHHW WKHLU RZQ QHHGV´ 5HSRUW
WKH &HQWUDO 6WDWLVWLFDO 2I¿FH WKH SURMHFW ZDV LQLWLDWHG RI WKH :RUOG &RPPLVVLRQ 7KH ¿UVW 3ROLVK GH¿QLWLRQ
E\ WKH (XURSHDQ &RPPLVVLRQ DQG (XURVWDW IROORZLQJ of sustainable development was published in the report
LWV LPSOHPHQWDWLRQ &HQWUDO 6WDWLVWLFDO 2I¿FH 7KH ³(FRGHYHORSPHQW LQ 3RODQG´ LQ $FFRUGLQJ WR WKH
purpose of the Urban Audit programme is to assess the GH¿QLWLRQ VXVWDLQDEOH GHYHORSPHQW DOVR NQRZQ DV HFR
quality of life on the local level basing on comparable GHYHORSPHQW³LVZKHUHSHRSOHSURYLGHIRUOLPLWDWLRQV
data on European cities, both in terms of objective GXHWRWKH¿QLWHFKDUDFWHURIWKH3ODQHWDQGWKHUK\WKP
TXDOLW\ RI OLIH ³FRQGLWLRQVOHYHO RI OLIH´ DQG VXEMHFWLYH of nature independent of human (...). It is a strategy
quality (satisfaction with life - with its various aspects) IRU DFKLHYLQJ GLJQL¿HG OLIH ZLWKLQ ZKDW LV SK\VLFDOO\ DQG
(Borys T., Rogala P., 2008). biologically possible. It guarantees meeting basic needs
Among the studies on quality of life conducted in of present and future generations, while maintaining the
3RODQGWKHUHVHDUFKFDUULHGRXWZLWKLQWKHSURMHFW³6RFLDO stability of the natural environment and natural diversity
'LDJQRVLV´ GHVHUYHV VSHFLDO DWWHQWLRQ LW ZDV RUJDQLVHG RI ERWK VSHFLHV DQG HFRV\VWHPV ³5HSRUW RI 3ROLVK
E\ WKH &RXQFLO IRU 6RFLDO 0RQLWRULQJ ZLWK WKH 6FKRRO Environmental ..., 1992).
of Finance and Management. The research has been a 2YHU WKH \HDUV GH¿QLWLRQV DQG DSSURDFKHV WR WKH
panel one, carried out since 2000, taking into account issue of sustainable development have undergone
important aspects of individual households and their changes. Initially, the dominant eco-friendly trend and
members in economic dimension (e.g. income, material discussions focused on the issues of limited natural
DIÀXHQFH VDYLQJV ORDQV DQG QRQHFRQRPLF RQH HJ resources turned to the socio-economic issues. One of
education, treatment, coping with problems, stress, well- WKHGH¿QLWLRQVRIWKLVW\SHLVWKHGH¿QLWLRQRI''XQSK\
being, lifestyle, pathological behaviour, participation in -%HQYHQLVWH $*ULI¿WKV 3 6XWWRQ DFFRUGLQJ WR ZKLFK

ISSN 1691-3078
sustainable development includes economic and social These characteristics are a great advantage in the
development models. These models protect environment ZRUNSODFH DW ZRUN :RUVOH\ -' 6WRQH &K)
and are designed to enhance social justice (Dunphy D. et 5HIHUULQJ WR WKH DERYHPHQWLRQHG FODVVL¿FDWLRQ RI
DO$NLQGRIHVVHQFHRIWKHGH¿QLWLRQRIVXVWDLQDEOH objective quality of life, it can be observed that some
development is captured by A.Kassenberg who indicates of the indicators describing the objective quality of
that in any decision equal treatment of social, economic life are indirectly related with the issue of human
and environmental issues should be sought in order to capital, among them economic activity GH¿QHG DV
create a platform for the three elements, and not to be functioning in the labour market can be mentioned.
limited to a simple compromise (Kassenberg A., 2007). The following characteristics can be used to illustrate
In Polish legislation, sustainable development is the area.
XQGHUVWRRG DV ³VXFK D VRFLRHFRQRPLF GHYHORSPHQW LQ One of the variables is the percentage of the working
which the process of integrating political, economic and age population which indicates the participation of a
social activities takes place, with keeping balance of nature group of people aged 18-59 for women and 18-64 for
and the durability of basic natural processes in order to men in the total population of municipalities. It is a
ensure the ability to meet basic needs of communities PHDVXUH GH¿QLQJ SRWHQWLDO ODERXU IRUFH .RWRZVND ,(
DQGFLWL]HQVRIERWKWKHSUHVHQWDQGIXWXUHJHQHUDWLRQV´ 0DW\VLDN$7KHDSSURSULDWHVL]HRIWKHUHVRXUFH
(The Environmental Protection Law..., 2008). of working age population shows correct proportions
Sustainable development - understood as a between this group and the rest of the human resources
FRQFHSWLVGH¿QHGDV³VXVWDLQDEOHLPSURYHPHQWLQWKH involved in the distribution of national income. This
quality of life of present and future generations through indicator is a stimulant (S).
the development of an appropriate balance between Another variable that describes the economic activity
WKH WKUHH FDSLWDOV HFRQRPLF KXPDQ DQG QDWXUDO´ in the labour market is the intensity of unemployment.
(Piontek F., Piontek B., 2009). D.Pearce, A.Markandya, 7KLV ¿JXUH VKRZV the share of the registered
E.Barbier draw attention to the quality of life in the unemployed in the population of working age population
GH¿QLWLRQ RI VXVWDLQDEOH GHYHORSPHQW WKH\ LQGLFDWH (D-destimulant).
that SD includes creating a socio-economic system. One of the most important indicators of standards
A system that provides support for such purposes of living are living conditions. Apartment is the most
as real income growth, improving education, important part of the household - its condition and
improving health - that is, generalising, quality of life equipment largely indicate the position of assets, level of
(Pearce D. et al, 1989). income, and wealth status.
7KH IDFWRUV DOORZLQJ XVLQJ D ÀDW DUH DPRQJ
Quality of life depends on environmental, social, and
RWKHUV LWV VWDQGDUG LWV VL]H ÀRRU VSDFH QXPEHU
economic conditions. Sustainable development implies
of rooms), equipment in technical and sanitary
a balance between them in shaping the quality of life
installations, technical condition etc. (Gutkowska K.
(Sustainable Development..., 2009).
HW DO 7KH VWDWLVWLFV RI WKH &HQWUDO 6WDWLVWLFDO
&KDUDFWHULVWLFV FRPPRQ WR WKH FKDQJHV LQ WKH
2I¿FH DPRQJ WKH GDWD DOORZLQJ WKH DQDO\VLV RI KRXVLQJ
development of quality of life and sustainable development
conditions include such variables as total housing stock
DUH UHÀHFWHG LQ HYHU PRUH UHYHDOLQJ UHODWLRQ WR WKH
SHU LQKDELWDQW 6 DYHUDJH ÀRRU VSDFH LQ P2 per 1
indicator description. Indicators describing sustainable
person (S), and the percentage of housing stock with
development at the same time depict objective quality
access to infrastructure (water supply, lavatory, gas,
of life (Borys T., Rogala P., 2008). An example is the
bathroom, central heating) (S).
³QXPEHU RI ÀDWV SHU FDSLWD´ EHLQJ DQ LQGLFDWRU RI
One of the important demographic variables
sustainable development as well as an indicator of
characterising society, and thus, households, is the
objective quality of life.
level of education of its members. This level affects the
quality of human capital and becomes the foundation of
,QGLFDWRUVRIREMHFWLYHTXDOLW\RIOLIH GHYHORSPHQW .ORG]LQVNL 0 )RU WKH DQDO\VLV RI
As it has previously been mentioned, the quality the children’s education with reference to the objective
of life can be analysed and studied in different ways. quality of life, the following variables can be taken into
While seeking indicators allowing to analyse its account: number of children aged 3-6 per 1 kindergarten
FKDUDFWHULVWLFV WKH FODVVL¿FDWLRQ RI -&]DSLQVNL GHVHUYHV (D) - the higher the value, the lower the availability of
special attention. Basing on the areas highlighted kindergartens and the more overcrowded they are;
by this author, attempts were made to search for primary schools per number of children in early school
indicators relating to objective quality of life available age - 7-12 (S); gymnasiums per number of children
in the public statistics on the level of municipalities aged 13-15 (S); students per 1 computer with
1876 $PRQJ WKH DUHDV LGHQWL¿HG E\ -&]DSLQVNL Internet access intended for the students’ use - in
six, for which such data are available, were the focus: elementary schools for children and young people
economic activity (functioning in the labour market), excluding special ones (D); students per 1 computer
KRXVLQJ VRFLDO VHFXULW\ EHQH¿WV FKLOGUHQ¶V HGXFDWLRQ with Internet access intended for the students’ use - in
participation in culture and recreation, and the use of gymnasiums for children and young people excluding
health care system services. special ones (D) - the higher the value of the latter
One of the key areas of sustainable development WZR LQGLFDWRUV WKH PRUH GLI¿FXOW LV WKH DFFHVV WR
is human capital. The theory of human capital the Internet.
refers to certain attributes, characteristics of people Quality of life is affected not only by the tangible aspect
such as education, training, skills, and experience. of social welfare; social activity is also very important,

ISSN 1691-3078
it can be analysed in relation with participation in in the general population (D) - the greater it is, the
culture. Participation in culture and recreation is one PRUH GLI¿FXOW LV WKH ¿QDQFLDO VLWXDWLRQ RI KRXVHKROGV
of the areas analysed for the objective quality of life. and municipal budget expenditure for social assistance
One of the indicators describing it is the number of per capita (S).
libraries per one thousand inhabitants (S). Libraries are The increase in quality of life of society is one of the
complementary to education system. They also play a objectives of sustainable development. The indicators
supporting role in the dissemination of knowledge and discussed directly or indirectly affect the quality of life
culture. Both the resource of a rural library as well as the of society.
appropriate organisation and management of it through
organising cultural events make it have an impact on
Conclusions
WKH LQKDELWDQWV¶ TXDOLW\ RI OLIH 2VVRZVND / 3RF]WD :
Sustainable development, the issue and its
2009). Other indicators describing the objective quality
REMHFWLYHV DUH RI LQWHUHVW WR PDQ\ ¿HOGV RI VFLHQFH
of life in terms of participation in culture and leisure
WKLV LV GXH WR LWV LQWHUGLVFLSOLQDU\ QDWXUH 'H¿QLQJ
are: book collection per 1000 people (S); computers
the concept of sustainable development one should
connected to the Internet available to readers in libraries
pay special attention to issues related to the quality
and library facilities per 1000 people (S), sports facilities
of life; quality of life of both present and future
per 1000 people (S), the number of houses and cultural
generations.
centres, clubs and community centres per 1000 people
Quality of life can be analysed in objective and
(S), the number of events organised by cultural centres,
subjective aspects. Objective character of the quality
clubs and community centres per 1000 people (S), the
of life is associated with pointing out factors possible
number of artistic groups acting in houses and cultural
to be depicted and characteristics derived from
centres, clubs and community centres per 1000 people
mass statistics. The mass nature of empirical data
(S), members of associations/clubs in the general
is extremely important due to the fact that these
population (in %) (S), and members of artistic groups in
IHDWXUHV FDQ DW WKH VDPH WLPH EH VSHFL¿F LQGLFDWRUV
the general population (in%) (S).
of sustainable development. The above study
The healthcare system in Poland has undergone
LGHQWL¿HV VL[ DUHDV RI DQDO\VLV RI WKH REMHFWLYH TXDOLW\
numerous transformations and reforms over the past
of life operationalised with the usage of indicators
20 years. These reforms combined with social and
available in the statistics collected by the Polish
economic changes have caused changes deepening in
&HQWUDO 6WDWLVWLFDO 2I¿FH $OO RI WKHP FDQ DW WKH
the overall state of health of society and the state of
same time provide indicators of sustainable
KHDOWKVHUYLFH2VVRZVND/3RF]WD:7KLVDUHD
development in the social area.
is extremely important for the analysis of quality of life
in society. For discussing the objective quality of life
in terms of using the health care system services Bibliography
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DVSHNW\ MDNRVFL ]\FLD QD SU]\NODG]LH ZRMHZRG]WZD S 5HWULHYHG KWWSZZZVDV]PSSR]QDQSO
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uwarunkowania rozwoju spoleczno-gospodarczego 5HWULHYHG KWWSZZZLGQRUJSO/RG]0NHQ
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(2009). BiaLystok: Development Initiatives Forum 28. KWWSZZZPSLSVJRYSOSRPRFVSROHF]QDV\VWHP

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Issue 2, p. 72. htm. Access: 12.06.2012.

ISSN 1691-3078
H.-H. Bass, K. von Freyhold, C. Weisskoeppel Water Management and Water Harvesting in Semi-Arid Mali
WATER MANAGEMENT AND WATER HARVESTING: HOW TO OVERCOME

CONSTRAINTS IN COMMUNITY GARDENING IN SEMI-ARID MALI
Hans-Heinrich Bass1+, professor Dr.; Klaus von Freyhold2, Dr.;

Cordula Weisskoeppel3, assistant professor (PD) Dr.
1, 2
Bremen University of Applied Sciences, Germany
3
University of Bremen, Germany
Abstract. Malnutrition, i.e. the undersupply of micro-nutrients, is a common phenomenon in the villages of West African
0DOL&RPPXQLW\JDUGHQLQJFDQKHOSWRRYHUFRPHWKHJDSEHWZHHQVXSSO\RIDQGUHTXLUHPHQWVIRUPLFURQXWULHQWV
In addition to its effect on nutrition, community gardening supports the pro-poor orientation of economic growth, and
has a potentially positive effect on human capital formation, communal coherence, and women’s empowerment. Water
VXSSO\KRZHYHULVDPDMRUERWWOHQHFNIRUJDUGHQLQJLQWKH6DKHO]RQH%DVHGRQD¿HOGVXUYH\XVLQJD³UDSLGUXUDO
DSSUDLVDO´LQVSLUHGUHVHDUFKPHWKRGWKHSDSHUGHYHORSVWKHDUJXPHQWIRUDGHOLQNLQJRILUULJDWLRQIURPGHHSZHOOV
(water mining) and argues in favour of a combination of water harvesting techniques and substantial improvements
of the gardens’ micro-climate in a low external input yet technically appropriately sophisticated cultivation. The paper
furthermore discusses traditional forms of social organisation and how to make them instrumental in supporting the
new system.
Key words: malnutrition, horticulture, water harvesting, development assistance, gender relations
JEL code: O13, O22, O33, Q16, Q25, Q54, Q57
Introduction abandoned by the village women apparently due to a lack

Over the past decades Mali’s semi-arid area, of water, the NGO commissioned an interdisciplinary team
SDUW RI WKH 6DKHO UHJLRQ KDV H[SHULHQFHG D VL]DEOH of three researchers (agronomist, cultural anthropologist,
population increase, in relation to which regional rain- and economist) to suggest a way out. Information was
IHGJUDLQSURGXFWLRQLVEHFRPLQJLQFUHDVLQJO\LQVXI¿FLHQW JDWKHUHGE\WKHUHVHDUFKWHDPLQWHUDOLDGXULQJD¿HOGWULS
&RPPHUFLDOIRRGLPSRUWVIURPRWKHUUHJLRQVLQH[FKDQJH to the village of D*** in March / April 2012. By applying
for exports of labour and livestock cannot make up for D³UDSLGUXUDODSSUDLVDO´LQVSLUHGUHVHDUFKPHWKRG)$2
WKH UHJLRQDO IRRG GH¿FLW 7R RXU XQGHUVWDQGLQJ 0DOL¶V n.d.), the team aimed at analysing the underlying causes
future will be decided in the rural areas. Supporting for the interlocutory failure of the community garden and
rural dwellers in producing more food of their own can developing a blueprint for sustainable management of
be of relevance to reduce push factors of migration in water resources and horticulture. As such, this study is
a country which already faces a number of nationwide essentially application-oriented research.
imbalances, including one of the world’s highest
XUEDQL]DWLRQ UDWHV DQG DQ H[WUHPHO\ ORZ UDWH RI MRE Research results and discussion
creation in manufacturing. 1. Overview
:HK\SRWKHVL]HWKDWLUULJDWLRQEDVHGKRUWLFXOWXUHFDQ West African Mali is one of the world’s poorest
contribute to bridging the gap between nutritional needs countries, ranking 175 out of 186 countries in the
and food supply and to overcoming the undersupply of UNDP’s 2011 Human Development Index as well as
PLFURQXWULHQWV WKH ³KLGGHQ KXQJHU´ +RZHYHU DFFHVV in the Multidimensional Poverty Index (UNDP, 2011).
to water is the most important bottleneck of any food About half of its 14+ million population lives below
SURGXFWLRQ LQ WKH 6DKHO ]RQH 1RW RQO\ KDV WKH ULVLQJ the international poverty line of USD 1.25 per day.
human population but also the increase in transhumant With a food consumption of 2,624 kcal/capita/day
livestock rearing put an immense strain on local water (data of 2009; FAOSTAT database) based on national
resources. We assume, however, that in contrast to water production and on some food imports, the country on
mining by means of deep wells which rapidly depletes average still has only little more food available than
limited water resources, rigorous water management and what is considered to be the borderline to hunger (an
sophisticated water harvesting techniques can transitorily average of 2,500 kcal per day), even if there has been
balance out supply of and demand for water (while in the some remarkable progress in terms of food security since
long run population control and a substantial amount of the turn of the millennium. In 2010-12, however, 8%
non-agricultural economic activities are indispensable). of the total population was still undernourished and one
This paper provides a case study analysis of an WKLUGRIFKLOGUHQXQGHU¿YHZHUHXQGHUZHLJKW)$2)RRG
1*2DVVLVWHG FRPPXQLW\ JDUGHQ RUJDQL]HG E\ ZRPHQ Security Indicators).
in the village of D*** (region of Koulikoro). In a dead- Agriculture is Mali’s key industry. It provides
end situation whereby the community garden had been employment for about 70% of the labour force and
___________________________
+
&RUUHVSRQGLQJDXWKRU7HO
E-mail address: hans-heinrich.bass@hs-bremen.de.

ISSN 1691-3078
accounts for 37% of its GDP (data of 2006; World addition, some vegetables are grown in small compound
Development Indicators, 2013). Seasonal unemployment gardens of which the elder women in the compound are
in agriculture is common and lasts four to seven months in charge. Irrigation of these gardens is from nearby
per year, and is twice as common for women as for men water holes by watering cans.
(MEFP/ANPE, 2007, p. 30). Therefore, poverty affects Over a number of years the village has been
three quarters of the rural population vis-à-vis one third supported by a German-Malian NGO with various
RI WKH XUEDQ SRSXODWLRQ 6LJQL¿FDQW GLIIHUHQFHV LQ WKH types of infrastructure assistance, including a school,
incidence of poverty also exist between the South and DQ LQ¿UPDU\ DQG D JUDLQ PLOO 7R LPSURYH IRRG VXSSO\
WKH1RUWKRI0DOLUHÀHFWLQJLQWHUDOLDGLIIHUHQWDJULFXOWXUDO and to provide village women with an additional income
conditions and the respective distance from the relatively source by marketing self-grown vegetables, the NGO has
PRUH DIÀXHQW FDSLWDO %DPDNR DQG LWV RSSRUWXQLWLHV WR assisted the village of D*** in setting up a two-hectare
market labour and farm products. communal garden, including the drilling of a deep well
The long-term average annual rainfall in the area under for irrigation in 2009. Apart from providing water for the
investigation is about 450 mm. Apart from substantial communal garden, the well was also meant to provide
year-to-year divergence, precipitation occasionally the village population with uncontaminated drinking
(as in 2011) seems to deviate from the usual seasonal water. In addition to the well, the NGO provided assets
pattern – a fact which is seriously detrimental for the such as simple tools, a wire mesh fence to protect the
crops. That said, however, in relation to the whole region, garden from goats, and also training for the gardeners.
the village of D*** is favoured with regard to access to In the beginning, work in the community garden was
ZDWHU WKDQNV WR LWV ORFDWLRQ DW WKH FRQÀXHQFH RI WKUHH ³FROOHFWLYHÉXWODWHURQWKHZRPHQ¶VDVVRFLDWLRQGHFLGHG
wadis, water-bearing during the rainy season and then WRZRUNLQIRXUJURXSVRUJDQL]HGDFFRUGLQJWRVXEHWKQLF
GUDLQLQJ LQWR D GHSUHVVLRQ ³PDUH´ RQ WKH HGJH RI WKH divisions.
village and forming a lake usually still existent at the
beginning of the dry season. 2. The rationale for community gardening
The village area consists of a core village with a &RPPXQLW\ JDUGHQLQJ LQ YLOODJHV VXFK DV '
population of about 600, living in 35 extended families of GRHV PDNH VHQVH IRU ¿YH UHDVRQV WKH LPSURYHPHQW
GLIIHUHQWVL]HXSWRSHRSOHRIZKLFKDERXWDUH of nutrition, the availability of cheap labour (in terms
temporary out-migrants. An extended family may consist of opportunity costs) during the vegetation period of
of a man and up to four wives, adult sons and their wives, vegetables, the pro-poor effect, the improvement of the
and occasionally other relatives. Associated with the available human capital, and the strengthening of the
core village is a satellite village where several families social coherence of the village and the empowerment of
of descendants of former slaves live, while a number of the village women.
nomadic families live in the outskirts of the core village. (1) Estimates suggest that nutrition in Sub-Saharan
The annual population growth in the county, where the on average covers only 43% of the requirements for
village is located is 3.2% (which is one of the highest in PLFURQXWULHQWV :RUOG 9HJHWDEOH &HQWHU QG 7KLV
the world). ³KLGGHQ KXQJHU´ LV SDUWLFXODUO\ SURQRXQFHG LQ DUHDV
Livestock in the village area can be estimated to be ZKHUHDJULFXOWXUHLVQRWVXI¿FLHQWO\GLYHUVL¿HGDQGH[WUD
300+ bovines in addition to donkeys, horses, sheep, regional trade links are poorly developed as well as among
goats, and poultry. Livestock keeping is predominantly the poorer strata of society. A household-based health
the responsibility of men. Annual livestock growth in survey in Mali shows that in the country’s capital 51%
Mali (compound annual growth rate, 2000 to 2010) is of the children between 6 and 23 months were fed fruits
4.4% for cattle and 5.7% for goats (computed from and vegetables rich in vitamin A (such as carrots, sweet
FAOSTAT data). As in other parts of the Sahel, excessive potatoes, vegetables with green leafs, and pumpkins) –
GHIRUHVWDWLRQ IRU ¿UHZRRG DQG IHQFLQJ VRLO FRPSDFWLRQ whereas this was the case for only 28% of children in the
around the wells where animals are watered, the overuse region of Koulikoro (where the village of D*** is located).
of trees and shrubs for forage and a drop in the water Among the households of the richest quintile of Malian
table due to excessive water extraction all lead to society, 45% provide their young children with food rich
GHFUHDVLQJ ELRGLYHUVLW\ DQG HYHQWXDOO\ GHVHUWL¿FDWLRQ in vitamin A, while only 26% of the poorest quintile can
$FWXDOO\WKLVLVDVLWXDWLRQULJKWO\WHUPHGWKH³WUDJHG\RI do so (République du Mali …, 2007, p. 166).
XQPDQDJHG FRPPRQV´ +DUGLQ +DUGLQ An example shows the potential contribution of
where the herder receives all of the proceeds from gardening to overcome the hidden hunger in D*** village:
each additional animal while the pasture is slightly (for &DOFXODWLRQVEDVHGRQ)$2DQG86$,'GDWDVXJJHVWWKDW
the individual almost imperceptibly) degraded by each 18 tons of tomatoes can be produced on one hectare. As
additional animal. Humans, animals, and plants are thus 100g of tomatoes provide 5% of the USDA’s vitamin A
LQDQHYHU¿HUFHUFRPSHWLWLRQIRUZDWHU intake recommendation for adults, tomatoes harvested
5HJDUGLQJ¿HOGFURSSLQJDGLVWLQFWLRQKDVWREHPDGH on one half of the community garden would completely
EHWZHHQ ¿HOGV IDUPHG E\ ZRPHQ DQG ¿HOGV IDUPHG E\ bridge the gap between actual intake and requirement of
PHQ$VDUXOHFURSVRQ¿HOGVFXOWLYDWHGE\ZRPHQDUH vitamin A for the whole village population for more than
PRUH GLYHUVL¿HG DQG VRPHWLPHV D VPDOO SDUW RI WKH a month.
KDUYHVW IURP WKHVH ¿HOGV ± LQ FRQWUDVW WR WKH KDUYHVW (2) Work in a community garden implies only minor
IURPWKHPHQ¶V¿HOGV±LVWUDGHGDWWKHPDUNHWVRIQHDU opportunity costs for women: Time competition between
by villages. Millet (Pennisetum glaucum), occasionally ZRUN RQ WKH PLOOHW ¿HOGV DQG JDUGHQLQJ LV YHU\ OLPLWHG
LQWHUFURSSHGZLWK6RUJKXP3HDQXWV2NUDDQG0DL]HLV In the area under investigation, the rainy season is from
JURZQLQDVKLIWLQJFXOWLYDWLRQPRGHRQUDLQIHG¿HOGV,Q May to October, while the dry season is from November

ISSN 1691-3078
WR $SULO 3UHSDUDWLRQ RI ¿HOGV IRU YHJHWDEOH FXOWLYDWLRQ (2) In addition to these water holes, a several-year
has to start in October. Thus, there is some overlapping ROGFRQFUHWHIRUWL¿HGGRQNH\SRZHURSHUDWHGGHHSZHOO
with the millet harvesting until December. From January (about 1 km outside of the village) exists. It usually
to March, however, no work is required on the millet supplies water all-year round. Water from this source
¿HOGVDQGZRPHQDUHIUHHWRZRUNLQWKHJDUGHQDSDUW was also used as drinking water for the core village and
from cooking, as preparing meals is the responsibility of the nomads before a new deep well was drilled by the
a compound’s younger women who alternate with each NGO. After that, water from the old well was used only for
other. Furthermore, only (young) men, not women, watering the herds in the custody of the nomads and as
migrate from this area during the dry season in search drinking water for the nomads. Presently, no depreciation
of waged labour in other regions such as the country’s RQ¿[HGFRVWVKDVWREHFRQVLGHUHGDVWKHZHOOKDGEHHQ
capital. Thus, apart from gardening, village women would built years ago from external funds. The marginal costs
have hardly any alternative income sources. imply only the working time spent fetching the water;
(3) Labour-intensive gardening provides more food no fees are imposed. Again, in 2012 the supply of water
security especially for those families which do not possess from this well was limited and allowed the herds to be
large amounts of land or livestock – i.e. those most watered only once or twice a day.
vulnerable with respect to a decline in food production. (3) Finally, there is the newly drilled solar pump-
Gardening thus becomes instrumental in a pro-poor equipped deep well (depth 40 m) outside of the core
growth strategy. Our village survey (following a method village. From here, two water pipes run to the NGO-
proposed by Dixon and Holt, 2010) shows that 70% of supported communal garden and to the brink of the core
WKHIDPLOLHVDUH³SRRU´DUHPLGGOHFODVVDQG village. Water from the NGO-drilled well is best suited
DUH³ZHDOWK\É\ORFDOVWDQGDUGVLHPHDVXUHGZLWKWKH as drinking water for humans. The NGO indicated that
\DUGVWLFN RI IDPLO\ VL]H LH DYDLODELOLW\ RI ODERXU IRUFH due to the use of this water, the number of water-borne
and ownership of large livestock (a proxy for property of diseases (such as diarrhoea) especially amongst children
both capital and land). KDG GHFUHDVHG VLJQL¿FDQWO\ $V WKH 1*2 SDLG WKH EXON
(4) As will be described below in more detail, of the drilling costs of this well, the contribution of the
gardening based on a low level of external input but on YLOODJHFRPPXQLW\WRWKH¿[HGFRVWVZDVRQO\PLQLPDO$W
more sophisticated cultivation and irrigation techniques WKHWLPHRIRXU¿HOGVXUYH\FRQVXPSWLRQRIZDWHUIURP
provides opportunities to develop extra-agricultural skills this source was priced by the village’s water committee
RUKXPDQFDSLWDOIRU\RXQJPHQDQGTXDOL¿HVWKHPIRU DFFRUGLQJ WR D IDPLO\EDVHG ÀDW UDWH LUUHVSHFWLYH RI
relatively more rewarding jobs than those usually taken WKH VL]H RI WKH IDPLO\ 3HU SHUVRQ DQ DYHUDJH RI DERXW
up by unskilled migrants. 11 litres of water per day was taken from the well for
(5) Finally, under certain conditions communal drinking water as well as for personal hygiene and
gardens – publicly functioning in terms of ownership, household-related purposes (like washing clothes).
access, and management – can strengthen the villages’ The nomads and the inhabitants of the satellite village
coherence and allow for a proper managing of the are refused access to this water by the inhabitants of
commons (see Hardin, 1994; Ostrom, 1990). Run by the the core village. At the beginning of the communal
village women, communal gardening also strengthens gardening, water from this well was used for irrigation.
the position of women in terms of income generation and During the drought of 2011, however, the village
social and political empowerment and thus supports a elders vetoed this practice due to a decreasing yield
more comprehensive and gender-balanced approach to of the well.
development.
However, as water is scarce and irrigation is a conditio 4. New ways of water management
VLQHTXDQRQIRUJDUGHQLQJLQWKH6DKHO]RQHWKHSUXGHQW &RQWUDU\ WR D ZLGHO\KHOG RSLQLRQ LQ WKH PHGLD
use of water is imperative. The sources of water in the KRZHYHUWKHGURXJKWRIZDVQR³UDUHRFFXUUHQFH´
village of D*** and their current management will be in the village area. In fact, data for the average of all
discussed in the next section. Sahelian measuring stations reveal that out of the 2000
WRSHULRG¿YH\HDUVKDGDKLJKHUSUHFLSLWDWLRQWKDQ
3. Current management of water supply and LQ \HW ¿YH \HDUV HYHQ KDG D ORZHU SUHFLSLWDWLRQ
demand (JISAO, 2012) – although the temporal distribution of
The water available in D*** is from three different rains was particularly adverse for the crops in 2011 (FAO,
sources of different qualities: water-holes, an old deep 2012). In any case, this warns against considering the
well, and a newly drilled deep well. de-linking of the D*** communal garden from the deep
(1) At the end of the dry season a number of several- well to be an exception; it rather suggests that water
PHWHUGHHS ZRRGIRUWL¿HG ZDWHU KROHV DUH GXJ RQ WKH shortages for the communal garden are an expectable
JURXQGRIWKHGHSUHVVLRQWKH³PDUH´:DWHUIURPWKHVH phenomenon. Therefore, the opening up of an alternative
holes, however, is suitable only for watering animals. water supply for the garden becomes imperative. This
6XSSO\ RI ZDWHU IURP WKLV VRXUFH LPSOLHV ¿[HG FRVWV new model has three distinct features: water harvesting
due to the time spent digging the hole and the wood to replacing water mining, improvement of the micro-
fortify it. Once the water hole has been dug, apart from climate in the garden, and introducing a new fee system
working time to fetch the water by human muscle power, for drinking water.
no marginal costs accrue. In spite of the region generally (1) Making use of the favourable situation of the
reporting serious water shortage in March 2012, some communal garden adjacent to a wadi, water streaming
of the holes on the ground of the depression were still down the wadi in the rainy season can be collected. This
water-bearing, but most holes were not in use. water harvesting is intended to be facilitated through

ISSN 1691-3078
construction of, initially, one larger open cistern of 260 in a truly Schumpeterian sense. To be successful, an
m3GLUHFWO\¿OOHGE\WKHUDLQZDWHUSDVVLQJDWWKHORZHVW LQQRYDWLRQ KDV WR EH OLQNHG WR URXWLQL]HG EHKDYLRXU EXW
point of the garden area at wadi level. The cistern is to be routines also need to be adapted to new conditions.
wire meshed and covered with leafy branches to curtail With respect to the community garden, several forms of
as much evaporation as possible. Additional water can be social organisation have to be considered in this respect,
drawn from shallow wells already in existence. From the including the transfer of knowledge in horticulture, the
cistern and the wells the water can be distributed to the organisation of co-operation, and the gendered division
¿HOGVHLWKHUE\ZDWHULQJFDQVRUKDQGSXPSV2QWKHMRE of labour.
learning to construct a cistern provides an opportunity $FFRUGLQJ WR WKH FRPSRXQGVSHFL¿F GLYLVLRQ RI
for (young) men to develop skills also in high demand in labour, the obligation to prepare meals for the whole
other trades. compound alternates between the (up to four) wives of
(2) The micro-climate in the garden has to the head of the family. Older women may transfer this
be systematically improved in order to reduce obligation to their daughter-in-law. The small compound
evapotranspiration. Instrumental in protecting against gardens, however, are under the auspices of the older
strong winds and sun are hedges as well as scrubs on women, who are thus the local experts in horticulture.
plot margins. For the hedge, a number of locally growing They also introduce the younger married women to
scrubs and trees are appropriate. Dividing the garden the basic horticultural knowledge and skills. Gardening
into smaller plots allows for additional planting of scrubs thus represents a female sphere of local knowledge
(such as Cajanus Cajan) on the plot margins. All this production which is transferred from the older to the
contributes to an increased humidity in the garden, younger generation within kin-relations of alliance
which reduces the water required for cultivating the (not from mother to daughter, but from elder wife to
vegetable. To further diminish watering requirements, \RXQJHUZLIH7KLVLVLQWHUDOLDUHÀHFWHGLQWKHIDFWWKDW
ridging need to be applied in all areas under cultivation. in the village of D*** the women’s group is chaired by
Ridges are better suited for rain water storage and for an elderly lady, clearly an expert in horticulture, and
protection against rain water erosion in sloping areas assisted by younger women able to read and write in
WKDQWKH³]Dw´WHFKQLTXHXVXDOO\DGYRFDWHGIRUWKH6DKHO French. Seniority is the dominant feature in gaining
area. In addition, fallow-periods need to be introduced, status and thus needs to be respected in all agricultural
alternating between the plots and using legumes as extension activities.
intermediate crops. (2) The village women’s association running the
The community gardeners will also be trained with community garden in D*** includes about 80 participants
respect to the selection of plants as well as how to (among them women from the satellite villages, but not
successively improve the micro-climate and to make best from the nomadic population). For the purpose of dividing
use of the surface water. For the regular and secure supply the right to access to water for the plants in the time of the
of feasible and ecologically well-suited plants required drought and to assist each other in the vegetation period,
for hedges and for agricultural production, a nursery the association divided themselves into four subgroups
¿HOG DQG D VHHGEHG ZLOO EH HVWDEOLVKHG GLUHFWO\ DW WKH DFFRUGLQJ WR VXEHWKQLF RU SDWURQ\PLF DI¿OLDWLRQ LH
cistern. A compost plant next to these two facilities will WR WKHLU NLQ RI RULJLQ 7KLV W\SH RI VHOIRUJDQL]DWLRQ
KHOSWRPLQLPL]HWKHDSSOLFDWLRQRILQGXVWULDOIHUWLOL]HU,Q according to traditional sub-structures needs to be
DGGLWLRQWKHDSSOLFDWLRQRIPRLVWFRPSRVWIRUIHUWLOL]DWLRQ strengthened in the process of introducing a new system
will assist the improvement of the micro-climate in the of organisation of cultivating the community garden, as it
plots. may enhance participatory involvement on an individual
)LQDOO\ WKH SUHVHQW ÀDWUDWH V\VWHP RI IHHV IRU or subgroup level. Furthermore, it supports the division
drinking water needs to be replaced by a system pricing of the garden into smaller units, which is instrumental
the quantity of water consumed and thus providing for the improvement of the micro-climate. Nevertheless,
incentives to use expensive uncontaminated water an external authority or coordinator of the group seems
for drinking purposes only while making the effort WR EH LQVWUXPHQWDO ZKHQ UHRUJDQL]LQJ WKH FRPPXQLW\
to walk to the old deep well for water for household garden to facilitate communication with external
purposes. We assume that the total amount of water players, such as funding agencies, especially in times
available in the area remains the same as a result of of water shortages or other types of crises. This person
the interconnection of all sources. It has to be taken (whether male or female) could also take responsibility
into consideration, however, that this implies a trade- for change management. The social organisation of
off between the aim of freeing women from unnecessary cooperation proposed by the authors of the present
work and using natural resources differentiated study to accompany the technical changes in the water
according to their qualities. On the other hand it is management and cultivation system is thus a mixture
imperative to grant access to the uncontaminated of the egalitarian collective approach taken in the early
water from the new well for both the nomads and the stages of the community garden project, the traditional
inhabitants of the satellite village. Given the intense type of sub-ethnically based organisation of the village,
social communication between the core village, the DQG D W\SH RI ³UDWLRQDO´ RUJDQLVDWLRQ DFFRUGLQJ WR WKH
satellite village, and the nomads, water-borne diseases Western model.
will not stop at the entrance of the core village. (3) During the rainy season both men and women
in the village are occupied with cultivating millet and
5. New ways of social organisation RWKHUFURSVRQWKHLU¿HOGV:KLOHHDFKJHQGHUEHDUVWKH
Enlarging the nutritional basis by introducing a sole responsibility for the results of its work, men and
community garden is a social and economic innovation women share their food within the extended families of

ISSN 1691-3078
WKH FRPSRXQG WR WKH EHQH¿W RI DOO %\ FRQWUDVW GXULQJ Bibliography
the dry season only women seek to compensate their 1. Dixon, S. and Holt, J. (2010). =RQHV HW SUR¿OV GH
³IUHH´WLPHE\JDUGHQLQJDQGFRQWULEXWHWRDZLGHUUDQJH moyens d’existence au Mali. Un rapport spécial du
of food for all, whereas men are more or less unemployed réseau du système d’alerte précoce, Retrieved:
apart from taking care of the animals (in the core village) http://http://www.fews.net/pages/ livelihoods-
or temporary migration (from the satellite village). The country.aspx?gb=ml&loc=6&l=en. Access:
availability of male labour at only low opportunity costs 20.02.2012
during the dry season suggests itself for assisting the 2. FAO (n.d.), Rapid Rural Appraisal, Retrieved: http://
women in the community garden by taking on tasks www.fao.org/docrep/W3241E/w3241e09.htm.
such as transport of stones to the building site of the Access: 15.02.2012.
FLVWHUQ ¿[LQJ VWRQHV SODQWLQJ KHGJHV WUDQVSRUWLQJ 3. FAO, Food Security Indicators (Database). Retrieved:
water, and cleaning the cisterns. It is obvious that by KWWSZZZIDRRUJSXEOLFDWLRQVVR¿IRRGVHFXULW\
these strategies of involving men in the newly emerging indicators/en/ Last access: 12.01.2013.
activities of the community garden, there will also be 4. FAOSTAT (Database). Retrieved: http://faostat.fao.
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and their established status. Nevertheless, it has to be 5. GIEWS / Global Information and Early Warning
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principles of a gendered division of labour. It is also Estimated Dekadal Rainfall – By Region/Province.
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WKH IHPDOH SDUWLFLSDQWV GXH WR WKHLU OHJLWLPL]DWLRQ E\ Science, Volume 162, No. 3859, pp. 1243-1248.
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$IULFD66$5HSRUW:DVKLQJWRQ'&,VODQG3UHVV
a more sustainable way of governing commons (see
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to October 2012, Retrieved: www.jisao.washington.
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&RPPXQLW\ JDUGHQLQJ LQ WKH 6DKHO DUHD PDNHV Département observatoire de l’emploi et de la
VHQVH IRU ¿YH UHDVRQV ,W LPSURYHV WKH VXSSO\ RI formation (2006), Rapport d’analyse situationnelle
micro-nutrients; it makes use of labour available at annuelle du marche du travail, Bamako: Ministère
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it improves human capital; and it strengthens the 11. 1XW]LQJHU + * 1REHOSUHLV LQ
social coherence of the village and contributes to the Wirtschaftswissenschaften für Elinor Ostrom:
empowerment of the village women. (LQ hEHUEOLFN EHU LKU |NRQRPLVFKHV +DXSWZHUN
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the exception and competition for water increases, Universities of Siegen, Marburg, Aachen, Gießen,
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are imperative. Instrumental for improving the et de Santé 2006, Bamako: Ministère de l’Économie,
micro-climate are hedges, scrubs planted on the GHO¶,QGXVWULHHWGX&RPPHUFH
edges of small plots, and planting in ridges (an 14. UNDP (Database). International Human Development
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PRGL¿HGIRUVORSLQJ¿HOGV statistics/. Last access: 12.01.2013.
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I. Pilvere, I. Sikunova Less Favoured Area Payments in The Regions of Latvia
LESS FAVOURED AREA PAYMENTS IN THE REGIONS OF LATVIA
Irina Pilvere1+, Dr.oec., Inga Sikunova1, Mg.oec.

1
Faculty of Economics, Latvia University of Agriculture
Abstract. 6XSSRUW IRU IDUPLQJ LQ OHVVIDYRXUHG DUHDV /)$ LV RQH RI WKH LQVWUXPHQWV RI WKH &RPPRQ $JULFXOWXUDO
SROLF\ &$3 RI WKH (XURSHDQ 8QLRQ (8 WR SUHVHUYH WKH IDUPLQJ SRSXODWLRQ LQ WKHVH DUHDV DQG PDLQWDLQ FXOWXUDO
landscapes for more than 30 years. In 2014, eligibility criteria for receiving LFA payments will be revised; therefore,
it is important to assess the results of its introduction in the Member States. In Latvia, LFA support is available since
the accession to the EU, and no extensive researches on this support are available. The aim of the present research is
to analyse the LFA payments in the regions of Latvia for the period 2004-2010. Over the period of analysis, farmers in
Latvia received an LFA funding of LVL2 PLOOLRQZKLFKFRPSULVHGDVLJQL¿FDQWVKDUHRIWKHWRWDODPRXQWRIVXSSRUW
payments for agricultural and rural development. The distribution of this support among the regions is different, as
/DWJDOHUHFHLYHGRIWKH/)$VXSSRUW9LG]HPH±DQG.XU]HPH±WKXVEHLQJDVLJQL¿FDQWVRXUFH
of income for farmers in these regions. Over the period of analysis, the amount of LFA support was relatively stable in
terms of total amount and per hectare of area declared for this support. The rates of other area payments increased,
WKXVUHGXFLQJWKHVLJQL¿FDQFHRI/)$VXSSRUW,QWKHUHVHDUFKXVLQJVHYHUDOVRXUFHVRILQIRUPDWLRQWKHDXWKRUVKDYH
analysed various LFA support aspects in the regions of Latvia.
Keywords: less-favoured areas, support, regions.
JEL code: Q18, Q 58.
Introduction France, Greece, or Austria. There have also been much

In 1975, the establishment of support for farming KLJKHUOHYHOVRIWDNHXSDQG¿QDQFLDOVXSSRUWIRU/)$VLQ
in LFA marked a major change in the nature of the EU northern Europe than in southern Europe (Dwyer et al.,
&$3 E\ LQWURGXFLQJ UHJLRQDO FDWHJRULHV )URP WKH YHU\ 2003). Long experience with LFA payments in Austria has
beginning, LFA policy was conceived as a structural demonstrated their positive impact on the continuation
policy aimed at the prevention of land abandonment, of land use in LFAs (Tamme, 2004). The main purpose of
to preserve the farming population in these areas and the Dutch LFA policy is to compensate farm businesses
maintain cultural landscapes. Presently, the LFA scheme for negative economic effects due to the conservation
also provides a substantial contribution to farm income of natural handicaps (Schouten et al., 2009). The LFA
'D[ '.OHSDFND.RORG]LHMVND SRLQWV scheme aims to respond to the widely divergent regional
that over the 30 years since it was established the LFA situation of the EU agriculture, with respect to both the
measure has never been thoroughly assessed; it has only socio-economic and natural characteristics of regions
been expanded. This shows that LFA is largely a political (Shigeto et al., 2007).
PHDVXUHDQGLVQRZYHU\GLI¿FXOWWRUHIRUP,WLVRIJUHDW ,Q /DWYLD VHYHUDO VFLHQWLVWV KDYH UHVHDUFKHG &$3
importance under conditions when growing population instruments and their operation in the regions of Latvia,
numbers, limited infrastructure and market access, for instance, E.Balamou, D.Saktina, W.H.Meyers (2009),
land tenure problems as well as increasing degradation I.Upite (2010), I.Pilvere (2012a, 2012b), I.Pilvere,
problems due to poor management of soils prone to I.Upite, V.Tetere (2012) et al., however, research on
erosion, steep slopes, or low rainfall quantities are some LFA support and its role in the regions has not been
of the limitations for agricultural production that have led performed. Therefore, especially in the light of the
in many areas to growing numbers of poor people (Lipper discussion on LFA support in the EU Member States
et al., 2006). and the revision of this policy in 2014, it is important
One has to agree with M. Stolbova’s (2007) opinion to assess the results of previous support. Therefore,
WKDW ³VXSSRUW WR (XURSHDQ DJULFXOWXUH VKRXOG IRFXV RQ the aim of the present research is to analyse the
the preservation of the typical European countryside, LFA payments in the regions of Latvia for the period
production of healthy food, protection of the environment, 2004-2010.
and the maintenance of the countryside as a residential In accordance with this aim, the following research
HQYLURQPHQW´ 6FLHQWLVWV RI RWKHU (8 FRXQWULHV DGPLW tasksZHUHGH¿QHG
WKDWWKHSDWWHUQVRIXVHRIWKH/)$PHDVXUHDOVRUHÀHFW — WRFKDUDFWHUL]H/)$VXSSRUWLQ/DWYLD
differences in geography and policy history. The measure — to analyse LFA support in the regions of Latvia,
KDV OLPLWHG VLJQL¿FDQFH WR LQWHQVLYHO\ IDUPHG FRXQWULHV based on various information sources.
such as Denmark and the Netherlands. It has traditionally To tackle the research tasks, the authors employed
been used to help maintaining farming in areas of analysis, synthesis, and the logical and constructive
H[WHQVLYH URXJK JUD]LQJ LQ FRXQWULHV VXFK DV ,UHODQG RU methods. The present research analysed information
the United Kingdom or mountainous areas such as in and data from the Rural Support Service (RSS), which
___________________________
+
&RUUHVSRQGLQJDXWKRUE-mail address: Irina.Pilvere@llu.lv
2
Latvian lats. 1 LVL=0.702804 EUR

ISSN 1691-3078
Table 1
Characteristics of LFA support in Latvia, LVL
Kind of support 2004 2005 2006 2007 2008 2009 2010 Total
LFA, thou. LVL 27492.4 35041.4 37181.7 30040.9 26930.6 27397.8 26375.9 210460.7
RDP AP*, thou. LVL 27492.4 45428.3 62019.7 52842.7 52491.6 54164.5 55088.8 349528.0
SAP*, thou. LVL 17440.7 26706.5 33648.3 39014.3 49143.4 59010.3 67166.9 292130.4
Support for agricultural
and rural development,
mln LVL 110.5 219.6 213.3 191.5 299.3 293 369.6 1696.8
/)$VKDUHLQWRWDO¿QDQFLDO
support, % 24.9 16.0 17.4 15.7 9.0 9.4 7.1 12.4
LFA share in RDP AP, % 100.0 77.1 60.0 56.8 51.3 50.6 47.9 60.2
LFA/SAPS, % 157.6 131.2 110.5 77.0 54.8 46.4 39.3 72.0
* RDP AP – RDP area payments; SAP – Single Area Payment
Source: author’s calculations based on the LSIAE database, 2012, LAD, 2011, Pilvere, 2012 b
administrates various support measures and the Latvian In Latvia after its accession to the EU on 1 May
State Institute of Agrarian Economics (LSIAE) database WKH PHDVXUH ³/HVVIDYRXUHG DUHDV DQG DUHDV
information on Rural Development Programme (RDP) ZLWK HQYLURQPHQWDO UHVWULFWLRQV´ XQGHU WKH 5XUDO
support measures. The research design process used Development Plan 2004-2006 became available
special and general literature, methodological materials (Latvijas lauku attistibas…, 2004). The implementation
RQ WKH (8 ¿QDQFLDO VXSSRUW IRU DJULFXOWXUH DQG UXUDO of the measure was also continued within the RDP
development etc. To specify the effect of support DV WKH PHDVXUH ³3D\PHQWV WR IDUPHUV LQ
payments on the economy of farms in various regions DUHDV ZLWK KDQGLFDSV RWKHU WKDQ PRXQWDLQ DUHDV´
of Latvia, the authors exploited the Farm Accountancy (hereinafter - LFAs) (Latvijas lauku attistibas…, 2007).
Data Network (FADN). The FADN is a survey carried out In 2012, the legal framework for LFA support in Latvia
by the Member States of the EU. It was established in is based on:
1965 in accordance with Regulation No 79/65 of the 1) the Rural Development Programme for Latvia
&RXQFLO RI -XQH VHWWLQJ XS D QHWZRUN IRU WKH 2007-2013;
collection of data on the incomes and business operation 2) WKH&DELQHW5HJXODWLRQ1R³5HJXODWLRQV
of agricultural holdings in the European Economic regarding Granting, Administering, and Supervising
&RPPXQLW\7KHWDUJHWVL]HRIWKHVDPSOHIRUWKH)$'1 National and European Union Support for Rural
in Latvia is 1000 farms (Bratka, Praulins, 2007). In the Development to Enhance the Environment and
(8 WKH )$'1 GDWD DUH FODVVL¿HG E\ UHJLRQ XVLQJ WKH 5XUDO /DQGVFDSHV´ /)$ VXSSRUW ZLOO EH SURYLGHG
territorial division in accordance with the Nomenclature of XQWLO 'HFHPEHU 7KH &DELQHW 5HJXODWLRQ
7HUULWRULDO8QLWVIRU6WDWLVWLFV1876FODVVL¿FDWLRQ7KHUH sets the following eligibility criteria for receiving LFA
are different numbers of regions in the countries, for support in 2012: an utilised agricultural area (UAA)
instance, 22 regions in France, whereas the smallest EU declared for LFA support is located in an LFA, it is
member countries (Austria, Belgium, Denmark, Ireland, declared for single area payments, and agricultural
Luxembourg, and the Netherlands) are not divided into activity is practised in an area of at least one
regions, although these countries often classify their KHFWDUH FRQVLVWLQJ RI ¿HOGV RI DW OHDVW KHFWDUHV
territory according to certain features for their domestic LQVL]H%HVLGHVD¿YH\HDUFRPPLWPHQWWRHQJDJH
needs. In Latvia, the following administrative and territorial in agricultural production has to be assumed, and
GLYLVLRQH[LVWVLQDFFRUGDQFHZLWKWKH1876FODVVL¿FDWLRQ a cattle density of at least 0.2 livestock units per
the whole territory of the country corresponds to hectare of permanent meadows and pastures,
Level 1 and Level 2, there are six regions at Level 3: perennial grasses sown on arable land, or nectar
5LJD3LHULJD9LG]HPH.XU]HPH=HPJDOHDQG/DWJDOH FURSVHOLJLEOHIRU¿QDQFLDOVXSSRUWKDVWREHHQVXUHG
which consist of administrative units – municipalities. A fallow area is eligible for support if the area of
Level 3 is used for the FADN needs; however, for the EU
fallow land does not exceed 30 percent of the total
FADN needs, Latvia is regarded as one region owing to
UAA during the current year. Such eligibility criteria
the small territory of it (LVAEI, 2010).
are quite simple, which stimulates farmers to apply
for this kind of support. A similar situation is also in
Research results and discussion Poland, as the LFA measure is widely accessible for
1. Characteristics of LFA support EHQH¿FLDULHV EHFDXVH WKH FULWHULD WKDW DUH LQ IRUFH
The LFA scheme is a part of Axis 2 of the Rural DUHHDV\WRPHHW.OHSDFND.RORG]LHMVND7KH
Development Policy for 2007-2013, which aims at characteristics of LFA support in Latvia are presented
improving the environment and the countryside by in Table 1.
supporting sustainable land management (European One can conclude from the information presented in
&RPPLVVLRQ Table 1 that over the period of analysis, the LFA support

ISSN 1691-3078
50 250
248 44.35
189 39.08 200
40
34.90 34.54
33.81 34.77 32.70
LVL 150
158 135 30.71 30.83 30.65
30 %
94 100
79
22.10 69
18.40 25.57
20
50
13.65
10 0
Year 2004 2005 2006 2007 2008 2009 2010
LFA support on average per ha, LVL

Rate of SAP per ha, LVL
LFA support on average per ha, LVL/Rate of SAP per ha, LVL (%)
Source: author’s calculations based on the LSIAE database, 2012 and Pilvere, 2012 b
Fig.1.LFA support per ha, LVL, the rate of SAP per ha, LVL,
and a comparison of these rates, %, in Latvia in 2004-2010
UHDFKHG /9/ POQ RU RI WKH WRWDO ¿QDQFLDO support, compared with 2004, was different; in three
support for agricultural and rural development, however, UHJLRQV±9LG]HPH=HPJDOHDQG/DWJDOH
WKH /)$ VXSSRUW FRPSULVHV D VLJQL¿FDQW VKDUH RI 5'3 (136%) – the increase rate exceeded the overall
area payments (APs) or on average 60.2% and 72% of national rate of increase in LFA support (135%), while
single area payments (SAPs). Yet, given the fact that .XU]HPH 1%), Pieriga (123%), and Riga (106%)
the amount of LFA support paid in the period 2004-2010 lagged behind. In the period 2008-2010, the LFA support
was quite stable, while the RDP APs, SAPs, and total decreased in all the regions at a quite similar rate of
support payments increased, the role of LFA support 8-16%, except in Riga, where the decrease was the
decreased compared with other support payments. This largest – 53%.
trend was also affected by changes in the rates of support However, the percentage distribution of LFA support
payments that are presented in Fig.1. for the entire period shows that farmers in Latgale
Over the period of analysis, the LFA support per UHFHLYHG 9LG]HPH DOPRVW .XU]HPH DOPRVW
ha of area declared for this support was relatively 17%, Zemgale 12%, and in Pieriga – 5% of the total
stable regardless of the rate reduction in the period amount of this funding, while in Riga it was only 0.3%.
2007-2013, as the difference between the highest and &RPSDUHGZLWKWKHEDVH\HDUDQLQFUHDVHLQ/)$VXSSRUW
lowest rate was 14%. Yet, owing to persistent increases in 2010 was observed only for Zemgale region, as it rose
of 3.2 times in the rate of SAP in 2010 compared with 5% in the period since 2004, whereas a decrease was
2004, the difference in LFA support payments per observed for all the other regions, and in Riga region it
ha, which accounted for only 69% of the rate of SAP decreased by 80%.
in 2010, decreased, although right after the accession to Similar trends might be observed for the area
the EU the difference was 2.5 times. declared for LFA support (Figure3). Until 2006, the area
$VLPLODUVLWXDWLRQH[LVWVLQWKH&]HFK5HSXEOLFZKHUH declared for this support increased in all the regions,
the share of the LFA payments in the current subsidies \HW LQ WKUHH UHJLRQV ± 9LG]HPH =HPJDOH DQG
steadily decreases during the 2004–2009 time series. Latgale (133%) – the increase rate exceeded the overall
7KLV LV FDXVHG E\ WKH ³WUDQVLWLRQDO´ LQFUHDVH RI RWKHU UDWHRILQFUHDVHLQWKHDUHDGHFODUHGIRU¿QDQFLDO
types of subsidies, namely the direct payments, while VXSSRUWKRZHYHU.XU]HPH3LHULJDDQG
WKH/)$SD\PHQWVDUH¿[HGIRUWKHZKROHSURJUDPPLQJ Riga (102%) lagged behind.
period (Stolbova, Micova, 2012). In the period 2008-2010, the area declared for LFA
support rose in Pieriga (103%) and Zemgale (102%),
2. LFA support in the regions of Latvia ZKHUHDVLWVOLJKWO\GHFUHDVHGE\LQ/DWJDOH9LG]HPH
The main indicators of LFA support for the regions DQG.XU]HPHUHJLRQVDQGDVLJQL¿FDQWGHFUHDVHRI
will be calculated by using: 1) the LSIAE database on took place in Riga.
RDP support; 2) the FADN information. After calculating and analysing the percentage
The calculation results, using the LSIAE database on distribution of the area declared for LFA support in
RDP support, are presented in Figures 2 and 3. Figure 2 the period 2004-2010 (Figure3), one can see that
shows the LFA support paid to farmers of the respective LQ 5LJD 9LG]HPH DQG =HPJDOH LW FRUUHVSRQGHG WR
UHJLRQZKLFKFRQ¿UPVWKHWUHQGVLQWKHWRWDODPRXQWRI WKH SHUFHQWDJH GLVWULEXWLRQ RI /)$ ¿QDQFLDO VXSSRUW
¿QDQFLDOVXSSRUWSUHVHQWHGLQ7DEOH±WKHWRWDODPRXQW (0.2%, 12%, and 27%, respectively), while in Pieriga
increased in all regions in the period from the accession DQG .XU]HPH WKH VKDUH RI DUHD H[FHHGHG WKH VKDUH RI
to the EU until 2006. Yet, the rate of increase in LFA funding (6% and 20%, respectively), which pointed to

ISSN 1691-3078
10 140 077
7 058 097
LFA 2010 LVL 4 438 150
3 369 604
1 344 193
25 785
10 667 568
7 451 510
LFA 2009 LVL 4 553 494
3 375 193
1 326 571 Latgale
23 443
10 454 578
7 286 805 9LG]HPH
LFA 2008 LVL 4 564 605
3 311 739
1 276 502
36 430 .XU]HPH
11 397 876
8 121 585
LFA 2007 LVL 5 280 747 Zemgale
3 670 097
1 515 512
55 145
Pieriga
14 719 604
9 970 919
LFA 2006 LVL 6 058 764
4 400 508
1 893 840 Riga
138 010
14 012 538
9 218 195
LFA 2005 LVL 5 672 075
4 148 311
1 854 928
135 325
10 840 223
7 151 440
LFA 2004 LVL 4 634 788
3 201 254
1 534 815
129 925
0 5 000 000 10 000 000 15 000 000 20 000 000

Fig.2. LFA support in the regions of Latvia in 2004-2010, LVL
large unfarmed LFA areas, whereas in Latgale (35%) it and a lower one in 2008-2010. The largest difference
lagged behind, which indicated that these areas were was observed for Pieriga and Zemgale with 14%, the
VPDOO DQG WKH SURSRUWLRQ RI &DWHJRU\ /)$ DUHDV ZDV smallest one was observed for Riga with 5%, while
greater. WKHUH ZHUH PHGLXP GLIIHUHQFHV IRU 9LG]HPH ZLWK
After calculating the LFA funding per 1 ha of the 11% and Latgale and Zemgale with 9%;
DUHD GHFODUHG IRU WKLV VXSSRUW )LJXUH RQH FDQ ¿QG — during both periods, the greatest support per
that: 1 ha, ranging within LVL 35-39, was paid in Latgale,
— there were two distinctive periods – a greater followed by Riga with LVL 34-37, whereas the
¿QDQFLDO VXSSRUW SHU KD LQ WKH SHULRG VPDOOHVW¿QDQFLDOVXSSRUWZDVDYDLODEOHLQ.XU]HPH

ISSN 1691-3078
290 867
232 909
LFA 2010 ha 178 942
105 322
51 801
755
304 125
244 300
LFA 2009 ha 182 728
105 533 Latgale
51 217
689
299 166
240 197 9LG]HPH
LFA 2008 ha 183 206
103 759
49 612
1 072
.XU]HPH
296 211
237 547
LFA 2007 ha 180 955
103 374 Zemgale
50 203
1 577
381 814
287 616 Pieriga
LFA 2006 ha 205 555
123 849
62 718
3 748
Riga
363 355
267 678
LFA 2005 ha 194 566
117 538
61 129
3 677
287 227
214 294
LFA 2004 ha 162 691
93 142
52 232
3 668
0 100 000 200 000 300 000 400 000 500 000
Fig.3. Area declared for LFA support in the regions of Latvia in 2004-2010, ha
with LVL 25-29 and Pieriga with LVL 26-30, but ZDV RQO\ &63 ,Q WKH UHJLRQV WKH /)$
LQ 9LG]HPH DQG =HPJDOH WKLV OHYHO ZDV PHGLXP support as a share of RDP area payments had similar
which might be explained by the share of LFAs of trends as in entire Latvia, as only LFA support was
&DWHJRULHVDQGLQWKHWRWDO/)$VXSSRUW granted in 2004. During the next years, the role of LFA
In 2010, the LFA support in these regions was 3.7 VXSSRUW VLJQL¿FDQWO\ GHFOLQHG LQ WKH UHJLRQV RI 5LJD
and 3.1 times, respectively, greater than in the regions and Pieriga, and its share was 27%; a medium share
of Riga/Pieriga. A similar situation was also observed of 45% was observed for the regions of Zemgale,
IRU WKH DUHD GHFODUHG IRU /)$ VXSSRUW DV LQ 9LG]HPH 9LG]HPH DQG .XU]HPH ZKLOH LQ /DWJDOH UHJLRQ LW ZDV
and Latgale it accounted for 61-65% of the UAA, VLJQL¿FDQW ± RI WKH WRWDO DPRXQW RI 5'3 DUHD
while in the regions of Riga/Pieriga and Zemgale it payments. If the LFA support is compared with the

ISSN 1691-3078
40
35
LVL
30
25
20
Riga Pieriga Zemgale .XU]HPH 9LG]HPH Latgale
Region
2004 2005 2006 2007 2008 2009 2010
Fig.4. LFA support per 1 ha of the area declared for this support in
the regions of Latvia in 2004-2010, LVL
Table 2
LFA support in the regions of Latvia in 2005-2010, LVL
Years/ Region Pieriga Vidzeme Latgale Kurzeme Zemgale Average

2005 274 2008 1633 971 902 1177
2006 309 1841 1464 1139 1134 1212
2007 462 1513 1360 1095 945 1157
2008 359 1269 1502 949 1080 1093
2009 440 1289 1618 1060 1050 1143
2010 414 1542 1758 1124 1307 1267
2010/2005, % 151 77 108 116 145 108
2010, % of average 33 122 139 89 103 100
6RXUFHDXWKRU¶VFDOFXODWLRQVEDVHGRQ/9$(,DQG3LOYHUHE
Table 3
Share of LFA support in the total amount of support payments in the regions of Latvia in 2005-2010, %

2005 3 16 20 14 8 13
2006 2 16 20 11 9 12
2007 4 6 20 11 7 12
2008 4 13 15 9 7 10
2009 5 13 17 10 7 11
2010 5 14 17 10 9 11
2010/2005, % 175 87 88 68 113 89
2010, % of average 45 123 152 84 77 100
amount of SAPs, one can see that the LFA support 62%, respectively, of the amount of SAPs. The LFA
SOD\HG D VLJQL¿FDQW UROH LQ WKH UHJLRQV RI 9LG]HPH DQG SOD\HG D PHGLXP UROH LQ .XU]HPH ZKHUH LW ZDV
Latgale, where the LFA support exceeded the amount of the amount of SAPs in 2010, while a small role
of SAPs 2.1 and 2.6 times, respectively; over the next belonged to LFA support in the regions of Riga, Pieriga,
years, its role decreased, and in 2010 it was 50% and and Zemgale.

ISSN 1691-3078
Table 4
LFA support per 1 ha in the regions of Latvia in 2005-2010, LVL

2005 7 29 33 16 10 19
2006 6 27 33 17 13 19
2007 8 26 32 16 11 19
2008 6 23 29 14 13 18
2009 8 22 29 15 12 18
2010 7 23 30 15 14 18
2010/2005, % 100 80 90 92 143 98
2010, % of average 40 128 162 82 77 100
Table 5
LFA support per 1 LVL of output in the regions of Latvia in 2005-2010, LVL

2005 0.00 0.09 0.12 0.05 0.02 0.03
2006 0.00 0.08 0.11 0.05 0.03 0.03
2007 0.01 0.06 0.10 0.04 0.02 0.03
2008 0.01 0.05 0.08 0.04 0.02 0.02
2009 0.02 0.06 0.11 0.05 0.03 0.03
2010 0.01 0.06 0.09 0.04 0.03 0.04
2010/2005, % 549 65 78 76 170 116
2010, % of average 37 166 256 110 89 100
Table 6
Share of LFA support in the net income of farms in the regions of Latvia in 2005-2010, %

2005 2 16 22 13 6 10
2006 1 18 22 11 11 11
2007 4 15 21 10 6 8
2008 3 13 22 11 6 12
2009 11 34 31 17 14 32
2010 6 23 25 12 13 14
2010/2005, % 342 141 115 95 201 145
2010, % of average 47 165 181 89 92 100
3. LFA support for the FADN farms in the since 2005, a detailed analysis was performed for the
regions of Latvia period 2005-2010.
Further, the FADN information will be analysed for The FADN information on LFA support in the regions
¿YH DJULFXOWXUDO UHJLRQV 3LHULJD 9LG]HPH .XU]HPH SDUWLDOO\FRUUHVSRQGVWRWKH¿QGLQJVRI&KDSWHURIWKH
=HPJDOHDQG/DWJDOH$VLWZDVLGHQWL¿HGLQWKHSUHYLRXV present research – the largest LFA support was received
FKDSWHU 5LJD UHJLRQ UHFHLYHG LQVLJQL¿FDQW /)$ VXSSRUW E\ IDUPV LQ /DWJDOH DQG 9LG]HPH <HW VLQFH WKH WKLUG
which makes it an exception. Since information on LFA ODUJHVW DPRXQW RI /)$ VXSSRUW ZDV SDLG LQ .XU]HPH
support is available in the FADN network for a period in 2010, the FADN information indicates that farms of

ISSN 1691-3078
Zemgale are in the third position, followed by those of greater LFA support was required to produce agricultural
.XU]HPH LQ WKH IRXUWK SRVLWLRQ ZKLFK PD\ EH UHODWHG products worth 1.00 LVL than in the other regions.
to the selected sample of the FADN farms. The FADN 7KH ¿QGLQJV RI WKLV UHVHDUFK VKRXOG EH WDNHQ LQWR
information also indicates that the smallest LFA support account in designing an LFA support policy from 2014
was received by farms in Pieriga, although an increase onwards.
from the base year (like in Zemgale) is the greatest in
this region. In the period 2005-2010, the amount of LFA
Bibliography
VXSSRUWGHFUHDVHGRQO\LQ9LG]HPH
1. Balamou, E., Saktina, D., Meyers, W.H. (2009).
Given the mentioned facts on LFA support in the
Impact of Rural Support Policy Alternative on Latgale
regions, a similar trend was observed for the share of
Regional Economy. In: Economic Science for Rural
LFA support in the total amount of support payments –
Development Nr. 19, Jelgava, Latvia, pp. 27-35.
in 2010, it accounted for 17% and 14%, respectively,
2. %UDWND 9 3UDXOLQV $ &DOFXODWLRQ RI
LQ /DWJDOH DQG 9LG]HPH D VOLJKWO\ ORZHU VKDUH ZDV LQ
Replacement Value of Fixed Assets for the Purpose of
.XU]HPHDQG=HPJDOH
FADN in Latvia. In: The Economic and Social issues
The LFA support per 1 ha of farms’ area presents
of Sustainable Development Volume III, Agricultural
the previously established trends – in Latgale and
8QLYHUVLW\RI6]F]HFLQ3RODQGSS
9LG]HPHLWZDVDQGWLPHVUHVSHFWLYHO\JUHDWHU
3. &HQWUDOD VWDWLVWLNDV SDUYDOGH &63
than on average in the country, and minimal one was in
/6.,, /$8.8 6$,01,(&,%8 *583(-806
Pieriga. Yet, it has to be noted that over the period of
3(& /$8.6$,01,(&,%$ ,=0$172-$0$6 =(0(6
analysis, the LFA support increased 1.4 times in Zemgale
PLATIBAS (Agricultural Holdings Grouped by Utilised
region, in Pieriga it remained at the level of 2005,
Agricultural Area). Available at: http://data.csb.
whereas it decreased in the regions having the largest
gov.lv/Dialog/varval.asp?ma=LSK10-I02&ti=LSK
LFA support.
',,(/$8.86$,01,(& &(%8*5
The data presented in Table 5 indicate that the LFA
83&-8063&&/$8.6$,01,(&&(%&
VXSSRUWKDGDQLQVLJQL¿FDQWHIIHFWRQDJULFXOWXUDORXWSXW
,=0$172-$0&6=(0(63/$7&(%$6 S
in all the regions, except Latgale, where 0.09 LVL of
ath=../DATABASE/laukskait_10/II%20ZEMES%20
LFA support were required to produce products worth
IZMANTO%D0ANA/&lang=16
1.00 LVL. Thus, the greatest LFA support generated the
4. 'D[ 7 7KH 5HGH¿QLWLRQ RI (XURSH¶V /HVV
smallest quantity of products in Latgale.
Favoured Areas. 15. November 2005 MPRA Paper
In 2010, compared with 2005, the role of LFA support
No. 711, posted 07. November 2007, 16 p.
LQFUHDVHG LQ DOO WKH UHJLRQV H[FHSW .XU]HPH DV WKH
5. Dwyer J., Baldock D., Beaufoy G., Bennett H.,
share of it in the net income of farms rose. This share was
Lowe P., Ward N. (2003). Europe’s Rural Futures –
KLJK LQ WKH UHJLRQV RI 9LG]HPH DQG /DWJDOH DFFRXQWLQJ
The Nature of Rural Development II. Rural
IRU ZKHUHDV LQ WKH UHJLRQV RI .XU]HPH DQG
Development in an Enlarging European Union, 146 p.
Zemgale it comprised 12%-13%.
6. (XURSHDQ&RPPLVVLRQ$LGWRIDUPHUVLQ/HVV
Favoured Areas (LFA). Retrieved: http://ec.europa.
Conclusions, proposals, eu/agriculture/rurdev/lfa/index_en.htm
recommendations 7. .OHSDFND.RORG]LHMVND ' 'RHV /HVV
The amount of LFA support totalled LVL 210.5 mln in Favoured Areas Measure Support Sustainability of
Latvia in the period 2004-2010, which accounted for 12% European Rurality? The Polish experience, pp.121-
RIWKHWRWDODPRXQWRI¿QDQFLDOVXSSRUWRIDOONLQGVSDLG 134. Retrieved: http://ageconsearch.umn.edu/
for agricultural and rural development. Over the period bitstream/139083/2/vol.%207_9.pdf
of analysis, the LFA support per ha was relatively stable, 8. Latvijas lauku attistibas plans lauku attistibas
yet, if compared with the SAPs, its role decreased, as the programmas istenosanai 2004. – 2006.gadam (Rural
rates of SAPs were gradually increased and had exceeded Development Plan of Latvia for Implementing the
the LFA support measured per ha since 2008. Rural Development Programme 2004-2006) (2004).
LFA support payments were very important for Riga: LR Zemkopibas ministrija, 297 lpp.
IDUPV LQ /DWJDOH DQG 9LG]HPH DQG PHGLXP LPSRUWDQW 9. Latvijas lauku attistibas programma 2007.-2013.
IRUWKRVHLQ.XU]HPHDQG=HPJDOH2IWKHWRWDODPRXQW gads (Rural Development Programme for Latvia
of LFA support, these regions received 94.5%, which 2007-2013) (2007). Riga: LR Zemkopibas ministrija.
corresponded to the area declared for this support in the 463 lpp.
period 2004-2010. 10. Latvijas Valsts Agraras ekonomikas instituts (LVAEI)
The LFA support per ha decreased in all the regions (2005). Lauku saimniecibas darba ekonomiskas
in the period 2008-2010 compared with the period analizes rezultati 2004 (SUDAT) (Agricultural
2004-2007, yet, the highest rates of support were paid Holdings, Results of Economic Analysis 2004
in Latgale (35-39 LVL ha-1) and Riga (34-37 LVL ha-1), (FADN)), Riga, 80.-111.lpp.
which might be explained by a higher share of LFAs of 11. Latvijas Valsts Agraras ekonomikas instituts (LVAEI)
&DWHJRULHVDQGLQWKHWRWDO/)$VXSSRUW (2006). Lauku saimniecibas darba ekonomiskas
)DUPV LQ /DWJDOH DQG 9LG]HPH UHFHLYHG DQG analizes rezultati 2005 (SUDAT) (Agricultural
1.3 times greater LFA support if measured per 1 ha. In Holdings, Results of Economic Analysis 2005
these regions, the LFA support accounted for 23%-25% (FADN)), Riga, 82.-111.lpp.
RI WKH QHW LQFRPH RI IDUPV 7KH PRVW LQHI¿FLHQW XVH RI 12. Latvijas Valsts Agraras ekonomikas instituts (LVAEI)
LFA support was observed in Latgale, where 2-3 times (2007). Lauku saimniecibas darba ekonomiskas

ISSN 1691-3078
analizes rezultati 2006 (SUDAT) (Agricultural 20. Pilvere I. (2012a). Support Payments for Agriculture
Holdings, Results of Economic Analysis 2006 in Latvia Regions. In: International Journal of
(FADN)), Riga, 89.-119.lpp. Business and Management Studies, Volume 1,
13. Latvijas Valsts Agraras ekonomikas instituts (LVAEI) Number 1, pp. 553-564.
(2008). Lauku saimniecibas darba ekonomiskas 21. Pilvere I. (2012b). Atskaite Par Lauku attistibas
analizes rezultati 2007 (SUDAT) (Agricultural programmas 2007.-2013. gadam atbalsta
Holdings, Results of Economic Analysis 2007 pasakumu „Maksajumi lauksaimniekiem par
(FADN)), Riga, 96.-131.lpp. nelabveligiem dabas apstakliem teritorijas, kas
14. Latvijas Valsts Agraras ekonomikas instituts (LVAEI) nav kalnu teritorijas” (Report on the Measure
(2009). Lauku saimniecibas darba ekonomiskas “Payments to farmers in areas with handicaps, other
analizes rezultati 2008 (SUDAT) (Agricultural than mountain areas” under the Rural Development
Holdings, Results of Economic Analysis 2008 Programme 2007-2013), 2012.gada novembris,
(FADN)) 5ŝJD 5HWULHYHG KWWSVVXGDWOYDHLOY 83 lpp.
Login.aspx?ReturnUrl=%2fDefault.aspx (Access: 22. Pilvere I., Upite I., Tetere V. (2012). Protekcionisma
06 August 2011) instrumentu ietekme primaro un sekundaro sferu
15. Latvijas Valsts Agraras ekonomikas instituts (LVAEI) ilgtspejiga attistiba (Effects of Protectionism
(2010). Lauku saimniecibas darba ekonomiskas Instruments on the Sustainable Development
analizes rezultati 2009 (SUDAT) (Agricultural of Primary and Secondary Sectors). Latvijas
Holdings, Results of Economic Analysis 2009 Lauksaimniecibas universitate, Ekonomikas
(FADN)), Riga, Retrieved: https://sudat.lvaei.lv/ fakultate, Jelgava, SIA Drukatava, 192 lpp.
Login.aspx?ReturnUrl=%2fDefault.aspx (Access: 23. Schouten M., ArisGaaff A., Heijman W. (2009).
10 August 2011) Less favoured area measure in the Netherlands:
16. Latvijas Valsts Agraras ekonomikas instituts (LVAEI) a welcome or negligible addition? pp. 23-
(2011). Lauku saimniecibas darba ekonomiskas 28. Retrieved: http://ageconsearch.umn.edu/
analizes rezultati 2010 (SUDAT) (Agricultural bitstream/49223/2/2Less%20favoured%20
Holdings, Results of Economic Analysis 2010 area%20measure%20in%20the%20Netherlands.
(FADN)), Riga. Retrieved: https://sudat.lvaei.lv/ pdf
Login.aspx?ReturnUrl=%2fDefault.aspx (Access: 24. Shigeto S., Kashiwagi M., Whitman G. (2007).
05 November 2011) Agricultural Policy Reform and Less-Favoured Areas
17. /DXNX DWEDOVWD GLHQHVWV /$' ,]PDNVDWD Policy: Application of EU Policy to Japan. Centre
atbalsta apjoms un struktura, milj.LVL (Amount for Rural Economy Discussion Paper Series No. 15.
and Percentage Distribution of Financial Support, December 2007, 14 p.
mln LVL). Retrieved: http://www.lad.gov.lv/ 25. 6WROERYD 0 &RPSDUDWLYH DQDO\VLV RI OHVV
¿OHVNRSVDYLONXPVBBBSGI (Access: favoured areas payments in the EU states. AGRIC.
19 November 2011) (&21±&=(&+ 53, 2007 (10), pp. 455–465.
18. Lipper L., Pingali P., Zurek M. (2006). Less-Favoured 26. 6WROERYD00LFRYD07KHIDUPVL]HLQWKH
Areas: Looking Beyond Agriculture Towards less-favoured areas and the economy of support
Ecosystem Services. ESA Working Paper No. 06-08, spending on public goods production in the case of
September 2006, 29 p. WKH &]HFK 5HSXEOLF ,Q $*5,& (&21 &=(&+, 58,
19. 0. QRWHLNXPL 1U ³1RWHLNXPL SDU 2012 (10), pp.482–494.
valsts un Eiropas Savienibas lauku attistibas atbalsta 27. Tamme O. (2004). The Less-Favoured Area (LFA)
SLHVNLUVDQX DGPLQLVWUHVDQX XQ X]UDXG]LEX YLGHV VFKHPH LQ VWXG\ DUHD ³%OXGHQ] %UHJHQ]HU :DOG´
XQ ODXNX DLQDYDV X]ODERVDQDL´ (Cabinet Regulation May 2004. 19 p. Retrieved; http://www.berggebiete.
No.295 of 23 march 2010 “Regulations regarding eu/cms/ dmdocuments/laendliche_entwicklung/
Granting, Administering, and Supervising National DUWLNHOBWDPPHBFDVHVWXG\EUHJHQ]HUZDOGBHVSRQ
and European Union Support for Rural Development pdf,
to Enhance the Environment and Rural Landscapes”). 28. Upite I. (2010). Use of Investment Support in
³/9´ >VWDMDV VSHND Latvian Agriculture. Doctoral thesis. Jelgava: Latvia
@DUJUR]LMXPLHP University of Agriculture, 222 p.e
Acknowledgements
7KHUHVHDUFKZDVSURPRWHGZLWKWKHVXSSRUWRIWKH/DWYLDQ6WDWH,QVWLWXWHRI$JUDULDQ(FRQRPLFV&RQWUDFW1R8%(
%³/)$LPSDFWDQDO\VLV´

ISSN 1691-3078
Z. Zalite, A. Auzina The Development of Forest Property Rights From Early 20th Century to Modern Times
THE DEVELOPMENT OF FOREST PROPERTY RIGHTS

FROM EARLY 20TH CENTURY TO MODERN TIMES
Zinta Zalite1, MBA; Anita Auzina2, Dr.oec., associate professor +

1
2
Abstract. Forest is an important natural resource to the Latvian economy. It is useful to examine the historical
context to estimate objectively the events that created the structure of forest property rights today. While 50.3% of
all Latvian forests are state-owned and the remaining 49.7% are under different ownership, historically this structure
has changed with the political situation and the authorities. The changes in forest property rights were examined from
the beginning of the 20th century up to modern times, identifying three distinct periods.
The main conclusions were that, looking from the standpoint of economic performance, the period between the
beginning of the 20thFHQWXU\DQGZDVFKDUDFWHUL]HGE\DQLOOFRQFHLYHGWUDQVIRUPDWLRQRIIRUHVWVLQWRIDUPODQG
In 1989, the notion that rural households are an economically independent form of farming became established. The
\HDUPDUNHGWKH¿QDOODUJHWUDQVIRUPDWLRQDVWKHVWDWHIXQFWLRQVLQIRUHVWU\ZHUHGHOHJDWHGWRWKH-RLQW6WRFN
&RPSDQ\³/DWYLMDVYDOVWVPH]L´ZKLFKQRZFRQWULEXWHVVLJQL¿FDQWO\WRWKHVWDWHDQGORFDOEXGJHWV
Key words: forest ownership, agrarian reforms, economical issues.
JEL code: Q15
Introduction of the 20th century to modern days. To accomplish it, the

Forest is a priceless treasure of the natural world. following objectives were proposed:
$FFRUGLQJ WR WKH GDWD RI WKH &HQWUDO 6WDWLVWLFDO %XUHDX 1) to explore the development of forest property rights
of Latvia, the total forested area is 3.5 million hectares, from early 20th century to 1940;
covering 56.9% of the territory of Latvia. This puts us 2) to explore the development of forest property rights
among the most forested countries in Europe. In 2011, from 1940 to 1990;
the export value of forestry output was 1.18 billion lats, 3) to explore the development of forest property rights
WKH YDOXH RI ¿QDO JRRGV ELOOLRQ ODWV DQG LWV VKDUH from 1990 to the modern days.
of gross domestic product accounted for 5% (Klauss K., Monographic descriptive method, analysis and
2011). These facts show that forests are an important synthesis methods are used in the research to explore
natural resource for the Latvian economy. the development of forest property rights from early
50.3% of all Latvian forests are state-owned, and 20th century to the modern days as well as theory
the remaining 49.7% are under different ownership. aspects and problem elements. Empirical research
Historically, this structure has changed with the method is used to develop general statements from
political situation and the powers. It is important to separate facts or to determine regularities. Logical
understand the historical developments. The eminent construction and interpretation methods are used for
Austrian economist Schumpeter has said that historical developing conclusions. Legislative acts of the Republic
knowledge in particular makes it possible to include an RI/DWYLDVFLHQWL¿FSXEOLFDWLRQVRWKHUUHOHYDQWOLWHUDWXUH
understanding of the state and the societal institutions and internet resources were used in the study.
that make up economic life in analysis. To shorten the
length of material, the authors chose the beginning of
the 20th century as the starting point of analysis of forest Research results and discussion
property rights, dividing this time into three periods. The structure of forest property rights and changes
Man has been dependent on the forest for food, in its distribution will be explored in three periods,
material, recreation, and income from antiquity to the describing the most important events during each of
modern day. In order to estimate objectively the events these periods. The periods are chosen based on the
that produced the structure of forest property rights theoretical studies (Boruks A., 2003, Boruks A., 2001,
today, it is useful to examine the historical context. Strods H., 1999., Kronitis J., 1965). The changes of
Property rights are a key factor for achieving maximal political and socio-economic regimes are the result of the
economic outcome from forest resources in a sustainable period distribution.
way. In addition, this research is topical, because it is
important to explore forest ownership development as 1. Characterisation of forest land property
the basis for future researches. Based on the topicality of rights before 1940
the theme, the aimRIWKHVWXG\ZDVGH¿QHGDVH[SORULQJ For many centuries, the territory of Latvia has been
the structure of forest property rights from the beginning under the rule of various foreign powers. Only in the
___________________________
+
&RUUHVSRQGLQJDXWKRUV
1
Zinta Zalite. Tel.: +371 26154140; E-mail address: ]DOLWH]LQWD#JPDLOFRP
2
$QLWD$X]LQD7HOE-mail address: Anita.$X]LQD#OOXOY

ISSN 1691-3078
19th century Latvian peasants did gain the right to The takeover of private forests can be divided into two
purchase property. Redemption of noble properties VWDJHV¿UVW±RZQHUOHVVIRUHVWVVHFRQG±IRUHVWVWDNHQRYHU
claimed with serfage begun in the second half of by the state in accordance with the Agrarian Reform after
the 19th century. It was not uncommon to purchase 1 October 1920. The Agrarian Reform of 1920
IDUPV LQ .XU]HPH DQG 9LG]HPH WRJHWKHU ZLWK DOO WKHLU (1920 – 1937) was a radical land ownership, land
easements. Private estates had an especially high SURSHUW\ VL]H DQG ODQG XVDJH UHDUUDQJHPHQW ZLWK
amount of easements. When the purchase of farms legislation. It was based on the Agrarian Reform
by serfage started, nobles often cut down and sold off /DZ DGRSWHG E\ WKH &RQVWLWXWLRQDO $VVHPEO\ RQ
the largest of the peasant forests (Strods H., 1999). 6HSWHPEHU 7KH ¿UVW SDUW RI WKH $JUDULDQ
Until World War I, only about 10% of all the land, 5HIRUP /DZ DGRSWHG E\ WKH &RQVWLWXWLRQDO $VVHPEO\ RQ
i.e. around 650 thousand hectares, was owned by the 16 September 1920 established the State Land Fund. It
state. The majority of this state owned land – more than LQFRUSRUDWHG DOO WKH VWDWH ODQG IRUPHU ³FURZQ´ HVWDWHV
half of it (around 400 thousand hectares) was covered and forests) as well as the majority of the previously
with forests. Around 1300 private estates owned 48% private estates and clergy estates (Strods H., 1999).
of all the land, 39.5% was owned by the peasants Takeover of ownerless forests was necessary to
(Vasilevskis A., 2007). protect them from rough looting. If the takeover of
6LQFHIRUHVWVFRXOGEHWRWDOO\RZQHGE\WKH³FURZQ´RU state forests did not cause any particular problems,
the nobles, but not the peasants, peasant farms suffered privately owned forests did present various problems.
from lack of access to forests for centuries. Theft was The revolution and the wars had dispersed estate owners
observed to be one of the ways to acquire the necessary across all of Europe. Fearing expropriation, they tried
FRQVWUXFWLRQ PDWHULDOV DQG ¿UHZRRG 7KH UHODWLRQVKLS to protect their property rights using proxies. Private
EHWZHHQ WKH HVWDWHV WKH ³FURZQ´ DQG WKH SHDVDQWV forests were in a chaotic state – lacking administration,
in regards to forest ownership become aggravated management plans, and descriptions, the forests also
during the peasant unrest, and especially during the contained abandoned wood products claimed by various
1905 revolution. The peasants made estate privileges entities. Takeover of ownerless forests started even
on using forests and gave themselves rights to use the under the conditions of war – from 1919 to 1920. The
forests, too (Strods H., 1999). estate owners and their proxies did not always claim their
Neither economic development, nor legislation property rights in time, leading to premature takeover of
PDQDJHGWRDVVXUHWKHXVHRIIRUHVWVWREHQH¿WWKHSHRSOH their property (Vasilevskis A., 2007).
Thus, after the revolution in Russia, the revolutionary The second part of the Agrarian Reform Law, which
legislation in Latvia tried to settle the forest issues for ZDV DGRSWHG E\ D MRLQW PHHWLQJ RI WKH &RQVWLWXWLRQDO
WKHEHQH¿WRIWKHSHRSOH$IWHUWKHHVWDEOLVKPHQWRIWKH Assembly on 21 December 1920, set the rules for using
State of Latvia on 18 November 1918 and victory in the the State Land Fund. Agricultural land, excluding part
War of Liberation (1918-1920) against the Bermontians of forest meadows, was included in the distribution
and the Bolsheviks, an independent policy and legislation fund and handed over to state land inspectors. Forest
on forestry emerged (Strods H., 1999). lands were handed over to the Department of Forests
In 1918, the Forest Rules of the Russian Empire (Strods H., 1999).
adopted in 1905 were still in force. The Forest Rules According to the 1921 data, Latvia had 1820 thousand
divided all the forests into state, public, and privately hectares of forests, covering 28% of its territory. State
owned. All of the said categories could still fall under the owned forests constituted about 84.1% of all the Latvian
LQÀXHQFHRIRWKHUVWKDQNVWRWKHDQFLHQWHDVHPHQWV7KH forests. The other 15.9% of the forests were privately
easements were cancelled before 1930s. An exception held (14.3%) and owned by the municipalities (1.6%).
ZDVWKHIRUHVWVRI+LV,PSHULDO+LJKQHVV¶&DELQHWZKLFK Precise data about the areas were not available at the
fell under special rules. State owned forests were a time. According to other (but still imprecise) data, after
³FURZQ´SURSHUW\6WDWHIRUHVWVZHUHIXUWKHUGLYLGHGLQWR taking over the estates in 1920, the state, on the basis
³FURZQ´DQGVSHFLDOIRUHVWV6WURGV+ of the Agrarian Reform Law, held 2,007,111 hectares, an
2Q -DQXDU\ ,VNROW GHFLGHG WR QDWLRQDOL]H increase of 65 thousand hectares (Vasilevskis A., 2007.).
WKHIRUHVWVRIWKH9LG]HPHSURYLQFHSXWWLQJWKHPDWWKH The Section of Private Forests was abolished after these
service of the Latvian workers, soldiers, and members of forests were taken over. By large, the forests were kept
the Landless Board. With the failure of the Bretlytovska in the state ownership, without further distribution to
peace talks and resumption of the German attacks in farmers (Strods H., 1999).
February of 1918, all of the territory of Latvia fell under =LJXUGV 6DOLQV LQ WKH ERRN ³)RUHVW 8VH LQ /DWYLD´
RFFXSDWLRQ$OORI,VNDORWV¶DFWLYLW\LQFOXGLQJLQWKH¿HOGRI HPSKDVL]HG D SUREOHP WKDW URVH RXW RI WKH DJUDULDQ
IRUHVWU\FHDVHG7KHQDWLRQDOL]DWLRQRIIRUHVWVUHPDLQHG reform, when forest lands were allocated to new farms. If
at the level of intentions (Vasilevskis A., 2007). the state forest fund held a little over 2 million hectares
On 19 February 1919, the Latvian Interim Government in 1922, 25% of which were former Russian state forests
established the Department of Forests (Strods H., ³FURZQ´ IRUHVWV DQG ZHUH IRUPHU HVWDWH IRUHVWV
1999). The Section of Private Forests ran parallel to the then on 1 April 1938 the state forest fund holdings had
Department of Forests under the auspices of the Ministry decreased to 1,735 thousand hectares due to distribution
of Agriculture from August 1918 (Salins Z., 1999). of 370 thousand hectares of fund’s land to new farms
On 8 October 1920, a circular by the Department of (282 thousand hectares of forest land and 88 thousand
Forests titled For Private Estate Foresters heralded that RIQRQIRUHVWODQG7KLVSURFHVVLQWHQVL¿HGIURPWR
WKH IRUHVWV RI SULYDWH HVWDWHV ZRXOG EH QDWLRQDOL]HG 1930. As a result, the state’s forest ownership declined
starting with 1 October (Strods H., 1999). every year, going from 87% in 1923 to 78% in 1938.

ISSN 1691-3078
From the standpoint of agricultural policy, the distribution After the change of the occupying power on
RIIRUHVWIXQG¶VODQGWRDJULFXOWXUDOXVHLVMXVWL¿DEOHDQG 7 September 1944, a decision was made On the
acceptable only if forestry is less economically viable than Liquidation of German Occupation Effects in the
agriculture. However, since agriculture in Latvia produced Agriculture of the Latvian SSR, producing instructions
OHVVSUR¿WWKDQIRUHVWU\WKLVDFWLRQFDQEHVHHQDVXQZLVH about the return of land and provision of land to
From 1923 to 1935, the use of forest resources produced servants, landless peasants, and small farms. In the
DQDYHUDJHDQQXDOSUR¿WRIPLOOLRQODWVWRWKHVWDWH period between 1944 and 1947, the land reform was
treasury (Salins Z., 1999). repeated (Locmers M., 2000). It was declared that state
In the period from 1923 to 1938, the share of private forests are all forests in the territory of the republic,
forests increased from 11% to 18%, but communal except forests that were given to collective farms in
and other ownership categories rose from 2% to 4% perpetuity. It was accepted that the forests of the Latvian
(Salins Z., 1999). At the start of World War II, Latvia had SSR’s Ministry of Forestry and Forest Industry are referred
0.9 hectares of forest per inhabitant (Forest Sector in to as state forests (Kronitis J., 1965).
Latvia ..., 2011). The land reforms of 1940 and 1944-1947 were
The development of forest property rights during executed in a hasty manner, using the most basic
this period was complicated because changing political methods, without producing technical drawings of land
leadership meant previous reforms lost power and surveys, indicating the short-term political goals behind
new ones came to replace them. Regardless of that, a WKHUHIRUPV7KLVZDVFRQ¿UPHGE\WKHFROOHFWLYL]DWLRQRI
tendency of increased order and sophistication in the farming and liquidation of the peasantry that followed,
forest property rights is noted, also introducing the notion driven by the same reform scenarios that put party
RI SULYDWH SURSHUW\ IRU WKH ¿UVW WLPH WKXV OD\LQJ WKH dogma, government decisions, and political leader
foundations for the market economy. The progress on land instructions above laws (Locmers M., 2000).
rights was determined by the 1920 Agrarian Reform Law, The goal of the Soviet authorities was not the formation
though subsequent events pointed to its shortcomings. RILQGLYLGXDOIDUPVEXWRXWULJKWFROOHFWLYL]DWLRQ±FUHDWLRQ
From the economic standpoint, the decision to distribute RIODUJH6RYLHWIDUPVNRONKR]HVDQGVRYNKR]HV7KLVZDV
forest land to the new farms was unwise, since it lead to implemented soon, in 1949-1950. Since the peasants did
forest land being turned into agricultural land. This action not want voluntarily to join the large collective farms, it
was one of the reasons for the decline in the total forest ZDV GRQH IRUFLEO\ )RUFHG FROOHFWLYL]DWLRQ ZDV H[HFXWHG
area. It follows that today one also needs to compare YHU\ UDSLGO\ :KLOH ZRUNLQJ LQ NRONKR]HV /DWYLDQV
ZKLFKIRUPRIHFRQRPLFDFWLYLW\LVPRUHSUR¿WDEOHEHIRUH gradually lost the characteristic lifestyle and work ethics
introducing major reforms. Another shortcoming of the (Boruks A., 2003).
agrarian reform is that the state owned 80% of the forests ,QWKHODQGDUHDRI/DWYLDQ665NRONKR]IRUHVWV
in 1938, while only 18% were held privately. The authors stood at 5,421.1 thousand hectares, or 19% of the
believe that a balanced approach with similar shares for total forest land in the republic. The state forests had
government and private ownership would have furthered a combined area of 2.8 million hectares (Kronitis J.,
private entrepreneurship, encouraged competition and 7KH /DZ RI /DWYLDQ 665 /DQG &RGH ZDV SDVVHG
improved the economy. If not for the outbreak of World RQ 0D\ 7KH /DQG &RGH GLG IRUPDOO\ UHJXODWH
War II, such an outcome would have been possible. peasants’ right to hold farms, while also stipulating that
they should have no more than one hectare of land and
2. Forest property rights from 1940 until 1990 up to 0.2 hectares of backyard land at their disposal.
Beginning with 1940 the Latvian nation was subjected :LWK WKH JUDGXDO GHPRFUDWL]DWLRQ RI DJULFXOWXUDO SROLF\
to 50 years of occupation, a foreign power imposing its during the period of national revival, the recognition that
own rules, and the Latvian having no say in his own land. a new land reform was necessary gradually took hold
*UHDW FKDQJHV WRRN SODFH LQ WKH ¿HOG RI IRUHVW SURSHUW\ (Locmers M., 2000).
rights as well, as private ownership was abolished. This According to data from 1988, the state forestry
abolishment of private ownership is characteristic of the institutions managed 63.3% of the total forest land,
period in forest property rights. With the incorporation of agricultural companies – 33.2%, towns and other
Latvia into the Soviet Union, the state became the only institutions – 3.5% (Distribution of Forest ..., 1998).
owner of forests. 2Q0D\WKH6XSUHPH&RXQFLORIWKH/DWYLDQ
On 22 July 1940 the People’s Parliament issued the SSR adopted the Law of Peasant Farms in the Latvian
Declaration of Land Transfer to the Ownership of the 665 ZKLFK PDUNHG WKH ¿UVW VWHS WRZDUGV UHVWRUDWLRQ
People, with which the parliament declared all land and of private property. While orienting the law towards a
its riches, forests, lakes, and rivers to be the property of UHRUJDQL]DWLRQRILQGXVWULDOUHODWLRQVLQUXUDODUHDVLWZDV
the people, i.e. the state. The area of land given to use HPSKDVL]HGWKDWSHDVDQWIDUPVDUHDQLQGHSHQGHQWIRUP
by farmers was limited to 30 hectares. All of the land RIDJULFXOWXUDOSURGXFWLRQZLWKHTXDOULJKWVWRNRONKR]HV
WKDWH[FHHGHGWKLVVL]HZDVWUDQVIHUUHGWRWKHVWDWHODQG and Soviet farms. The concept of peasant property was
fund, so the state could give land to landless peasants put into law. Land given to a peasant shall not be divided
and small farms. The legislation was adopted in a great DQGLWVVL]HFDQRQO\EHFKDQJHGYLDDQDSSOLFDWLRQIURP
hurry (Locmers M., 2000). the owner. Adoption of this law gave hope that a Latvian
22 July 1941 marked the start of Germany’s military could once again be the master of his land and his tillage
campaign against the USSR, and as soon as the beginning %HUH]RYVNLV=
of July, all of Latvia came under German occupation. The &RPSDULQJ WKH SUHYLRXV WZR SHULRGV LQ KLVWRU\ RQH
German authorities upheld the basic rules of the 1940 FDQ QRWH D VLJQL¿FDQW GLIIHUHQFH ,I GXULQJ WKH SHULRG
ODQGQDWLRQDOL]DWLRQ/RFPHUV0 between the beginning of the 20th century and 1940 the

ISSN 1691-3078
goal of land reform was to put property rights’ regulation 5HFHLYH &RPSHQVDWLRQ )RU 5XUDO /DQG &RQ¿VFDWHG RQ
in order, granting the right of private ownership, then -XO\/DZ2Q/DQG3ULYDWL]DWLRQ
after 1940 the goal of reform was liquidation of private 7KH ODZ 2Q 5XUDO /DQG 3ULYDWL]DWLRQ ZDV DGRSWHG LQ
ownership. Market economy ceased to function in ,WQRWRQO\UHPRYHGWKHÀDZVRIWKHODQGUHIRUPODZ
WKLV SHULRG $ FHQWUDOL]HG JRYHUQPHQW UDQ HFRQRPLF but also created contradictions and changed its contents.
development. The state was declared the only owner The authors think that one of the most important aspects
of forests. The hasty nature of land reform, without of it was a change in the goals of the reform, putting an
making technical drawings of land surveys, destroying emphasis on rights of previous owners and their heirs
SULYDWHRZQHUVKLSDQGEXLOGLQJFROOHFWLYL]HGIDUPVZDV to regain property owned up to 21 July 1940, while
misguided. With the destruction of peasantry, people discontinuing legal, social, and economic improvement
assimilated, and the characteristic lifestyle and work or support for farming. As a result, the rights of existing
HWKLFVRIWKHFRXQWU\VLGHZHUHORVW$EUHH]HRIIUHVKDLU users of these properties seriously suffered. A principle
came with the law of 1989 that proclaimed peasant farms about equal rights of heirs to land, regardless of what
to be an independent form of agricultural production. it was used for was formulated, saying that everyone
This law marked a breaking point with talks about the can regain his share without expense. Individuals’ rights
return to the market economy and restoration of private WR SURSHUW\ ZHUH RI¿FLDOO\ UHVWRUHG LQ %RUXNV $
ownership coming just a year later. 2001).
About 1.3 million hectares of forest land were
3. Forest property rights after 1990 VXEMHFWHG WR SULYDWL]DWLRQ LQ IRU ZKLFK DERXW
The need for new agrarian reform was set by the 120,000 to 180,000 individuals had applied for new
political realities after the proclamation of independence or restituted property rights. In 1996, 15.5% of
on 4 May 1990, and the shape of the economic policy, Latvian forests were in the hands of such new owners
which tried to set the stage for a gradual phase-in of the (Svarca K., 1996).
market economy (Grube G., 2000). After regaining independence, the government of
The process was made easier because before the Latvia had to solve the same task that daunted the
4 May declaration of independence, some work, like JRYHUQPHQW RI WKH ¿UVW /DWYLDQ UHSXEOLF ± SXWWLQJ WKH
giving land usage rights to viable farms, had already been issues of property rights in order. The main difference
done. To assure succession of the process, the Supreme was that with the agrarian reform law of 1920 and
&RXQFLO IRUPHG D JURXS WKDW GHYHORSHG FRQFHSWV IRU creation of the state land fund, the government took over
SULYDWL]DWLRQ RI UXUDO ODQG DW ¿UVW JUDQWLQJ XVDJH ULJKWV state land, private estates, clergy estates, and ownerless
to the people who worked the land, while simultaneously forests, while the reforms started in early 1990s let the
DOORZLQJLWVSULYDWL]DWLRQ*UXEH* SUHYLRXVRZQHUVRIWKHODQGUHJDLQSURSHUW\FRQ¿VFDWHG
The decision of 13 June 1990 On Agrarian Reform is on 21 July 1940 giving people the opportunity also to
considered the start of Land reform in Latvia. It was a DFTXLUHODQGE\SULYDWL]LQJLW7KH¿QDOODQGUHIRUPZDV
republic-wide bid for agrarian reform, within which the marred by several mistakes, fragmenting properties,
ODQGUHIRUPZRXOGKDYHWREHH[HFXWHG%HUH]RYVNLV= creating unviable farms, and failing to support agriculture
2000). in general. Latvians had lost the pre-occupation work
2Q 1RYHPEHU WKH 6XSUHPH &RXQFLO RI WKH ethics, which had to be learned again. There was a broad
Republic of Latvia adopted the law On Land Reform in failure to assure effective use of land.
Rural Areas of the Republic of Latvia, which went down $ VLJQL¿FDQW WXUQLQJ SRLQW LQ IRUHVW SURSHUW\ ULJKWV¶
LQKLVWRU\DVWKH¿UVWUHIRUPODZWKDWUHJXODWHGWKHULJKW protection occurred in 1999 when, based on the order
to acquire property after 4 May 1990. Special attention RI WKH &DELQHW RI 0LQLVWHUV RI WKH 5HSXEOLF RI /DWYLD
was paid to incorporating a provision in the law that 1R 2Q WKH &UHDWLRQ RI -RLQW 6WRFN &RPSDQ\
required all sale and purchase agreements with the land ³/DWYLMDV YDOVWV PH]L´ WKH FRPSDQ\ ³/DWYLMDV YDOVWV
originating from land reform to be concluded only after PH]L´ /90 ZDV HVWDEOLVKHG ,W LV DQ HQWHUSULVH RZQHG
the land rights have been recorder in the land register. entirely by the state of Latvia. LVM started its economic
This averted a lot of misunderstandings and disputes, and DFWLYLW\LQ0H]DQR]DUH
DVVXUHGOHJDOMXVWL¿FDWLRQIRUWUDQVIHURISURSHUW\ULJKWV From the economic standpoint, the creation of
This circumstance prevented possible disputes from deals /90 KDV SURYLGHG VHYHUDO SRVLWLYH EHQH¿WV )LUVWO\ WKH
made with owners whose rights to the property were not corporation pays to the state a duty for using its capital,
OHJDOO\YHUL¿HGDQGUHFRJQL]HG6HLOH$7KHODQG and it pays taxes to the state and municipality budgets.
UHIRUPZDVLPSOHPHQWHGLQWZRVWDJHV¿UVWIURP Secondly, it has created new jobs, employing 984 people
to 1996 and second in the 10-15 year period starting in 2011. Thirdly, forests are managed in accordance with
from 1 January 1993 (Law On Land Reform ..., 1991). the principles of sustainability, which include maintaining
The main condition for developing the agrarian and increasing the value of state’s forests in the long
reform was to create a legal basis for acquiring and re- term.
acquire land. Another essential condition was linking of 7KHFRPSDQ\WXUQHGDVPDOOSUR¿WRIPLOOLRQODWV
the land’s cadastral value with the real estate tax, which )LJXUH LQ LWV ¿UVW \HDU RI RSHUDWLRQV ,W FRQWLQXHG
created real and indisputable privileges to low quality and to grow year by year, reaching LVL 33.8 million. In
unusable stretches of land (Seile A., 2000). the next year, however, LVM earnings dropped, with
To encourage rational use of land and undo the one of the reasons being the storm of 2005. Record
LQMXVWLFHV WKDW ZHUH DOORZHG ZLWK WKH FRQ¿VFDWLRQ RI SUR¿WV ZHUH DFKLHYHG LQ D \HDU RI VXFFHVV IRU
SULYDWH ODQG WKH 6XSUHPH &RXQFLO RI WKH 5HSXEOLF RI the economy of Latvia as a whole. With the beginning
Latvia made a decision on 15 May 1991 On Rights to RI WKH UHFHVVLRQ /90 SUR¿WV VOLG RQO\ UHDFKLQJ

ISSN 1691-3078
Source: JSC “Latvijas valsts mezi” Annual Reports from 2000 to 2011
Fig. 1/90QHWSUR¿WDQGFRQWULEXWLRQVWRVWDWHDQGPXQLFLSDOLW\EXGJHWVIURPWRPLOOLRQODWV
LVL 33.2 million in 2009, a full 37% less than the year 3. The Law of Peasant Farms in the Latvian SSR passed
EHIRUH DOVR PDUNLQJ WKH ORZHVW SUR¿W VLQFH ,Q LQPDGHKLVWRU\PDUNLQJWKH¿UVWVWHSWRZDUGV
2010, LVM paid 57.7 million lats to the state, its highest restoration of private property. Importantly, it
contribution yet, giving state and municipal budgets a UHFRJQL]HG WKDW IDUPV DUH DQ LQGHSHQGHQW IRUP RI
total of LVL 71 million. For 2011, the amount was only agricultural production.
1.2 million lats lower. 4. ZDV WKH ¿QDO \HDU RI VLJQL¿FDQW FKDQJH LQ
7R VXPPDUL]H EHFDXVH RI KLVWRULFDO HYHQWV WKH the structure of forest property rights. The state’s
percentage of forestland owned by the state has functions in forestry were taken over by the Joint
decreased by 34%, while the share of other forests has 6WRFN&RPSDQ\³/DWYLMDVYDOVWVPH]L´7KHFRPSDQ\
increased. The total area of forested land has grown FRQWULEXWHVVLJQL¿FDQWO\WRWKHVWDWHDQGPXQLFLSDOLW\
by 53%. According to the Forest Fund, in 1921 Latvia budgets, paying taxes and an annual duty for
had 1,780 thousand hectares of forest while, by the exploiting state capital.
forest statistical inventory data for 2011, it now covers 5. The structure of forest property rights has changed
3,354 thousand hectares of the state’s territory. It since the 20th century, decreasing the share of the
means that there is 1.5 hectares of forest per inhabitant government, while increasing the share of other
in Latvia, almost twice as much as at the time of owners. The total area of forests has increased by
WKH¿UVW/DWYLDQUHSXEOLF 1,574 thousand hectares or 53%.
Regardless of the complicated history, the many
reforms, and changes in political leadership, the total
Bibliography
area of forests in Latvia has grown from 0.9 hectares to
1. %HUH]RYVNLV = <HDUV RI /DQG 5HIRUP
1.5 hectares per capita. Soviet occupation stopped the
+LVWRULFDO 2YHUYLHZ RI /DQG 5HIRUP Riga: Ministry
agrarian reform of 1920, which then came back in 1990
of Agriculture. p.24.
to some degree after Latvia regained its independence.
2. Boruks, A. (2001). Zemes izmantosana un kadastrs
Looking back in the history, it is possible to see mistakes
Latvija/DQG8VHDQGD&DGDVWUHLQ/DWYLD=HPHV
that should not be repeated in the future. The authors
dienests, Jelgava: LLU. pp 259. – 279.
believe that the structure of forest property rights in
3. Boruks, A. (2003). Zemnieks, zeme un zemkopiba
place today is the most optimal economically, with half
Latvija no seniem laikiem lidz musdienam (Peasant,
of the forests owned by the state and almost half held by
Land and Agriculture from Ancient Time till
others. Such a distribution of property rights encourages
Nowadays), Jelgava: LLU, p. 671.
competition, price stability, the growth of the industry
4. Grube G. (2000). 10 Years of Land Reform.
and the state as a whole.
+LVWRULFDO 2YHUYLHZ RI /DQG 5HIRUP Riga: Ministry
of Agriculture. p. 160.
Conclusions 5. Kronitis, J. (1965). Latvijas mezu apsaimniekosana
1. From the economic standpoint, the period from the (Latvian Forest management), Riga: Liesma, p. 115.
start of the 20th century to 1940 is distinguished by 6. Klauss, K. (2011). Sasniegtais kokrupniecibas joma
the ill-conceived decision to allow the transformation (Progress in timber sector), Retrieved: http://www.
of forest land into farmland. This step would only PDNURHNRQRPLNDOYVLWHVGHIDXOW¿OHVNODXVVBOYB
EH DFFHSWDEOH LI DJULFXOWXUH ZDV PRUH SUR¿WDEOH pdf. Access: 02.01.2013.
than forestry. From 1923 to 1935, forestry produced 7. ³/DWYLMDV YDOVWV PH]L´ $QQXDO 5HSRUWV IURP
DQ DQQXDO SUR¿W RI PLOOLRQ ODWV IRU WKH /DWYLD to 2011. Retrieved: http://www.lvm.lv/lat/lvm/
treasury. ¿QDQVXBLQIRUPDFLMD$FFHVV
2. With the 1940 Declaration of Land Transfer to the 8. Locmers M. (2000). 10 Years of Land Reform.
Ownership of the People, the state became the sole +LVWRULFDO2YHUYLHZRI/DQG5HIRUP Riga: Ministry of
owner of forest land for the next 50 years. Agriculture. p. 160.

ISSN 1691-3078
9. Distribution of Forest Land by Form of Ownership 14. 6DOLQV=0H]DL]PDQWRVDQD/DWYLMD)RUHVW
1988. – 1997., State Forestry Service 8VHLQ/DWYLD-HOJDYD-HOJDYDVWLSRJUD¿MDS
10. Forest Sector in 20 Years of Independence (2011). 15. Seile, A. (2000). 10 Years of Land Reform. Historical
Riga: Ministry of Agriculture p. 46. 2YHUYLHZ RI /DQG 5HIRUP Riga: Ministry of
11. Forest Sector in Latvia 2002 (2003). Annual Report, Agriculture. p. 160.
Ministry of Agriculture. Retrieved: http://www. 16. Strods, H. (1999). Latvijas mezu vesture lidz
]PJRYOYGRFBXSOPH]DBQR]DUHBBZHESGI. 1940. gadam (History of Latvian Forests until
Access: 10.02.2011. 1940). (WWF) Pasaules Dabas Fonds. Latvijas
12. /DZ RQ /DQG 3ULYDWL]DWLRQ LQ 5XUDO $UHDV programma. Riga : [WWF - Pasaules Dabas Fonds],
Latvian State Law Retriewed:http://www.likumi.lv/ 13. – 104. lpp
doc.php?id=74241. Access: 05.01.2013. 17. Svarca, K. (1996). Nenoplicinosa mezsaimnieciba
13. /DZRQ/DQG5HIRUPLQ/DWYLDQ&LWLHVRIWKH5HSXEOLF Latvija (Sustainable Forest Management in Latvia):
(1991). Latvian State Law Retrieved: http://www. 9DOVWV LSDVXPV XQ X]QHPHMGDUELED SHFSDGRPMX
OLNXPLOYGRFSKS"PRGH '2& LG $FFHVV parejas laika. Riga: WWF-Latvijas birojs,
05.01.2013. p. 28.)

ISSN 1691-3078
A. Zvaigzne et al. Main Factors of Direct Effect on Employment in Latvia
MAIN FACTORS OF DIRECT EFFECT ON EMPLOYMENT IN LATVIA
Anda Zvaigzne1, Dr.oec.; Inese Saulaja2, Mg.oec.; Dzesija Zeiferte3, Mg.oec.

1,2,3
1
6FLHQWL¿F,QVWLWXWHRI5HJLRQDOLVWLFV5H]HNQH+LJKHU(GXFDWLRQ,QVWLWXWLRQ/HDGLQJUHVHDUFKHULQHFRQRPLFV
Abstract. The employment of the local population is a topical problem in Latvia and its regions. There is an economic
and social need to promote employment both in Europe and in Latvia.
The research aim is to investigate and evaluate the main factors of direct effect on employment in the regions of Latvia.
7KH ¿QGLQJV EDVHG RQ WKH H[SHUW PHWKRG VKRZHG WKDW WKH IROORZLQJ VLJQL¿FDQW IDFWRUV KDYH D GLUHFW HIIHFW RQ
employment: number of jobs, wage, number of working population, number of enterprises, and demographic
burden.
The correlation analysis showed that there was a strong correlation between the number of vacant jobs and the
QXPEHU RI HPSOR\HG SHUVRQV LQ WKH UHJLRQV RI 9LG]HPH .XU]HPH DQG /DWJDOH $ PHGLXP VWURQJ FRUUHODWLRQ ZDV
observed in the regions of Riga, Pieriga, and Zemgale. With an increase in the number of vacant jobs, the number of
employed persons in the regions of Latvia also rose and vice verse.
The present research found that stimulation of the factors of direct effect on employment would promote employment
in Latvia’s regions.
Key words: employment, direct factors, regions of Latvia.
JEL code: J00
Introduction The research aim is to investigate and evaluate

Over the recent years in Latvia, the labour market the main factors of direct effect on employment in the
has been researched from various aspects, and there are regions of Latvia.
studies on possibilities to promote employment in the To achieve the aim, the following research tasks
country. The previous researches have not contributed were set:
WR¿QGLQJDQHIIHFWLYHVROXWLRQIRULWDQGWKHSUREOHPRI 1) the nature of and development trends in employment
employment becomes more acute. The employment of in Latvia and its regions were described;
the local population is an urgent problem of Latvia and 2) an expert rating and ranking of the factors of direct
its regions. effect on employment in Latvia was performed.
There is an economic and social need to promote Research subject: factors of direct effect on
employment both in Europe and in Latvia. As the birth employment in Latvia.
rate declines in the European Union Member States, Research methods: the monographic and
VLJQL¿FDQW GHPRJUDSKLF FKDQJHV DUH H[SHFWHG IRU descriptive methods as well as analysis and synthesis,
the next 50 years (population aging). As a result, the graphic method, a statistical analysis method –
the present European pension and social security correlation analysis, and a sociological method –
model will be overburdened more than up to now and the expert method were employed in the present
possibly even critically overburdened. Presently, part research.
of the working age population is not employed for The present research is based on various
various reasons; therefore, many efforts are made VFLHQWL¿F SXEOLFDWLRQV GRFXPHQWV WKDW DUH SXEOLFO\
to integrate economically inactive persons in the available as well as information available in the
labour market (Optimala, nodarbinatibu veicinosa..., databases of the Republic of Latvia and expert survey
2007). results and other sources of information.
Increasing employment would promote the
economic development of Latvia and its regions
and raise the standard of living of the population. Research results and discussion
9DULRXV IDFWRUV LQÀXHQFH HPSOR\PHQW ZKLFK PD\ 1. Nature of and development trends in
EH FODVVL¿HG DFFRUGLQJ WR WKH ZD\ RI HIIHFW LQWR employment in Latvia and its regions
two groups: factors of direct and indirect effect. Employment is a totality of physical, material, and
Factors of direct effect are the factors that primarily emotional efforts made to produce goods and services
can affect employment in Latvia and its regions, that are intended for self-consumption or consumption
therefore, it is important to identify and research by others. Employment is divided into three categories:
them. employment as economic activity, employment
Research hypothesis: various factors have an effect as unpaid labour (leisure time spending), and
on employment in Latvia. voluntary work (Marshall G., Scott J., 2005).
___________________________
1
(PDLODGGUHVV$QGD=YDLJ]QH#OOXOY
2
E-mail address: Inese.Saulaja@llu.lv
3
(PDLODGGUHVV']HVLMD=HLIHUWH#OOXOY

ISSN 1691-3078
Technical and Individual and

Socioeconomic factors
economic factors subjective factors
9internal environment 9physical abilities of 9micro- and macro-

at work; employees; environment of an
9technologic level and 9professionalism of organisation;
innovations at work; employees; 9style and methods of
9hygiene, orthobiosis at 9intellectual abilities of management;
work; employees; 9evaluation of work
9natural, climatic, and 9emotional intelligence; results, wage;
other exogenous 9psychical quality of 9information supply,
conditions of work employees. connections;
environment. 9socialisation level, life
standard of
employees.
Source: Garleja, R., 2003
Fig.1.1. Groups of factors affecting the working process
Table 1.1
Number of employed persons in Latvia and its regions in 2006-2011, thous.
Statistical Change (+/-)

2006 2007 2008 2009 2010 2011
region 2011/2006, %
Riga 381.3 386.1 380.6 333.3 306.0 320.7 -15.9
Pieriga 172.6 189.1 192.8 170.7 168.2 174.3 1.0
9LG]HPH 105.0 105.9 105.9 94 95.5 98.8 -5.9
.XU]HPH 138.4 145.7 144.5 128.4 125.9 124.9 -9.8
Zemgale 129.4 133.4 137.5 118.8 111.7 118.2 -8.7
Latgale 160.9 158.8 162.8 141.5 133.7 133.6 -17.0
Latvia 1087.6 1119.0 1124.1 986.7 940.9 970.5 -15.9
Source: authors’ construction based on the data of CSB and State Employment Agency
The main and positive aspect of an employment supply economics relates to changes in prices and output,
situation is a job. A. Giddens has outlined six elements i.e. the regulation of prices and output after a while when
that characterise paid and regular employment: money, WKH HFRQRP\ VWDUWV ÀXFWXDWLQJ %HJJ ' )LVFKHU 6
activity level, variety, time planning, social contacts, and Dornbusch R., 1984).
personal identity (Giddens A., 1999). The total number of employed persons decreased in
Habilitated pedagogical and economics doctor Latvia from year to year. The analysis of the number of
5DVPD*DUOHMDFRQGLWLRQDOO\FODVVL¿HVWKHIDFWRUVDIIHFWLQJ employed persons by statistical region shows that it has
the working process into three groups: technical and been unstable (Table 1.1).
economic, individual and subjective, and socio-economic According to Table 1.1, the greatest change in the
factors (Figure 1.1). number of employed persons was observed in Latgale
Employment theories described in literature are region – in 2011 compared with 2006, it decreased by
associated with wages and prices. For instance, a 17%, while in the entire Latvia it decreased by 15.9%.
macroeconomics book, written by R.Dornbusch and Only in Pieriga region it rose by 1.0%.
S.Fischer, analyses employment in relation to wages If analysing employment in the country, it is important
and prices. The authors point to a correlation between WR¿QGWKHUDWHRIHPSOR\PHQWRUWKHVKDUHRIHPSOR\HG
wages, prices, and employment and the regulation persons in the total number of population expressed as
process of changes in aggregate demand – monetary, a percentage.
OHQGLQJ DQG ¿QDQFLDO SROLFLHV RU DXWRQRPRXV FKDQJHV The average share of employed persons in the
in consumption. The authors believe that the nature of total number of population in Latvia in the period

ISSN 1691-3078
Factors affecting the

employment of population
Factors of direct effect Factors of indirect effect
x x
x x
demographic burden; availability of home;
x x
number of working population; public transportation;
x x
number of enterprises; quality of roads;
x x
number of jobs; opportunities for education;
x x
investment in employment; health care;
x
wages; availability of services etc.
performance of the State
x
Employment Agency;
diversity of jobs etc.
6RXUFHDXWKRUV¶FRQVWUXFWLRQEDVHGRQ6DXODMD,5DVQDFD/HWDO0LKHMHYD/6DXODMD,
Zvaigzne A., et al., 2012.
Fig.1.2. Factors of direct and indirect effect on employment in Latvia
2006-2011 was 58.1%. The highest annual rate Based on the research of other authors (Saulaja I.,
was in Riga region, as it is the capital city of Latvia. Rasnaca L., et al., 2007; Mihejeva L., Saulaja I., 2009;
Over the period of analysis, a decrease in the rate of =YDLJ]QH $ HW DO UHJDUGLQJ HPSOR\PHQW WKH
employment was observed in all the regions. The IDFWRUVDIIHFWLQJHPSOR\PHQWLQ/DWYLDPD\EHFODVVL¿HG
greatest decrease was in the regions of Riga, Pieriga, and into two groups (Figure 1.2):
Zemgale. 1) factors of direct effect;
The rate of job seekers tended to increase in Latvia 2) factors of indirect effect.
every year. The share of job seekers is an indicator Employment in Latvia is directly affected by the
showing a percentage of job seekers in the total number demographic burden, the number of the working
of economically active population. population, the number of enterprises, and the other
In 2006-2011, the share of job seekers increased factors of direct effect as presented in Figure 1.2.
in each region (Number of job…). In 2011, the greatest Employment is also affected by such factors of indirect
increase was observed in the regions of Zemgale and effect as the availability of home and public transportation,
5LJD ZKHUHDV WKH VPDOOHVW ± ± ZDV LQ 9LG]HPH the quality of roads, opportunities for education, and the
region. availability of health care and services, yet, they were
One of the most urgent problems in the labour market not researched.
of Latvia from 2009 to 2011 was high unemployment. The factors of direct effect on employment in Latvia
The number of unemployed persons in Latvia increased will be further investigated in the present research.
even twice. A sharp increase in the number unemployed
persons was observed in 2009, especially in Pieriga 2. Rating and ranking of the main factors
region – 934.4%, followed by Riga region with 305.6%, of direct effect on employment in Latvia by
and in the remaining regions it was 200.0%. Over the experts
period considered, such an increase in the number An expert survey was conducted within the present
of unemployed persons might be explained by the UHVHDUFK LQ ZKLFK ¿YH H[SHUWV ZHUH TXHVWLRQHG WR
worsening of economic situation in the country. The identify the key factors of direct effect on employment
situation slightly stabilised in 2011 when, compared DQGUDQNWKHPE\VLJQL¿FDQFHRQWKHVFDOHIURPWKH
with 2009, this number started decreasing: by 35.89% PRVW VLJQL¿FDQW IDFWRU RU SULRULW\ 1R LQ SURPRWLQJ
LQ 5LJD UHJLRQ LQ 3LHULJD LQ .XU]HPH HPSOR\PHQW WR WKH PRVW LQVLJQL¿FDQW IDFWRU RU
LQ /DWJDOH LQ 9LG]HPH DQG E\ LQ priority No.10). The results of the expert discussion are
Zemgale region. presented in Table 2.1.

ISSN 1691-3078
Table 2.1
([SHUWUDWLQJUHVXOWVUDQNVDQGFRQFRUGDQFHFRHI¿FLHQWVRUD.HQGDOO¶V W test
Gi 2
¦ Li
Experts
Li LYLG
Rank Rank
Factors A B C D E Gi
Ratings
R
demographic burden 4 6 5 4 3 22 2.1 4.41 4
number of working population 1 3 3 1 2 10 -9.9 98.01 2
number of enterprises 3 2 3 2 1 11 -8.9 79.21 3
number of jobs 2 1 1 1 1 6 -13.9 193.21 1
investment in employment 6 4 4 6 6 26 6.1 37.21 6
wages 2 1 1 1 1 6 -13.9 193.21 1
performance of the State
5 4 5 7 5 26 6.1 37.21 6
Employment Agency
diversity of jobs 5 3 5 4 6 23 3.1 9.61 5
social responsibility at an enterprise 6 7 3 8 7 31 11.1 123.21 7
¦ L =199
labour safety at an enterprise 7 8 6 9 8 38 18.1 327.61 8
n=10 m=5 199

i
- S=1102.90 -
Source: authors’ calculation based on the data obtained in December 2012, ranking the factors of direct effect on
employment by the experts
The replies provided by the experts were evaluated An average value of the rank sum L may be calculated
in terms of opinion concordance degree (Table 2.1). by using Formula 2.2 (Kendall M.G., 1955; Diakov N.,
In the case of direct evaluation of parameters, the Krug G., 1966).
¦n
expert concordance degree is evaluated by means of
WKH FRQFRUGDQFH FRHI¿FLHQW W (Kendall M.G., 1955;
Diakov N., Krug G., 1966) according to Formula 2.1:
Li
LYLG (2.2.)
Based on Formula 2.2 and the data of Table 2.1, the

average value of the rank sum L was calculated:
(2.1.)
Where:
W - FRQFRUGDQFHFRHI¿FLHQW The average value of the rank sum was 19.9.
n - number of factors observed; 7KHFRQFRUGDQFHFRHI¿FLHQW W ) was equal to 0.53,
ZKLFK LQGLFDWHG WKDW WKH H[SHUWV ZHUH TXLWH XQL¿HG LQ
m - number of experts; their opinions and unanimously recognised such factors
of direct effect on employment as:
rij - rank for the i-th object based on the j-th — Rank R No.1 – number of jobs;
expert’s opinion.
— Rank R No.1 – wages;
0 d W d 1 , besides,
9DOXHV RI WKH FRQFRUGDQFH FRHI¿FLHQWV Wt and :S
— Rank R No.2 – number of working population;
— Rank R No.3 – number of enterprises;
change within a range
— Rank R No.4 – demographic burden.
W 0 , if there is no correlation between ranks, and 2QH RI WKH PRVW VLJQL¿FDQW IDFWRUV RI GLUHFW HIIHFW
W 1 , if all experts have equally ranked the objects.
W t 0.5 , as it is believed that such concordance
on employment is demographic burden (Rank R No.4,
$ VXI¿FLHQW FRQFRUGDQFH FRHI¿FLHQW LV DVVXPHG WR EH
Table 2.1), which is indicated by the number of persons
under and over the working age per 1000 capita.
RI H[SHUWV LV VXI¿FLHQWO\ KLJK .HQGDOO 0*
The demographic burden increased in Latvia in
Diakov N., Krug G., 1966).
the period from 2010 to 2012. The difference in
Based on Formula 2.1 and the data of Table 2.1, the
demographic burden among the statistical regions is
FRQFRUGDQFHFRHI¿FLHQWZDVFDOFXODWHG
comparatively small. In 2012, the demographic burden
LQ WKH UHJLRQV RI 9LG]HPH DQG /DWJDOH ZDV KLJKHU WKDQ
on average in the entire Latvia, while in the other regions
it was lower.

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Table 2.2
Average share of the population by age group in Latvia and its regions in 2008-2011, %
2008 2009 2010 2011

age population
age population
age population
age population
age population
age population
age population
age population
Under working
Under working
Under working
Under working
Over working
Over working
Over working
Over working
Working age
Working age
Working age
Working age
population
population
population
population
Region
Riga 12.3 66.1 21.6 12.5 66.4 21.1 12.7 65.9 21.4 12.9 65.4 21.7
Pieriga 15 66 19 15.1 66.6 18.3 15.2 66.4 18.4 15.3 66.2 18.5
.XU]HPH 15.1 64.6 20.3 14.9 65.3 19.8 14.8 65.3 19.9 14.6 65.2 20.2
9LG]HPH 14.3 64.6 21.1 14 65.5 20.5 13.7 65.7 20.6 13.5 65.7 20.8
Latgale 13.1 65.7 21.2 12.9 66.4 20.7 12.9 66.4 20.7 12.7 66.3 21
Zemgale 14.8 65.7 19.5 14.5 66.5 19 14.4 66.5 19.1 14.3 66.4 19.3
On average
14.1 65.45 20.45 13.98 66.12 19.90 13.95 66.03 20.02 13.88 65.87 20.25
in Latvia
Source: authors’ construction based on CSB data
Table 2.3
Average gross monthly wage in the public sector in Latvia and its regions in 2006-2011
Change (+/-)
Region 2006 2007 2008 2009 2010 2011
2011/2006, %
Riga 409 552 659 585 548 579 41.56
Pieriga 333 455 530 465 435 449 34.83
9LG]HPH 280 376 459 413 374 384 37.14
.XU]HPH 289 390 466 421 383 395 36.68
Zemgale 289 394 476 412 377 392 35.64
Latgale 261 350 427 375 347 360 37.93
Latvia 350 474 564 504 470 492 40.57
$FFRUGLQJWRWKHH[SHUWVDVLJQL¿FDQWIDFWRURIGLUHFW regions. In 2011, the greatest number of economically

effect on employment was also the number of the working active market sector statistical units operated in Riga
population (Rank R No.2, Table 2.1). region (55314 or 39.1% of their total number), followed
According to Table 2.2, the share of the working by Pieriga (22175 or 15.7%), while the smallest number
age population has started to decrease since 2009, was in Zemgale (14304 or 10.1%).
whereas the share of the above-working-age population In 2011 in Riga and Pieriga, the majority of these
has increased. In 2011, the highest share of the under- units were companies – in total, there were 42094
working-age population (15.3%) existed in Pieriga companies in Riga region, which accounted for 76% of
region, whereas in Latgale region this indicator was the the total number of economically active market sector
lowest – 12.7%. statistical units registered in this region, while in Pieriga
One of the factors causing the decrease in the there were 11332 companies, accounting for 51% of their
number of the working age population was migration. total number in this region. Yet, in all the other regions
According to statistics, totally 48774 persons emigrated in 2011, the majority consisted of self-employed persons.
from Latvia in 2010, which was almost 3% more than The number of economically active market sector
in the year before. Regionally, the trend was the statistical units per 1000 capita also increased in the
same – the number of emigrants increased. The number period 2006-2011. In 2011, it increased 40% in Riga
of emigrants decreased only in Riga region, by 4.7%, in region, while in the entire Latvia it increased by 33%.
2010 compared with 2009 (Long-term migration...). According to the experts, employment was
$ VLJQL¿FDQW IDFWRU DIIHFWLQJ HPSOR\PHQW ZDV WKH VLJQL¿FDQWO\ DIIHFWHG E\ WKH ZDJHV DQG WKH QXPEHU RI
number of enterprises (Rank R No.3, Table 2.1). In jobs (Rank R No.1, Table 2.1). An analysis of the average
the period 2006-2011, the number of economically gross wage by region both in the public and in the
active market sector statistical units increased in all the private sector showed that there was inequality among

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Table 2.4
Average gross monthly wage in the private sector in Latvia and its regions in 2006-2011
Change (+/-)
Region 2006 2007 2008 2009 2010 2011
2011/2006, %
Riga 317 410 492 495 483 503 58.68
Pieriga 268 354 432 423 418 432 61.19
9LG]HPH 206 267 329 308 317 351 70.39
.XU]HPH 228 308 381 366 381 392 71.93
Zemgale 216 282 344 335 340 379 75.46
Latgale 173 219 267 265 271 301 73.99
Latvia 277 362 438 433 427 447 61.37
the regions. The unequal wage level also promoted the In the correlation analysis, the authors used statistical
unequal development of employment in the regions, as GDWDIRUWKHSHULRG7KHFDOFXODWLRQFRQ¿UPHG
people wish to work and live in a region where they can that there was a strong correlation between the number
earn more. of vacant jobs and the number of employed persons
In the period 2006-2011, the highest gross LQ 9LG]HPH (r .XU]HPH r=0.85), and Latgale
wage in the public sector was reported in (r=0.84). A medium strong correlation between the
2008 – LVL 564. In 2008, the highest gross wage was variables was observed in the regions of Riga (r=0.68),
reported in Riga region – LVL 659, whereas the lowest Pieriga (r=0.48), and Zemgale (r=0.71). With an
one was in Latgale region with LVL 427 (Table 2.3). increase in the number of vacant jobs, the number of
The greatest increase in the average gross wage in employed persons in Latvia’s regions also increased and
the private sector was observed in the regions of Zemgale vice verse.
and Latgale, 75.46% and 73.99%, respectively, whereas
the smallest increase was observed in Pieriga region with
61.19% (Table 2.4). It may be explained by the fact that
in 2006 the average gross wage in the private sector in recommendations
Pieriga region was higher than in the regions of Latgale, 1. The employment of local residents is a topical
=HPJDOH.XU]HPHDQG9LG]HPH problem in Latvia’s regions. There is an economic and
$ YHU\ VLJQL¿FDQW IDFWRU ZDV WKH QXPEHU RI YDFDQW social need to promote employment both in Europe
jobs. An analysis of the average number of vacant jobs in and in Latvia. The government has to promote the
Latvia regions in the period 2006-2010 showed that the development of employment rather than the system
trend was negative. In 2011, the sharpest decrease in the RIVRFLDOEHQH¿WVLQWKHFRXQWU\
number of vacant jobs occurred in Zemgale region – by 2. The highest rate of employment, in the period of
92.72%, while a slightly smaller decrease was observed analysis, was in Riga region, whereas the lowest rate
in Latgale region with 79.37%. was reported in Latgale region. The government has
In the aspect of providing jobs in Riga region in 2011, to promote the equalisation of the employment rate
WKHPRVWVLJQL¿FDQWLQGXVWU\ZDVWUDGHDORQJZLWKORGJLQJ in the regions of Latvia.
DQGFDWHULQJVHUYLFHVLQ9LG]HPHWKLVLQGXVWU\DOVRKDG 3. 7KH ¿QGLQJV EDVHG RQ WKH H[SHUW PHWKRG VKRZHG
WKHJUHDWHVWSURSRUWLRQRIHPSOR\HHV,Q.XU]HPHUHJLRQ that employment is directly affected by the following
the greatest number of employed persons was reported VLJQL¿FDQW IDFWRUV QXPEHU RI MREV ZDJH QXPEHU
LQ DJULFXOWXUH IRUHVWU\ DQG ¿VKHULHV ZKHUHDV LQ WKH of working population, number of enterprises, and
regions of Zemgale and Latgale, the greatest number demographic burden.
of jobs was provided by manufacturing and the power 4. The number of the working age population has
industry. decreased in Latvia and its regions. The government
In the period 2006-2011, the proportion of vacant has to elaborate effective measures hindering the
jobs both in the private and in the public sector of Latvia decrease in the number of the working age population,
and its regions tended to decline. including the decrease due to the emigration of the
The Kendall’s W test showed that one of the most population to other countries.
VLJQL¿FDQW IDFWRUV RI GLUHFW HIIHFW ZDV WKH QXPEHU 5. An analysis of the average gross wage by region
of vacant jobs. Therefore, a correlation analysis was both in the public and in the private sector showed
performed in the present research. A correlation that there was inequality among the regions. The
indicates an association between two or among several government has to eliminate the difference in wages
variables (i.e., if one of the variables changes, then the in the public sector among the regions.
other one also changes) (Arhipova I., Balina S., 2003). 6. The correlation analysis showed that there was a
The present research was conducted to identify whether strong correlation between the number of vacant
WKH QXPEHU RI YDFDQW MREV LQÀXHQFHG WKH QXPEHU RI jobs and the number of employed persons in
employed persons. 9LG]HPH .XU]HPH DQG /DWJDOH $ PHGLXP VWURQJ

ISSN 1691-3078
correlation between the variables was observed in (.2120,6.,$.7&(9&667$7,67,.$69

the regions of Riga, Pieriga, and Zemgale. With the ,(1&(%$667$7,67,6.$-265(&&,2126
increase in the number of vacant jobs, the number of &5(38%/,.$63,/6&7&681129$
employed persons in Latviah regions also increased '26 SDWK '$7$%$6(X]UHJ,NJDG(MLH
and vice verse. By means of various government statistikas%20dati/01_skaits/&lang=16. Access:
EHQH¿WVDQGDFWLYLWLHVWKHFUHDWLRQRIQHZMREVKDV 11 December 2012.
to be promoted to increase the number of employed 8. *DUOHMD5'DUEVRUJDQL]DFLMDXQSVLKRORJLMD
persons in Latvia and its regions. /DERXU 2UJDQLVDWLRQ DQG 3V\FKRORJ\. Riga:
6,$Ä,]GHYQLHFLED5D.DÓSS
9. Giddens, A. (1999). Sociology. Moscow: Editorial
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Risinajumi ar SPSS un Microsoft Excel (Statistics in
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Economics. Solutions by SPSS and Microsoft Excel).
darbspejas un virs darbspejas vecuma grupas
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regionos, republikas pilsetas un rajonos gada
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the under, over, and working age population in
&RPSDQLHVSS
regions, cities and districts as of the beginnig
3. %H]GDUEQLHNX VNDLWV (Number of employed
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4. Brivo darbavietu skaits 2005.-2011.gadam pa
6/&('='$5%63&-$6&'$5%63&
statistiskajiem regioniem (Number of vacant
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jobs in 2005-2011 by statistical region) &6%
83&65(&&,2126&5(38%/,.$63,/6
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&7&6815$-2126*$'$6&.80
DVS"PD MYVJ WL -96*(%5&(9
& SDWK '$7$%$6(,HG]VRF,NJDG(MLH
&6'$5%9,(7$63$67$7,67,6.$-,(05
VWDWLVWLNDVGDWL,HG]((YRW(ML)
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GDWL$L])HPW(VXQEU((YDV
darbspejas un virs darbspejas vecuma grupas
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laiks/&lang=16. Access: 1 September 2012.
novados gada sakuma (Number and share of
5. 'LDNRY1.UXJ*8VHRI5DQN&RUUHODWLRQ
population in the under, over, and working
Methods in Processing Qualitative Information (in
age population in statistical regions, cities and
Russian) in: Research papers of the Moscow Power
municipalities as of the beginning of the year)&6%
(QJLQHHULQJ,QVWLWXWHRIWKH2UGHURI/HQLQ, No. 69,
Retrieved: http://data.csb.gov.lv/Dialog/varval.as
Moscow, pp. 7-28.
S"PD ,6 WL ,6*(,('=&(927&
6. Ekonomiski aktivas tirgus sektora statistikas
-86.$,7681&(3$769$56/&('='$5%
YLHQLEDV SD OLHOXPD JUXSDP XQ X]QHPHMGDUELEDV
63&-$6&'$5%63&-$6819,56'
formam statistiskajos regionos, republikas
$5%63&-$69(&80$*583&667$7,67,6
pilsetas un rajonos (Economically active market
.$-265(&&,2126&5(38%/,.$63,/6
sector statistical units by group of size and
&7&681129$'26*$'$6&.80&
form of business in statistical regions, cities
SDWK '$7$%$6(,HG],HG]((YRW(ML
and districts) &6% 5HWULHYHGKWWSGDWDFVEJRY
VNDLWVXQW(L]PDL)DV9(O
lv/Dialog/varval.asp?ma=SR0 041&ti=SRG041%2
nep%E2rr%E7%EDin%E2ti%20dati%20p%E7c%20
((.2120,6.,$.7&(9&667$7,67,.$6
2011.gada%20tautas%20skait%EE%F0anas%20
9,(1&(%$66$'$/&(-80&3$/,(/80$
UH]XOW(WLHP ODQJ $FFHVV 'HFHPEHU
*583&08167$7,67,6.$-,(05(&&,2
2012.
1,(0 SDWK '$7$%$6(X]UHJ,NJDG(MLH
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economically active market sector statistical units
Dialog/varval.asp?ma=IB0050&ti=IBG05%2E +IL
in statistical regions, cities and districts) &6%
*7(50,'$0,*5&&,-$67$7,67,6.$-
Retrieved: http://data.csb.gov.lv/Dialog/varval.
265(&&,2126&5(38%/,.$6 3,/6
asp?ma= SR0010&ti=SRG01%2E+EKONOMISK
&7&681129$'26 SDWK '$7$%$6(
,$.7&(9&667$7,67,.$69,(1&(%
,HG],HG]((YRW(ML(0LJU(FLMD
$667$7,67,6.$-265(&&,2126&5(
V%E7l%20nep%E2rr%E7%EDin%E2ti%20
38%/,.$63,/6&7&6815$-2126
dati%20p%E7c%202011.gada%20tautas%20
&('(J( SDWK
VNDLW(()DQDVUH]XOW(WLHP ODQJ
'$7$%$6(X]UHJ,NJDG(MLHVWDWLVWLNDV
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13. Kendall, M.G. (1955). Rank Correlation Methods.
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1HZ<RUN+DIQHU3XEOLVKLQJ&R

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14. Marshall, G., Scott, J. (2005). Dictionary of Sociology. Latvija pec iestasanas ES (Employment problems
Publisher: Oxford University Press, p. 709. of small towns in Latvia after accession to the
15. Mihejeva, L., Saulaja, I. Part-time employment EU). Economic Science for Rural Development,
as a promotional factor of labour market. Kaunas No. 12. Jelgava: Latvia University of Agriculture,
University of Technology. Retrieved: http:// pp. 167-175.
ZZZNWXOWOWPRNVODV]XUQDODLHLV0LKHMHYDB 20. Stradajoso menesa videja darba samaksa
Saulaja_2009_99-106p.pdf. Access: 7 August 2012. republikas pilsetas un novados (Average
16. Nodarbinatiba 2002.-2011.gadam pa statistiskajiem monthly wage in cities and municipalities) &6%
regioniem (Employment in 2002-2011 Retrieved: http://data.csb.gov.lv/Dialog/ varval.
by statistical region) &6% 5HWULHYHG KWWSGDWD DVS"PD '6 WL '6* (675&'
csb.gov.lv/Dialog/varval.asp?ma=NB0030&ti=NBG0 &-2'20&1('$9,'&-&
(,('=&(927&-,3&&(.2120,6. '$5%$6$0$.6$5(38%/,.$63,/6&7
&6$.$FFHVV6HSWHPEHU &681129$'26ODWRV SDWK
17. 1RGDUELQDWR LHG]LYRWDMX VNDLWV '$7$%$6(,HG]VRF,NJDG(MLHVWDWLVWLNDV
gadam (Number of employed persons in 2006- dati/Darba%20samaksa/&lang=16. Access:
2011) &6% 5HWULHYHG KWWSGDWDFVEJRYOY 1 September 2012.
Dialog/varval.asp?ma=NB0030&ti=NBG03 %2E+I 21. Videja darba samaksa republikas pilsetas un
('=&(927&-,3&&(.2120,6.&6 rajonos (Average monthly wage in cities and
$.7,9,7&7(667$7,67,6.$-265(&&,2 districts) &6% 5HWULHYHG KWWSGDWDFVEJRYOY
126 SDWK '$7$%$6(,HG]VRF,NJDG(MLH Dialog/varval.asp?ma=DS012 0&ti=DSG12%2E
statistikas%20dati/Nodarbin%E2t%EEba/&lang=16. 675&'&-2'20&1('$9
Access: 7 September 2012. ,'&-&'$5%$6$0$.6$5(38%/,.$
18. Optimala nodarbinatibu veicinosa nodoklu un 63,/6&7&6815$-2126 SDWK
pabalstu sistema. (2007). ES Strukturfondu '$7$%$6(,HG]VRF,NJDG(MLHVWDWLVWLNDV
QDFLRQDODV SURJUDPPDV Ä'DUED WLUJXV SHWLMXPL´ dati/Darba%20samaksa/&lang=16. Access:
SURMHNWV Ä/DENODMLEDV PLQLVWULMDV SHWLMXPL´ 2SWLPDO 7 September 2012.
7D[ DQG %HQH¿W 6\VWHP 3URPRWLQJ (PSOR\PHQW 22. =YDLJ]QH$HWDO,HG]LYRWDMXQRGDUELQDWLEX
Project „Welfare Ministry Studies” under the EU tiesi ietekmejosie faktori Karsavas pilseta (Factors
Structural Funds’ National Programme „Labour Directly Affecting Employment in Karsava Town).
Market Studies”). Nr. VPD1/ESF/NVA/04/ 5H]HNQHV $XJVWVNROD 5HJLRQDOLVWLNDV ]LQDWQLVND
NP/3.1.5.1./0001/0003. Riga: LR LM, p. 231 instituta (REGI) Socialo zinatnu zurnals „Latgales
19. 6DXODMD , 5DVQDFD / .UX]PHWUD = %LWH ' Tautsaimniecibas petijumi” 212.-240. lpp.;
1RGDUELQDWLEDV SUREOHPDV PD]SLOVHWDV ISSN 1691-5828

ISSN 1691-3078
I. Curkina et al. Role of Mineral Deposits in the National Economy of Latvia in 1935 – 2011
ROLE OF MINERAL DEPOSITS IN THE NATIONAL ECONOMY

OF LATVIA IN 1935 – 2011
Irina Curkina1, Mg.oec., researcher; Ilze Sproge, Dr.sc.administr., leading researcher

Institute of National Economy
Sandra Jekabsone, Dr.oec., as. prof.
University of Latvia
Abstract. Extraction of mineral deposits has quite a long history in Latvia; however, fundamental studies of available
resources have been started only after the World War I. At various periods, the consumption of mineral resources
has been mainly determined by the intensity of construction works. Besides, the sales of ready products in this
sector and the value of the products sold to the European countries have increased following the transition to the
market economy. In the article, the authors mainly analyse the trends of the utilisation of mineral resources for the
construction needs and peat.
Key words: mineral resources, mining and quarrying, foreign trade, consumption of mineral resources.
JEL code: O44, O50, Q31
Introduction The available data on mineral reserves during the

Extraction of mineral deposits has quite a long history 1930s are quite limited and this can be explained by the
in Latvia; however, fundamental studies of available fact that it was the initial stage of the research. It should
resources have been started only after the World be noted that according to the estimations developed
:DU , /DWYLMDV ]HPHV EDJDWLEX« 'XULQJ WKH in geological survey studies in 1937, the reserves of
21st century, the amount of extracted mineral deposits freshwater limestone amounted from 532 100 m3 in
for various needs has already reached several millions Bauska district to 676 650 m3 in Liepaja district, and
of cubic metres (in 2011, sand - 3.6 mln m3, sand-gravel - the approximate reserves of freshwater limestone in
2.9 mln m3, and dolomite - 1.6 mln m3'HULJRL]UDNWHQX Talsi region were estimated to amount to 2.5 mln m3
ieguves…, 2012). The research aim is to analyse the (Vitins J., 1939).
dynamics of mineral deposits, mineral products, and Within the framework of the economic model for
their consumption since the 1930s in order to establish the planning period of 1940-1990, the role of mineral
the major trends of external trade in mineral products deposits in the development of Latvia’s national economy
over the time. The following methods were used in the increased and this can be explained by the economic
paper: comparative analysis and synthesis, monographic policy of that period. According to the statistics, the
analysis, and statistical data analysis. The main research reserves of mineral resources, which can be used in
sources include branch studies and analysis of statistical constructions, amounted to the following levels at the end
information. RIWKHV1DURGQRMHKR]MDLVWYR/DWYLMVNRM
— dolomite for combustion - 102 mln t;
— dolomite for construction - 124 mln m3;
Research results and discussion — gravel - 220 mln m3 (incl. 91% for concrete
Description of the mineral reserves and the production);
extraction development since 1935 — sand - 28 mln m3 for brick production and 9 mln t for
Mineral deposits present one of the driving forces of glass production;
the global economic development. Besides, the global — clay - 137 mln m3 for brick, lightweight clay
development is secured by both fossil fuel and mineral production;
resources that are used in agriculture, construction, and — clay for the needs of the concrete production -
other industries. 35 mln t;
7KH¿UVWLPSRUWDQWUHVHDUFKVWXGLHVRIPLQHUDOGHSRVLWV — rock gypsum - 20 mln t.
in Latvia refer to the second half of the 19th century; The amount of the surveyed reserves increased in
they also encouraged the development of manufacturing the beginning of the 1990s. In 1991, the reserves of
industry and the expansion of the use of domestic major mineral deposits (total surveyed reserves available
resources. Earlier, the studies of mineral deposits had for extraction, approximately surveyed reserves, and
been carried out only for obtaining required construction eventual reserves) were as follows (Latvijas statistikas
materials for small-scale production. The research of gadagramata..., 1992; 1994):
mineral resources grew deeper when the Research — dolomite - 616 mln m3;
Institute of Natural Resources (1936) was established — limestone - 1551 mln m3;
and assigned the task of studying the properties, extent, — gypsum - 95 mln t;
and use of natural resources (Eiduks J., 1940). — clay - 375 mln m3;
___________________________
&RUUHVSRQGLQJDXWKRUE-mail: irina.curkina@gmail.com
1

ISSN 1691-3078
Source: Central Statistical Bureau database
Fig. 1. Production of sand, dolomite and sand-gravel mix in Latvia in 1991-2011, thou. m3
6RXUFH/DWYLMVNDMD665YFLIUDKYJRGX6WDWLVWLNDVJDGDJUDPDWD
Fig. 2. Development of peat production in Latvia in 1940-1990, thou. t
— sand - 248 mln m3; the territory of Latvia) amounted to approximately

— sand and gravel materials - 635 mln m3. 2.412 billion tonnes and 70% of these reserves were
The reserves that were surveyed and estimated found in marshes with the area above 100 ha. In the
in 2008 were as follows: dolomite reserves 1930s, peat was used as fuel, litter and for heat insulation
673.1 mln m3; gypsum - 92.2 mln t; limestone for concrete plates; it was mostly used for the domestic market needs
production - 504.9 mln t; clay for concrete production - and a certain part was also exported (mainly litter)
415.5 mln t; sand and gravel mixture - 1088.4 mln m3, (Rupniecibas statistika, 1940).
and sand - 1162.6 mln m3&6%GDWDEDVH In the 1960s, the surveyed reserves of peat in
The comparison of the development of the extraction deposits exceeding 1000 ha were estimated at 724 mln t
of dolomite and sand following the transition to the for energy needs (504 mln t of this amount were eventual
market economy reveals that the extraction of sand deposits) and 66 mln t for heat insulation and litter needs.
exceeds the level of 1991 and the extraction of dolomite It should be noted that in 1960 the production of fuel
and sand-gravel is still regaining lost capacities peat in Latvia accounted for 3.3% of the total production
(Figure 1). LQWKH6RYLHW8QLRQZKLOHLQWKLV¿JXUHZDV
When the data are compared with those of 1995, it in 1980, it was 4.7%, and in 1989, it was 2.5% (Latvijas
can be seen that the extraction of mineral deposits has statistikas gada…, 1972; 1990).
increased multifold within the groups of dolomite as well The use of peat in the national economy of Latvia
as sand, gypsum, and sand-gravel mix. has considerably increased since the 1930s. In 1930, the
Peat is also an important resource in the national production of peat amounted to 4.7 thou. t and in 1940,
economy. According to the estimations as of 1938, this amount was 213 thou. t, and, after reaching the peak
the reserves of dry peat in marshes (covering 10% of level in 1970, it was decreasing until the transition to the

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Source: authors’ estimate based on the CSB; Share in the year 2011
Fig. 3. Value added of manufacturing, extraction and construction sectors in Latvia in 1990-2011,
as percentage of total (in current prices)
market economy (Guljan P.V., 1967; Latvijas statistikas…, 150 factories employing 12 000 employees in the sector
1992). ³PLQHUDOVSURGXFWLRQLQGXVWU\´7KH:RUOG:DU,FDXVHG
In 1991, the estimated reserves of peat in marshes adjustments in the number of manufacturing companies,
amounted to 481 mln t. In compliance with the data of thus, the proportion of factories operating in the mineral
2008, peat reserves in Latvia amounted to 743.5 mln t. resources manufacturing industry amounted to mere 2%
The summary of obtained data leads to the conclusion in 1920 compared with 19% of all the manufacturing
that the use of mineral deposits in the national economy companies in 1910. The proportion of employees in the
of Latvia was increasing and in the short-term, it mineral resources manufacturing industry amounted to
ÀXFWXDWHG FRQVLVWHQW ZLWK WKH OHYHO RI DFWLYLW\ RI WKH 4% of the total number of employees in the manufacturing
construction and national economy of the relevant in 1920 compared with 13% in 1910 (Latvijas statistikas
period. gada…, 1920).
The next chapter will provide a more detailed analysis It should be noted that already during the next year,
on the use of resources for the needs of the industry i.e. in 1921, the number of companies in the mineral
during various time periods. resources sector increased up to 43 and the number of
employees almost doubled reaching the number of 1699.
Trends of development of mineral extraction Brick kilns accounted for one third of the companies
and manufacturing industries in 1935-2011 operating in the minerals industry and their total number
The contribution of the extraction industry to the was 16 out of which there were 8 clay potteries and
total value added of the national economy of Latvia in clay dishes factories, 6 lime kilns, 6 glass factories,
the 21st century is small; however, it is growing. In 5 companies engaged in rock processing, 3 mirror
1990, the share of the extraction industry in the total factories, and one cement factory. Glass and clay dishes
value added amounted to 0.2%, it has been experiencing factories accounted for the highest number of employees:
a moderate growth and reached 0.6% in 2010 46% and 39% accordingly, the smallest number of
(Figure 3). employees was employed in mirror factories (1% of the
The trends indicate that the number of people total number). More than 50% of the companies were
employed in the extraction industry has experienced a ORFDWHG LQ 9LG]HPH UHJLRQ PDLQO\ LQ 5LJD ZKLOH WKHUH
smaller decline than in the manufacturing industry in was the least number of companies in Latgale region.
comparison with the year 1990 (in 2011, the number The distribution of the number of employees per region
of employees in this industry was 30% below the level FHUWL¿HVWKDWWKHUHZHUHODUJHFRPSDQLHVZLWKWKHDYHUDJH
of 1990, and the decline in the manufacturing industry number of employees amounting to 111 per company in
amounted to 70%). Latgale region, the average number of employees was
Earlier statistics, which indicate the place and the LQ 9LG]HPH UHJLRQ LW ZDV LQ .XU]HPH UHJLRQ
role of the extraction industry in the national economy and the number of employees per company amounted
of Latvia, date back to the 1920s and more detailed to 9 in Zemgale region (Latvijas statistikas gada…,
data refer to the 1930s. According to the statistical data, 1922).
thirty-one companies (with more than 5 employees) Generally, in the 1930s, the number of companies
operated in the minerals production industry in 1920, increased considerably both in the extraction industry
of them there were 15 brick kilns, 9 glass factories, and in the industry of processing of mineral deposits.
3 rock processing companies, 2 cement factories, 2 The turnover level in each industry changed as well. In
mirror workshops, one dishes production workshop, and comparison with the total turnover of the manufacturing
one pottery. In total, 903 persons were employed by industry, the proportion of these sectors accounted to
these companies (Latvijas statistikas gada…, 1920). In almost 5% during the period of 1936-1938 (Rupniecibas
comparison, ten years earlier, i.e. in 1910, there were statistika, 1938).

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Source: authors’ estimation based on the Statistics of Manufacturing Industry 1938 (1940)
Fig. 4. The number of companies and turnover per unit in the industries of extraction and
processing of mineral resources
Table 1
Use of mineral resources in the manufacturing industry in 1935-1938, in tonnes
Product/use 1935 1936 1937 1938
&OD\ 267.000 364.000 436.000 515.000

incl. brick production 239.000 336.000 390.000 455.000
Sand 23.800 29.500 38.800 43.600
incl. brick production and pottery 15.000 15.300 18.000 19.000
Dolomites 107.300 134.700 155.700 95.600
incl. building of motorways and unpaved roads 46.000 65.000 70.000 no data
Limestone 141.400 167.400 169.600 246.600
incl. production of Portland cement 116.000 148.000 141.000 217.000
Gypsum rock 111.000 137.000 218.000 222.000
incl. export 83.000 96.000 157.000 162.000
(190.000*)
0LQHUDO6WDWLVWLFVRIWKH%ULWLVK(PSLUHDQG)RUHLJQ&RXQWULHVIURPWR
Source: Eiduks J., 1940
Development of the number of companies and in 1934 and it increased up to 118.1 thousand bricks in
turnover per employee in the industries of extraction and 1938, thus, equalling the growth of 2.5 times.
processing of mineral resources are displayed in Figure 4. The volume and the value of external trade
The extraction and the use of mineral resources transactions grew considerably in the 1920s and the
experienced a stable growth in 1935-1938; it was related 1930s. In 1921, the export of minerals produced in
with the volume of construction works and the demand Latvia amounted to 1240.9 tonnes and the export of
for construction materials on both the domestic and mineral products amounted to 1072.8 tonnes. Lithuania
foreign market accordingly (Table 1). and Finland presented the major markets for minerals,
At the end of the 1930s, mainly the mineral resources while Lithuania, Estonia, and Norway were the major
extracted in Latvia and imported raw materials, which markets for products. In 1937, the import of minerals
were not available at the latitude of Latvia, were used for amounted to 689 thou. t and the export amounted to
the needs of the manufacturing industry. 203 thou. t. In 1937, the import of mineral products
The activity level of construction affected the volume amounted to 14 thou. t and the export amounted to
of production of construction materials, for example, 5 thou. t. Gypsum was among the export products in
the building of Kegums power plant promoted not the 1930s, i.e. 200 thousand tonnes were exported by
only the production of domestic cement but also the Latvia in 1938. At that time, Great Britain was a large
increase of its import volume. The production of Portland producer and consumer of gypsum in Europe; it was also
cement amounted to 66.5 thousand tonnes in 1934 the biggest market for the gypsum from Latvia. The UK
and it increased up to 147.1 thousand tonnes in 1938 consumption of gypsum in 1938 was 1.3 mln t, of which
(Rupniecibas statistika, 1940). The production of the 20% were imported (Mineral Statistics of…, 1939). In
biggest brick kilns amounted to 49.6 thousand bricks the 1930s, the mineral resources imported from Latvia

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Table 2
Production of a few mineral products in Latvia in 1935 and 1938
Product Unit 1935 1938

&HPHQW thou. t 72 155
Lime thou. t 26 51
Gypsum thou. t 20 40
Plate glass thou. m2 676 880
Bricks mln pcs 89 124
Slate thou. pcs 899 8930
Source: Rupniecibas statistika 1938 (1940)
6RXUFH/DWYLMVNDMD665YFLIUDKYJRGX6WDWLVWLNDVJDGDJUDPDWD
Fig. 5. Production of bricks in Latvia in 1940-1990, mln pcs
Source: Latvijskaja SSR v cifrah v 1969 godu 6WDWLVWLNDVJDGDJUDPDWD
Fig. 6. The development of the production volume of cement, lime, and gypsum in
Latvia in 1940-1990, thou. tonnes
included different clays, lime, and granite. Asbestos, 7.1% in 1980, and 8.8% in 1989. The expansion of
various stones, bricks etc. were among imported the construction caused the increase of demand for the
products. materials used in the construction.
After the World War II, the extraction of mineral The volume of brick production increased rapidly in
resources increased more rapidly in the 1960s with the the 1960s and in 1990, it was 4 times above the level of
increase of the volume of construction works. Within 1938 (Figure 5)
the framework of the planned economy, the value of the The development of the cement production was
national income created by the construction sector was similar (Figure 6). Its consumption in Latvia amounted
growing up to the end of the 1980s. The proportion of to 1.2 million tonnes in 1990 and more than 60% of this
the new value created by this sector within the national volume was produced locally. For the sake of comparison:
income amounted to 5.9% in 1960, 7.5% in 1970, in 1970, the cement consumption in Latvia amounted to

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approximately 1.04 mln tonnes and more than 80% of Poland - 2.8%. However, in most countries and also in
this volume were covered by the domestic production Latvia, the share of this sector in the total value added
1DURGQRMH KR]MDLVWYR /DWYLMVNRM« /DWYLMDV is below 1%. On the EU level, this sector presents
statistikas gada…, 1992). Lithuania was the major an important source of employment: 600 thousand
supplier of the required cement to the Latvian market, employees were employed there in the EU-27 countries
i.e. 76% of the total amount of imported cement of in 2010. In Latvia and in Lithuania, the employment
475 thou. t in 1990. accounted for 0.4% of the total, in Estonia, it was
In 1991-1995, both the extraction of mineral deposits 0.8%, while it was 11-12% in Romania and Germany. In
and the production of products used in the construction total, 20 thousand companies operated in this industry
decreased rapidly with the collapse of the planned in the EU-27 in 2010, and the created value added
economy. Walling materials could be mentioned as one of exceeded the level of EUR 83 billion. There are
the examples - 585.8 mln pieces of conventional bricks the following leaders from the point of view of the
were produced in Latvia in 1980, and 46.4 mln pieces newly created value in the industry: the UK with
were produced in 1994, while just 21.1 mln pieces were EUR 60 billion, the Netherlands with EUR 10 billion,
produced in 1996. It should be mentioned that the decline and Poland with EUR 8 billion. In Latvia, the value added
of production is related not only with the peculiarities of of this branch amounted to EUR 59 million or 0.1%
the transitional period and the decrease of the volume of the EU-27 in 2010 (Annual Detailed Enterprise…,
of construction works but also with the new trends of Eurostat).
demand for construction materials. The value added created by the industry of quarrying
According to the latest information, in 2011, the sales of stone, sand and clay in the EU-27 amounted to
of construction sand exceeded 4 times the level of 2000; EUR 9 nill. in 2010 and 169 thousand people were
WKHVDOHVRIJUDYHOSHEEOHVVKLQJOHDQGÀLQW±WLPHV employed by this industry. The value added of this
the sales of peat and peat briquettes – 2 times; the sector amounts to EUR 13 million and approximately
VDOHVRIWLOHVÀDJVWRQHVDQGVLPLODUDUWLFOHVRIFHPHQW± 650 employees are employed there in Latvia. In
5 times; and the sales of ready-mixed concrete – 3 times comparison with other countries, the level of productivity
6DOHVRI0DQXIDFWXUHG«&6%7KHUHIRUHLQWKH of this sector (value added per employee) in Latvia is
sales of peat and peat briquettes reached 1236 thou. t; similar to that in Lithuania and Estonia; however, it is
the sales of construction sand - 1282 thou. t; the sales considerably below the level of the old EU Member
RIJUDYHOSHEEOHVVKLQJOHDQGÀLQWWKRXWWKH States. The highest productivity indicators in the EU
VDOHVRIWLOHVÀDJVWRQHVDQGVLPLODUDUWLFOHVRIFHPHQW are observed in the Netherlands, Luxembourg, and
223 thou.t; and the sales of ready-mixed concrete - Denmark. In these countries, the gross value added
1164 thou. t. per employee is 2-4 times above the EU-27 level of
The foreign trade of mineral products has increased EUR 54.5 thousand. On average, the productivity of
following the transition to the market economy. The export this sector in the EU-27 countries is 2.6 times above the
value of articles of stone, plaster, cement, glassware productivity in Latvia. Investment rate per value added
and ceramic products amounted to EUR 162 million in indicates the high proportion of investment in this sector
2011, which is 12 times above the level of 1993. The in Latvia where it is almost double of the indicators
EU-27 countries currently present the most important of Sweden, Belgium, and Austria (Annual Detailed
VRXUFH RI H[SRUW LQFRPH ZKLOH WKH WUDGH ZLWK WKH &,6 Enterprise…, Eurostat).
countries has decreased considerably and accounts In 2010, 6300 companies operated in the sector
for just 10% of the total export of stone and pottery ³4XDUU\LQJRI2UQDPHQWDODQG%XLOGLQJ6WRQH/LPHVWRQH
products. *\SVXP &KDON DQG 6ODWH´ LQ WKH (8 FRXQWULHV
It can be concluded that the consumption of mineral and they created the value added in the amount of
resources has been mainly determined by the intensity EUR 2.8 billion. The latest comparable statistical data
of construction works at various periods. Besides, certify that the value added of this sub-sector in Latvia
the sales of ready products in this sector and the amounted to EUR 5 million in 2006. Ten companies in
value of the products sold to the European countries Latvia operated in this sector in 2008.
have increased following the transition to the market Fifty-four companies in Latvia (2 thousand companies
economy. in the EU-27) operated in the extraction industry of
In order to gain an insight of the place of the extraction PLQHUDO UHVRXUFHV QRW FODVVL¿HG HOVHZKHUH DQG WKH
industry of Latvia among the EU Member States, the created value added amounted to EUR 47 million
authors will analyse the indicators of the value added and (EUR 2.2 billion in the EU-27).
productivity in Latvia and in other EU countries in the The value added of the peat extraction
next section. industry amounted to EUR 45 million or 8% of the
EU-27 indicator in Latvia in 2010. Based upon the
The indicators of the extraction industry in productivity indicators in the sector, Latvia with
Latvia in comparison with the EU countries the gross value added per employee amounting to
The share of the extraction industry is not high in EUR 22.7 thousand is among countries with the
other EU countries and it amounts to 0.8% on average lowest productivity (EUR 13.7 thousand in Lithuania,
in the EU-27.2 6RPHWLPHV WKH GLIIHUHQFH LV VLJQL¿FDQW EUR 11.7 thousand in Hungary, EUR 3.3 thousand in
among countries, for example, in Denmark, the mining Romania, and EUR 2.4 thousand in Bulgaria). Thereby,
and quarrying industry created 3.9% of the total the productivity of this sector in Latvia is twice as low as
value added, in the Netherlands, it was 3.7%, and in the EU-27 indicator (EUR 52 thousand).
___________________________
2
In this section, the insight into the extraction industry is based upon the latest comparable Eurostat data on the
year 2010

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Conclusions Kaunas University of Technology, Kaunas, Lithuania,

1. After the evaluation of the industry data, it can be pp. 134-140.
concluded that the extraction industry just started to 9. Latvijas statistikas gadagramata 1991 (Statistical
establish itself on the industrial level at the beginning Yearbook of Latvia 1991)(1992). Riga: LR Valsts
of the 20th century. statistikas komiteja, 358 lpp.
2. During the observed period of 1935-2011, this 10. Latvijas statistikas gadagramata 1993 (Statistical
industry served mainly as a source of domestic Yearbook of Latvia 1993) (1994). Riga: LR Valsts
resources for the construction market. statistikas komiteja, 307 lpp.
3. Following the transition to the market economy, the 11. Latvijas statistikas gadagramata 2000 (Statistical
industry experienced a short-term crisis; however, it <HDUERRNRI/DWYLD5LJD/5&HQWUDOD
is characterised by a high volume of extraction and statistikas parvalde, 249 lpp.
use of mineral resources for both the needs of the 12. Latvijas statistiska gada gramata 1920 (Statistical
domestic market and the satisfaction of the external Yearbook of Latvia 1920) (1921). Riga: Valsts
demand. statistiska parvalde, 312 lpp.
4. The productivity of peat extraction industry in Latvia 13. Latvijas statistiska gada gramata 1921 (Statistical
is twice as low as the EU-27 indicator; industry of Yearbook of Latvia 1921) (1922). Riga: Valsts
quarrying of stone, sand and clay productivity in the statistiska parvalde, 316 lpp.
EU-27 on average is almost three times larger than 14. Latvijas tautas saimnieciba. Statistikas gadagramata
in Latvia. 1989 (National Economy of Latvia. Statistical
Yearbook 1989) (1990). Riga: Latvijas valsts
Statistikas komiteja, 330 lpp.
Bibliography 15. Latvijskaja SSR v cifrah v 1969 godu (Latvian SSR
1. Annual Detailed Enterprise Statistics for Industry in Figures in 1969) (1971). Latvijskoje otdeljenije
1$&( 5HY %( >VEVBQDBLQGBU@ (XURVWDW L]GDWHOMVWYD³6WDWLVWLND´V
Retrieved: http://epp.eurostat.ec.europa.eu. 16. /5 &6% GDWDEDVH 5HWULHYHG KWWSGDWDFVEJRYOY
Access: 05.01.2013. Access: 28.12.2012.
2. &XUNLQD , Ekonomikas augsmes faktori 17. Mineral Statistics of the British Empire and Foreign
Latvija (Economic Growth Factors in Latvia). Riga, &RXQWULHV IURP WR /RQGRQ
168 lpp. ,PSHULDO ,QVWLWXWH +LV 0DMHVW\¶V 6WDWLRQHU\ 2I¿FH
3. 'HULJR L]UDNWHQX NUDMXPX ELODQFH SDU JDGX p. 450.
(Balance of Mineral Deposits Resources for 2011) 18. 1DURGQRMHKR]MDLVWYR/DWYLMVNRM6651DWLRQDO
5LJD/9*0&OSS Economy of Latvian SSR 1972) (1972). Latvijskoje
4. 'HULJR L]UDNWHQX NUDMXPX ELODQFH SDU JDGX RWGHOMHQLMHL]GDWHOMVWYD³6WDWLVWLND´V
(Balance of Mineral Deposits Resources for 2009) 19. Rupniecibas statistika 1938 (Statistics of Industry
5LJD/9*0&OSS 1938) (1940). Riga: Valsts statistiska parvalde,
5. 'HULJR L]UDNWHQX NUDMXPX ELODQFH SDU JDGX 164 lpp.
(Balance of Mineral Deposits Resources for 2005) 20. Sales of Manufactured Industrial Products, Table
5LJD/9*0&OSS 1R58*&6%GDWD5HWULHYHGKWWSGDWDFVEJRY
6. Eiduks, J. (1940). /DWYLMDV GHULJLH L]UDNWHQL WR lv. Access 18.12.2012.
LHJXVDQD XQ L]PDQWRVDQD 0LQHUDO 'HSRVLWV RI 21. Sprogis, J., Sproge, I., Sprogis, A. (2008).
Latvia, their Extraction and Use). Riga, 9 lpp. /DWYLMDV ODXNVDLPQLHFLEDV UHJLRQDODV VSHFLDOL]DFLMDV
7. Guljan, P.V. (1967). Latvija v sisteme narodnogo L]PDLQDV &KDQJHV RI 5HJLRQDO 6SHFLDOLVDWLRQ RI
KR]MDLVWYD 6665 /DWYLD LQ WKH 6\VWHP RI 1DWLRQDO Latvia’s Agriculture). Economic Science for Rural
Economy of the USSR). Riga: Zinatne, 386 s. Development, No. 15, pp. 257-264.
8. -HNDEVRQH 6 6WUDWHJLF &KRLFHV IRU WKH 22. Vitins, J. (1939). Saldudenu kalki (Lime of
Economic Development of the Republic of Latvia as Freshwater). In: Latvijas zemes bagatibu petijumi.
the EU Member State. European Integration Studies Riga: Zemes bagatibu petisanas instituts,
Research and Topicalities, No. 6, Institute of Europe, 47.-50.lpp.

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S. Jekabsone et al. Export and Import Dynamics of Mineral Resources in Latvia in the Period of 2000-2012
EXPORT AND IMPORT DYNAMICS OF MINERAL RESOURCES IN LATVIA

IN THE PERIOD OF 2000-2012
Sandra Jekabsone1, Dr.oec., as.prof.

Ilze Sproge, Dr.sc.administr., leading researcher; Irina Curkina, Mg.oec., researcher
Research Institute of National Economy
Abstract. Mineral resources are among the most important natural resources of Latvia and they are widely used both
on the domestic market as a fuel; a raw material for construction, production of construction materials, in agriculture
DQGPHWDOOXUJ\DQGWKH\DUHH[SRUWHGDVZHOO$FFRUGLQJWRWKHGDWDRIWKH&HQWUDO6WDWLVWLFDO%XUHDXLQWKH
export of mineral products accounted for 9.1% of the total export of goods from Latvia; and the demand for various
mineral resources available in Latvia (cement, dolomite, gypsum rock etc. that can be used for the production of
construction materials) is increasing every year.
This article aims to present an analysis of the development of the external trade on non-metallic mineral products
across various product groups during the period from 2000 to 2012. The major export markets (regions and countries)
DQGJURXSVRISURGXFWVDVZHOODVWKHPDMRUVRXUFHVRILPSRUWKDYHEHHQLGHQWL¿HGDVDUHVXOWRIWKHDQDO\VLV7KH
conclusions of the article summarise the measures that are required for ensuring sustainable use of Latvian mineral
resources in the medium term, since the potential of mineral resources of Latvia is not fully utilised either for the
satisfaction of domestic needs or for export.
Key words: mineral resources, export and import balance.
Introduction the period from 2000 to 2012. The following tasks are
In comparison with other countries, the range and the set to achieve this aim: to analyse development of the
volume of natural resources available in Latvia is small, import and export of mineral products and the structure
thus, a part of the required resources has to be imported. thereof in Latvia during the period from 2000 to 2012;
Natural gas and oil products are fully imported, also to identify the most important export and import
almost one third of the needed electricity is imported. markets and product groups of the Latvian mineral
However, versatile non-metallic mineral resources, which products; and to establish the factors restricting broader
are important for the development of the construction, use of domestic mineral resources in the economic
agriculture, and other related sectors, can be found activities.
in the earth of Latvia. The reserves of sand and sand- The extraction of mineral resources causes local
gravel, dolomite, clay, limestone, gypsum rock, peat negative impact upon the environment by destroying
and sapropel are widely available. According to the data natural habitats, degrading the landscape, causing the
of the Latvian Environment, Geology and Meteorology ÀXFWXDWLRQV RI WKH XQGHUJURXQG ZDWHU OHYHO DQG WKH
Agency (LVGMA), at the current level of extraction, the deterioration of its quality. Therefore, the environmental
reserves of dolomite, gypsum rock, sand and gravel impact of non-metallic mineral resources presents a
would last for approximately two thousand years; those controversial and topical issue within the global dimension
of clay for six thousand years, limestone for eleven and increased attention should be paid to it in Latvia as
thousand years and peat for more than one thousand well, in particular, related with the development of new
years (Regionalas attistibas un pasvaldibu lietu ministrija, extraction pits.
2006). Mineral products present an important group of The methods of analysis and synthesis, reference,
the Latvian export products that contribute to the growth and dynamic rows have been used for the data
of the Latvian GNP. The growth of the export of mineral assessment. The main research sources include
products has been 17-fold in Latvia since 2000 and their WKH LQIRUPDWLRQ DYDLODEOH LQ WKH GDWDEDVHV RI WKH &6%
share in the export volume has increased accordingly (in and Eurostat, the studies and reports by the Latvian
2000, the export of mineral products accounted for 2.7% Environment, Geology and Meteorology Agency, the
of the total export of goods from Latvia and in 2011, this publications by the Ministries of Economics and Regional
¿JXUHKDGLQFUHDVHGXSWR+RZHYHUWKHLPSRUWRI Development and Municipalities of the Republic of Latvia,
mineral products exceeds the export considerably; thus, and the programming documents of Latvia and the EU
the issue of attaining the balance of external trade and etc., including the NDP (National Development Plan) of
securing sustainable use of the Latvian mineral resources Latvia 2007-2013, Sustainable Development Strategy of
is topical. This article aims to present an analysis of /DWYLD³/DWYLD´WKH(86WUDWHJ\³(XURSH´HWF
the development of the external trade on non-metallic The article does not cover all the aspects related with the
mineral products across various product groups during external trade, including the legislation, and the factors
___________________________
&RUUHVSRQGLQJDXWKRUE-mail: sandra.jekabsone@lu.lv; Phone + 371 26172296
1

ISSN 1691-3078
GH¿QLQJ WKH H[SRUW DQG LPSRUW FKDQJHV WKH FXUUHQF\ of unsolved issues, hindering conditions and factors that
exchange rate, customs rates, trade restrictions etc.). impede the development of external trade of Latvia and
restrict the competitiveness of Latvia. The external trade
balance of Latvia has been negative since 1993 because
the import of goods has exceeded the export of goods
1. Importance of the external trade in the
considerably. It is partially compensated by the positive
national economy of Latvia
balance of services; however, the value of the balance of
Latvia is a small country with restricted resources of
services is lower than the negative balance of goods (it
domestic raw materials and it cannot specialise in the
FRYHUVRQO\RIWKHH[WHUQDOWUDGHGH¿FLWUHVXOWLQJ
production of a broad range of goods. Therefore, most
LQ WKH GH¿FLW RI WKH FXUUHQW DFFRXQW RI WKH EDODQFH RI
of goods have to be imported and the external trade has
payments (BOP) of Latvia. Although during the crisis
always been and will be important in the development
period (2008-2010), the position of the current account
of the national economy of Latvia. The external trade of the balance of payments improved (in the 2nd quarter
balance (export-import balance) impacts both the GDP of 2009, the surplus of the current account in Latvia
and other indices of the economic development, like reached its historically highest level, i.e. 13.6% of the
HPSOR\PHQWDQGXQHPSOR\PHQWLQÀDWLRQLQWHUHVWUDWHV GDP) along with the decrease of import. However, this
the currency exchange rate etc., thus, the trade balance does not indicate any stable trends, because along with
presents an important index of the national economic the increase of economic activity the import development
independence and development (Sulca O., Sproge I., becomes faster resulting in the worsening of the current
2009). The external trade allows each country to use its DFFRXQW EDODQFH LQ WKH UG TXDUWHU RI WKH GH¿FLW
resources in a more comprehensive manner, providing a of the current account amounted to 1.8% of the GDP)
versatile range of goods and services to its residents and /DWYLMDV%DQNDVGDWXED]H0RUHRYHUWKHXQHPSOR\PHQW
the required raw materials as well as modern machinery in Latvia is high, thus, in the near future attention should
and technologies to its producers (Olevskis G., 2003). be focused on increasing the export volume, searching
Thus, the external trade contributes to the fast and for new sales markets outside the EU, and securing the
advanced economic growth of a country presenting the improvement of the quality of goods and services of
basis for the improvement of the people’s standard of Latvia and improvement of their competitiveness as well
living and improvement of welfare. Since the restoration as ensuring favourable conditions for the free movement
of the national independence, the export of goods and of goods and the development of external trade within
services has amounted to approximately 45% and the the EU. The competitiveness of export also largely
import to above 50% of the GDP. More than 70% of reveals the quality of life of the community, as the export
export and import transactions of Latvia currently relate characterises the internal processes of the country and
ZLWKWKH(8FRXQWULHV5XVVLDDQGWKHRWKHU&,6FRXQWULHV its society, and indicates to what degree the current
also present an important trade partner. Generally, Latvia policy and the society structure guarantees the long-term
engages is external trade transactions with more than international competitiveness and also welfare.
190 countries, the biggest trade partners of Latvia in
2012 included Lithuania, Estonia, Russia, Germany and 2. Development trends of the external trade
Poland, and their respective share in January-September of Latvia from 2000 to 2012
2012 amounted to 53.9% of the total export volume of The analysis of the external trade of Latvia (from
the countries and 57. 3% of the total import volume of 2000) may result in distinguishing of several stages with
WKHFRXQWULHV/DWYLMDVDUHMDWLUG]QLHFLED«([SRUW different characteristic development trends:
has played an important role in the recovery process 1) 2000 - 2003, when reforms were initiated to ensure
of the national economy of Latvia following the global that Latvia could join the economic area of the EU
¿QDQFLDO FULVLV ,Q WKH FRQWULEXWLRQ RI H[SRUW LQ and handle the EU competitiveness pressure;
the GDP change amounted to 5.4% and in 2011, it was 2) 2004 - 2007, when rapid and dynamic development
6.6% (Economic Development of Latvia, June 2012). The of external trade took place based upon the increase
export volumes of goods and services have currently of both the domestic and external demand, at the
reached the historically highest level and continue to VDPHWLPHWKHGH¿FLWRIWKHWUDGHRIJRRGVDQGWKH
undergo growth. The increase of the Latvian export of balance of payments were increasing rapidly;
goods and services (in constant prices) amounted to 3) 2008 - 2010, when the national economy of Latvia
LQ DQG GXULQJ WKH ¿UVW WKUHH TXDUWHUV RI encountered the economic crisis which was promoted
2012 (compared with the relevant period of 2011) the by structural, cyclic and external environment
export increased by 9.2%. The fastest export growth (in factors, and which caused a rapid decline of the
current prices) in 2012 referred to the product groups GDP as well as the volume of external trade and the
of drinks and also electrical devices and electrical FXUUHQWDFFRXQWGH¿FLW
equipment (43.9% and 29.6%, respectively); however, 4) starting from 2011, when the national economy is
the export of pharmacy products and vehicles decreased undergoing stabilisation, the GDP, export and import
during the period of January-September 2012 (by 18.6% volumes are gradually increasing.
and 12.7%, respectively) (External Trade of Latvia…, 'XULQJ WKH ¿UVW VWDJH IURP WR /DWYLD
2012). The development of external trade of Latvia is experienced a rapid economic development (the average
promoted by the comparatively well developed transport annual GDP growth equalled 7.5%) which encouraged
infrastructure, which allows (Latvia) to be part of the also the development of external trade. The annual
economic processes of both the Scandinavian and the growth of the volume of the export of goods of Latvia
&HQWUDODQG(DVWHUQ(XURSHFRXQWULHV6WLOOWKHUHLVDUDQJH during the time period from 2000 to 2002 (in current

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Table 1
Export and import of goods of Latvia in 2004 - 2007 (in current prices, mln LVL)
Balance of the trade of goods Balance of the trade of goods in

Year Export Import
relation with the GDP (%)
2004 2 278.1 3 781.1 –1 502.9 -20.2
2005 3 031.3 4 746.3 –1 715.1 -19.1
2006 3 431.8 6 288.2 –2 856.4 -25.7
2007 4 214.4 7 750.5 –3 536.1 -24.0
Source: authors’ estimations based on the data of the balance of payments (database of the Bank of Latvia)
prices) amounted to 11-12%, in 2003, this growth was and food products accounted for a major share (above
17%; at the same time import was also growing (by 13% 30%) of the total export volume, and the intensity of the
in 2002 and by 19.7% in 2003); thus, the negative trade export of goods with higher value added was very low
balance of Latvia deteriorated further. During this period, in Latvia in both 2004 and 2007. The ratio of the export
there were no considerable changes in the structure of of goods and services to the GDP did not change a lot
external trade or its distribution by countries or product during these years either (in 2007, the ratio of the export
groups. The EU-15 countries, the other Baltic States and of goods to the GDP equalled 28.6% and the ratio of the
WKH &,6 FRXQWULHV ZHUH WKH PDMRU WUDGH SDUWQHUV:RRG export of services to the GDP was 12.8%, i.e. the ratio
and its products as well as vehicles, metal processing and of the export of goods to the GDP even decreased by
machinery products dominated in the export of goods. 2.1 percentage points compared with 2004).
Metal processing and machinery products, products In 2008, along with the economic recession, both in
of the chemical industry and related sectors were the Latvia and globally, the trend of decrease of both export
PDMRU SURGXFW JURXSV LQ WKH LPSRUW RI JRRGV WKH &6% DQG LPSRUW GRPLQDWHG DQG LQWHQVL¿HG DW WKH HQG RI WKH
database). \HDUZLWKWKHGHFUHDVHRIWKHGH¿FLWRIWKHWUDGHEDODQFH
A rapid increase of the export of goods and services or the dominance of import over export. Similar trends
was experienced after Latvia joined the EU. During four prevailed in the beginning of 2009, and in the middle of
years following the joining of the EU, the average annual the year the situation got more stable and the export of
increase of export of goods was 23% and that of services goods even started to experience some growth. However,
was 22% (the database of the Bank of Latvia). During the growth of export was restricted by the decline of the
WKH ¿UVW WZR \HDUV IROORZLQJ WKH MRLQLQJ RI WKH (8 WKH H[WHUQDOGHPDQGDQGWKHLQWHQVL¿FDWLRQRIFRPSHWLWLRQRQ
dominance of import over export decreased along with the external markets. The possibilities of gaining positions
the increase of export (in 2004, import exceeded export on new markets had shrunk considerably. Similar to the
by 66%, in 2005 - by 56.6%). However, the dominance SUHFHGLQJ WKUHH \HDUV H[SRUW WR WKH &,6 FRXQWULHV DQG
of import over export again increased up to 83% in the other countries was growing faster than that to the
2006 and 2007 due to the decline of the speed of the EU countries. The decline of the domestic demand, in
H[SRUW JURZWK 7DEOH 7KHUHIRUH WKH GH¿FLW RI WKH particular for goods with long-term usage, determined the
trade balance of goods also increased simultaneously decline of import, which commenced during the second
deteriorating the status of the current account of the half of 2007. In 2008, the decrease of import amounted
EDODQFHRISD\PHQWVGH¿FLWRIWKHFXUUHQWDFFRXQWRIWKH to 4.1%, besides the decrease of import exceeded that
balance of payments exceeded the level of 22% of the of export, and this situation lasted until the 2nd quarter
GDP both in 2006 and 2007). of 2009. Vehicles, machinery and equipment as well as
Following the enlargement of the EU the structure of wood and its products dominated in the declining groups.
the external markets of Latvia experienced considerable Only the increase of the import of mineral products and
changes: the external trade with the 10 new EU Member agriculture and food products was meaningful. Along
States increased much more rapidly and the cooperation with the decline of import its dominance over export
with the EU-15 countries did not change a lot. This was decreased from 92.6% in 2007 to 69.9% in 2008, and
conditioned by the slow growth of the national economies WKHQHJDWLYHWUDGHEDODQFHGHFUHDVHGE\WKH&6%
of the Western Europe and the comparatively low demand database). In 2009, the total turnover of the external
in these countries. Generally, the increase of the Latvian trade was LVL 3750.7 mln or 31.4 % below the level
export to the 10 new EU Member Stated in 2004 –2005 of 2008. Export decreased by almost 20% and import
amounted to 70% on average annually, and in 2006 and decreased by almost 40%, thus, improving the balance
2007, the average annual increase amounted to 30%, of the external trade of Latvia (Figure 1).
besides, the increase of export to Lithuania and Estonia The improvement of the trade balance had a positive
accounted for 90% of this. In comparison with 2003, the impact upon the current account of the balance of
external trade (export and import) with Lithuania and payments of Latvia where there was a surplus at the
Estonia increased threefold and at the end of 2007, it end of the year (8.3% of the GDP). The structure of
accounted for more than 30% of the total trade volume the Latvian export also changed slightly as regards the
with the EU countries. The structure of the export of groups of countries. The share of the EU-15 countries
goods also changed. Although the share of wood and decreased to 35% and the export of Latvia to other
its products in the total volume of the export of goods countries experienced a slight growth (by 2%). The fact
had been decreasing since 2004, wood, and agriculture that as of the mid-2009 the export has not been declining

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527.8
600 398.5 417.3 407.5 396.4
386 378.6 359.2 366.6 373.2 374 390.9 385.5
352.4 355.1 323.3 315.8

100 302.5 294.4 279.2 277.1 295.3 273.4 284.7
257.3 263.7
-82.1 -71.3 -89.3 -55.1 -41.3 -67.6 -69.7

-122.3 -122.9 -99.4 -99.8
-141.2
-225.3
-400
XII I II III IV V VI VII VIII IX X XII XII
2008 2009
Balance export import
Source: CSB database
Fig. 1. Development of the export and import of goods of Latvia per month in 2009
(current prices, mln LVL)
2500 2094.7 2111.7 2148.1 2195.9

1982.4
1854.5
1752.1
2000 1623.2 1658.2
1355.4
1500 1181.2 1820.9
1570.3 1609.7 1519.3 1601.1
1490.0
1000 1289.9 1340.3 1328.5
1123.9
500 940.7
-500 -240.5 -231.5 -333.3 -329.7

-411.8 -364.5 -375.0
-524.4 -502.0 -463.1 -547.0
-1000
I II III IV I II III IV I II III
2010 2011 2012

Balance export import
Source: Latvijas areja tirdznieciba…, 2012
Fig. 2. ([WHUQDOWUDGHRI/DWYLDE\TXDUWHUVLQLQFXUUHQWSULFHVPOQ/9/
further and the growth of export could be seen in 2010 continued also in 2012 (Figure 2). Due to the impact
should be mentioned as a positive trend. The export caused by the change of the prices of goods, the volume
volume (in current prices) increased by 30% compared of export, in constant prices, increased by 9.2% during
with 2010, and the growth has been 6% compared with the period of January-September 2012 compared with
the pre-crisis level, the year 2008 (20% and 9% based the period of January-September 2011, while import
upon the constant prices accordingly). The import growth increased by 4.3% during the relevant period.
also recommenced (the increase of 25.5% according to Wood and wood products, charcoal, iron and steel
current prices and 15.6% according to constant prices); as well as mineral products were the major export
however, it was still considerably below the top pre- goods of Latvia in 2012. Wood and wood products, and
crisis level which was achieved in 2007 (in 2010, import charcoal were mostly exported to Sweden (14.5%), the
exceeded export by mere 26%). Although the import United Kingdom (13.1%), and Germany (11.6%); iron
volume increased, the current account of the balance of and steel were exported to Poland (24.1%), Algeria
payments remained positive in 2010 (the overall surplus (14.9%), and Turkey (14.7%); mineral products - to
of the current account amounted to 3.6% of the GDP (the Poland (21.7%), Lithuania (21.1%), and Afghanistan
database of the Bank of Latvia)). (16.6%). Mineral products, mechanisms and mechanical
In 2011, the export of goods of Latvia in current devices, and electrical devices and electrical equipment
prices increased by 28% compared with 2010 (by 14% dominated in the import structure of Latvia in 2012.
in constant prices). The growth of the export of goods During the period of January-September 2012, mineral

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Table 2
Development of the export and import of mineral products in Latvia from 2000 to 2012
(thou. LVL, current prices)
Year Total incl. mineral Share of mineral Total incl. mineral Share of mineral
export products products in the import products products in the total
total export (%) import (%)
2000 1131315 30670 2.7 1933935 249397 12.8
2001 1256402 21249 1.7 2201565 245058 11.1
2002 1408816 24058 1.7 2497386 243187 9.7
2003 1650630 26419 1.6 2989166 296857 9.9
2004 2150027 114114 5.3 3805258 481649 12.6
2005 2888234 265229 9.2 4867011 752828 15.5
2006 3293210 182157 5.5 6378477 854771 13.4
2007 4040293 165426 4.1 7780231 896674 11.5
2008 4428945 184029 4.1 7527687 1171231 15.6
2009 3602243 199629 5.5 4709779 808586 17.1
2010 4694885 283115 6.0 5911949 907637 15.3
2011 5998518 548649 9.1 7719105 1337932 17.3
2012 4941300 457900 9.3 6326400 1160000 18.3
I–IX
Source: CSB database
products were mostly imported from Lithuania (39.7%), the construction and which are comparatively cheap are
Russia (24.3%), and Belarus (15.2%); mechanisms exported from Latvia to other countries. Latvia imports oil
and mechanical devices were imported from Germany products (gasoline, diesel, HFO), natural gas, electricity
(22.0%), Lithuania (9.9%), and Estonia (7.6%); while and other energy resources from other countries, and the
electrical devices and electrical equipment were imported share of non-metallic mineral products in the total import
IURP *HUPDQ\ /LWKXDQLD DQG &KLQD volume is comparatively low (salt and various materials
(10.5%). required for the construction are imported to Latvia). As
the analysis of the development of the external trade of
3. Export and import of mineral resources in non-metallic mineral products was set as the aim of this
Latvia from 2000 to 2012 article, the further analysis will not cover oil products
Mineral products present an important group in the DQGRWKHUSURGXFWJURXSVRI&KDSWHUVDQGRIWKH
external trade of Latvia. According to the combined &1 DQG ZLOO IRFXV RQ WKH SURGXFW JURXSV RI &KDSWHU
QRPHQFODWXUH RI JRRGV &1 WKH JURXS RI PLQHUDO RIWKH&1RQO\7KUHHSURGXFWVGRPLQDWHGLQWKHH[SRUW
products covers the following: salt; sulphur; earths in the product group of non-metallic mineral products
and stone; plastering materials, lime and cement in 2012: cement (2523), gypsum rock, gypsum (2520),
&KDSWHU ores; slag and ash &KDSWHU and salt (2501); as regards the import - the dominating
mineral fuels; mineral oils and products of their products were gravel, pebbles (2517), salt (2501), and
distillation; bituminous substances; and mineral waxes cement (2523). The comparison of the structure of
&KDSWHU ,QWUDVWDW 'XULQJ WKH SHULRG export and import goods shows that there have been
of January-September 2012, the export of mineral no considerable changes (if compared with 2000). In
products accounted for 9.3% of the total export of DOVRWKH¿UVWWZRSRVLWLRQVLQWKHH[SRUWEHORQJHG
goods and presented the third most important product to cement and gypsum rock, gypsum and the third
group within export; besides mineral products are the position was taken by gravel, and pebbles (2517); as
leading group of products in export accounting for almost UHJDUGVWKHLPSRUWWKH¿UVWSRVLWLRQZHQWWRJUDYHODQG
RQH ¿IWK RI WKH WRWDO LPSRUW RI JRRGV /DWYLMDV DUHMD pebbles, the second - to cement and the third - to salt
WLUG]QLHFLED«7KHLPSRUWDQFHRIPLQHUDOSURGXFWV (Tables 3 and 4).
in the external trade of Latvia has increased considerably The review of the development of the three major
since 2000, in particular, following the accession to export products over years reveals that the income
the EU (Table 2). Still, it has to be noted that during from exports of cement as well as gypsum rock and
the whole studied period the import of mineral products J\SVXP KDV EHHQ ÀXFWXDWLQJ D ORW RQ WKH H[WHUQDO
has been exceeding the relevant export volume and this markets during the time period from 2000 to 2011
is determined by the different structures of export and (Figure 3).
import. $VLWFDQEHVHHQIURPWKLV¿JXUHWKHH[SRUWLQFRPH
Mainly cement, gravel, gypsum rock, gypsum and of cement has increased rapidly in 2007 and 2008, then
other non-metallic mineral products which are used in it sharply decreased in 2009 due to the economic crisis

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Table 3
Export volumes of the major non-metallic mineral products of Latvia (EUR)
2012 (January-
2000 2005 2011
October)
&HPHQW 1882195 1031128 48089907 40018727
Gypsum 1336031 4780413 5854969 6175637
Salt 60091 1167456 2691240 1990222
Gravel, pebbles, crushed stone 1540339 221028 688267 443920
&KDON 4 20186 308638 116053
&OD\ 992 28035 224839 34148
Sand 77951 221605 193604 211665
Granite, sand rock, stones for construction 795 122968 32304 441568
Dolomite 513 4752 19047 6710
Quicklime, slaked lime 130 0 16366 6823
Magnum carbonate, magnesium 0 0 2657 4144
Limestone 0 15732 598 0
Total 4899041 7613303 58122436 49449617
Source: Eurostat
Source: authors’ estimations based on the Eurostat data
Fig. 3. 'HYHORSPHQWRIH[SRUWLQFRPHIURPVSHFL¿FPLQHUDOSURGXFWVLQ/DWYLD(85IURPWR
and increased quite rapidly again in 2010 and 2011. The major export and import partners have been
The export income from gypsum rock and gypsum stable during the period from 2000 to 2012. Latvia is
experienced moderate growth up to 2008, when it mostly cooperating with the neighbouring countries:
decreased and had not regained the pre-crisis level Lithuania, Russia, Belarus, Estonia, and Finland
until 2011. Similar trends can also be seen in the import (Table 5).
expenditures on mineral products. According to the data summarised in Table 5, Russia
When the development of the three major products is the biggest export market for the Latvian cement, it is
per years is reviewed, it can be seen that the import followed by Finland, and Estonia is the main partner of
expenditures and volumes of cement have decreased Latvia as regard the import of cement. Gravel and pebbles
rapidly since 2008, and this can be explained mostly by are mostly exported to Lithuania, while Norway is the
the activity of the construction sector. Also during the main import partner, followed by Lithuania, Sweden, and
crisis (in 2009 and 2010), the import expenditures (and Estonia. Lithuania and Estonia present the main sales
imported volumes) of gravel and pebbles decreased; markets for gypsum rock and gypsum from Latvia.
however, as of 2011 they have been increasing again, Generally, the evaluation of the export and import
although at a more moderate speed than during the of non-metallic mineral products of Latvia during the
period of the rapid growth (from 2004 to 2008), and this time period from 2000 to 2012 leads to the conclusion
can be seen clearly in Figure 4. WKDW LW KDV EHHQ ÀXFWXDWLQJ DQG GHSHQGHQW XSRQ WKH

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Table 4
Import volumes of the major non-metallic mineral products of Latvia (EUR)
2012 (January-
2000 2005 2011
October)
Gravel, pebbles, crushed stone 5801287 16888481 10870530 12481346
Salt 2535462 5135188 10125815 6608059
&HPHQW 4313441 10873670 5185492 4663154
clay 680571 1709574 3452852 2813955
Granite, sand rock, stones for construction 1261434 3263201 3137495 835998
Sand 833336 1183556 1331164 1297379
Gypsum 809303 793627 1011604 818908
Magnum carbonate, magnesium 542465 523360 739915 2375192
&KDON 194170 152348 502053 809660
Dolomite 116078 1359698 348662 172140
Limestone 682338 424092 329731 545946
Quicklime, slaked lime 49354 232530 292143 403849
Total 17819239 42539325 37327456 33825586
Source: Eurostat
Fig. 4. 'HYHORSPHQWRILPSRUWH[SHQGLWXUHVRQVSHFL¿FPLQHUDOSURGXFWVLQ
Latvia (EUR) from 2000 to 2011
Table 5
Largest export and import markets of the major mineral products of Latvia in
2012 (January-October) (EUR)
Countries Export of Import of Export of Import of Export of gypsum Import of

cement cement gravel, pebbles gravel, pebbles rock, gypsum salt
Belarus 4018628 …. 8593 13784 1790563 1633997
Estonia 2166053 3861093 79591 740686 1156085 59928
Russia 16134990 …. 54654 … 659858 ….
Lithuania 5757675 33722 301082 1206473 2564277 460307
Finland 11935160 …. …. … … ….
Germany …. 155046 …. 81105 … 1774734
Denmark 0 421194 …. … … 1155410
Norway 6212 …. …. 8593056 3960 …

ISSN 1691-3078
development of the overall economic situation in Latvia products is considerably lagging behind the import
and globally. The export and import structure of mineral due to the different structures of export and import.
products of Latvia has changed comparatively little 5. The structure of import and export of mineral
during this period as regards the groups of both goods products of Latvia has changed comparatively little
and countries. Latvia has established stable relationship across different product groups. Three products
with other Baltic States in the export and import of dominated in the export in the product group of non-
mineral products. Latvia also exports its mineral products metallic mineral products in 2012: cement, gypsum,
to Russia and Belarus, since the activity on these markets and salt; as regards the import the dominating
KDV LQWHQVL¿HG LQ SDUWLFXODU IROORZLQJ WKH DFFHVVLRQ RI products were gravel, pebbles, salt, and cement.
Latvia to the EU. Still, it has to be noted that the potential 6. The demand for cement as well as gypsum rock and
of mineral resources of Latvia is not fully utilised either J\SVXP KDV EHHQ TXLWH ÀXFWXDWLQJ RQ WKH H[WHUQDO
for the satisfaction of domestic needs or for export. Only markets during the period from 2000 to 2011. The
a small part of the mineral resources available in Latvia is export of cement increased rapidly in 2007 and
currently involved in the economic operations, there is a 2008, then it sharply decreased in 2009 due to the
ORWRIQRWVXUYH\HGDQGXQLGHQWL¿HGUHVRXUFHVLQ/DWYLD economic crisis and increased quite rapidly again in
Therefore, at present, Latvia imports numerous mineral 2010 and 2011.
products, although it could replace the import and fully 7. The export of gypsum rock and gypsum experienced
satisfy the domestic demand for construction materials a moderate growth up to 2008, then it decreased and
(cement, gravel, clay etc.) by using its own resources. did not regain the pre-crisis level until 2011. Similar
Too little attention has been focused on gaining market trends can be seen also in the import of products.
shares on new export markets; export partners of Latvia 8. Russia, Baltics and the Scandinavian states are
have changed very little during the past 10 years. As important Latvian trade partners. Russia is the
the consumption of mineral resources grows, also the biggest export market for the Latvian cement followed
burden upon the environment increases; thus, in order by Finland. Estonia is the main partner of Latvia as
to maintain the balance between the development of the regard the import of cement. Gravel and pebbles are
national economy and the environment, the problems mostly exported to Lithuania, while Norway is the
that are related with the extraction of mineral resources, main import partner, followed by Lithuania, Sweden,
for example, the recultivation of mines and the handling and Estonia. Lithuania and Estonia present also the
of construction waste, should be solved by providing main sales markets for gypsum rock and gypsum
additional funding for this purpose. from Latvia.
9. The potential of mineral resources of Latvia is not
fully utilised either for the satisfaction of domestic
needs or for export. Only a small part of the mineral
recommendations resources available in Latvia is involved in the
1. Following the regaining of the independence, the economic operations, there is a lot of not surveyed
external trade has had an important role in the DQG XQLGHQWL¿HG UHVRXUFHV LQ /DWYLD 1XPHURXV
national economy of Latvia; export of goods and mineral products are imported, although Latvia could
services had amounted to 40-45% of the GDP and replace the import and fully satisfy the domestic
import to 55-65% of the GDP during this period. demand for construction materials (cement, gravel,
Export has played a decisive role in the recovery clay etc.) by using its own resources; also too little
process of the national economy of Latvia following attention has been focused on gaining market shares
WKHJOREDO¿QDQFLDOFULVLV,QWKHFRQWULEXWLRQ on new export markets; export partners of Latvia
of the export in the GDP change amounted to 5.4% have changed very little during the past 10 years.
and it was 6.6% in 2011.
2. The export structure of Latvia has not changed
considerable during the period from 2000 to 2012, Bibliography
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and labour consuming products to the manufacturing bank.lv/en/statistics/data-room/main-indicators
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ISSN 1691-3078
I. Sproge et al. Mineral Resources and Long Term Development in Latvia
MINERAL RESOURCES AND LONG TERM DEVELOPMENT IN LATVIA
Ilze Sproge1, Dr.sc.administr., leading researcher; Irina Curkina, Mg.oec., researcher

Research Institute of National Economy
Sandra Jekabsone, Dr.oec., as.prof.
Abstract. The availability of mineral resources and their utilisation for covering both the domestic and external
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amount of mineral resources available in Latvia is low in comparison with other countries, they play an important role
in the development of the construction, agriculture, and other industries. The aim of this research is to analyse the
role of mineral resources in the national economy of Latvia and their impact upon the long-term development of the
national economy. In order to achieve this aim, it is necessary to analyse the programme documents of the long-term
development of Latvia within the context of the EU long-term economic policy goals.
Key words: mineral resources, economic development, low-carbon economy, investments.
Introduction the base for food production and constructing of the

The effective use of resources is among the priorities engineering production, household, and communications
of the European long-term development strategy: to infrastructure. Land and its depths are subject to
achieve sustainable growth, by promoting a more resource ERWK QDWXUDO SURFHVVHV LH WHFWRQLF ÀXFWXDWLRQV
HI¿FLHQW JUHHQHU DQG PRUH FRPSHWLWLYH HFRQRP\ current geological processes, and human activities.
(Europe 2020). Also, the development perspective of The resources of the land depths contain the deposits,
the national economy of Latvia is related with a lower rocks and minerals that can be used for the needs of the
emission amount, the effective use of energy resources national economy, both now and in future, liquid usable
in the industry of extraction and processing of mineral substances found in rocks, the warmth of the land, and
deposits (energy consumption and lower greenhouse geological structures that can be used for economic
gas emissions from extraction and processing). The activities.
development of recycling will be important in long-term, The estimated volume of the global extraction
and it could impact the volume of extraction of certain industry has experienced considerable growth during
mineral deposits to some extent. the past 30 years. The volume of extraction of both
The aim of the research is to analyse the role of fossil fuel and ores has increased; however, the
mineral resources in the national economy of Latvia and volume of extraction of mineral resources for the
their impact upon the long-term development of the needs of construction and industry has changed more
national economy. considerably (Figure 1).
The tasks of the research were set in order to ,Q &KLQD WKH 86$ DQG 5XVVLDQ )HGHUDWLRQ
achieve the aim: 1) to identify the importance of mineral were the global leaders in extraction of fossil fuel.
resources for the long-term development of the European 0RUHRYHU WKH LQGH[ RI &KLQD KDG DOPRVW TXDGUXSOHG
Union; and 2) to study the strategic documents of the in 2008 vs. 1980. The global leaders of ore extraction
long-term development of Latvia and to identify the future ZHUH &KLQD 3HUX DQG $XVWUDOLD &KLQD WKH 86$
role and development opportunities of the extraction and India take the leading positions in the industry
industry and the industries producing mineral products. of extraction of Industrial and construction minerals
(Global Material Flows).
The research was performed in 2012 and the
The subterranean depths of Latvia are rich in the
following research methods were used in the paper:
resources of various mineral materials that can be
comparative analysis and synthesis, monographic,
used for the production of construction materials: the
logically constructive, and statistical. The main research
resources of sand and sand-gravel, dolomite, clay,
sources included programme documents, statistical
limestone, gypsum rock, peat, and sapropel are widely
data, publications on the natural resources as well as
available. It should be noted that as regards the
information from the Internet resources.
extraction of industrial and construction minerals,
Latvia occupies mere 0.02% on the global map. Also in
Research results and discussion Lithuania and Estonia, the proportion of the extraction
1. Inventory of mineral resources of minerals for further use in the national economy is
Soil and the sedimentary rocks beneath it are non- similar (Global Material Flows). Per capita extraction of
renewable natural resources providing the ecosystem industrial and construction minerals (used materials)
and satisfying the needs of the human life processes, in Latvia is below the level of our neighbouring country
including the resources of underground potable water, Estonia and similar to that of Lithuania and Belarus. In
___________________________
&RUUHVSRQGLQJDXWKRUE-mail: LO]HVSURJJH#JPDLOFRP; Phone + 371 29253929
1

ISSN 1691-3078
Note: Used materials - the amount of extracted resources, which enters the economic system for further
processing or direct consumption
Source: Global Material Flows
Fig. 1. Global resource extraction of minerals (used materials)
2008, the average volume of extraction of industrial and The extraction of mineral resources is closely related
construction minerals amounted to 5.1 tons per capita in with the economic activities and environmental impact
Latvia and Lithuania, it was 9.2 t/capita in Estonia and it caused by being not just a production waste. However,
was 5.3 t/capita in Belarus. the extraction of mineral resources and peat, in particular
The evaluation of the overall situation in Latvia at the time when the use of deposits is started, causes
reveals that the quantitative loads that are related local negative environmental impact, for example, by
with the extraction of mineral resources and peat destroying natural habitats, degrading the landscape,
are not considerable. It is possible to estimate the FDXVLQJ ÀXFWXDWLRQV RI WKH XQGHUJURXQG ZDWHU OHYHO
length of mineral resource reserves by evaluating the and deterioration of its quality as well as pollution of
current extraction volume of the provision of the most above the ground water. Some of these impacts are
important mineral resources in Latvia. In compliance short-term and reversible according to the expert
with the estimation of the Strategic Environmental evaluation, for example, in relation to the use of new
Impact Assessment for the Strategy of the Sustainable deposits of mineral resources and the construction of
Development of Latvia until 2030: the reserves of settling basins (Vides parskats. Nacionalajam attistibas
gypsum rock will last for 50 years, sand for 100 years, planam 2007.- 2013.).
sand-gravel mix for 200 years; dolomite for 210 years, The promotion of sustainable management of
clay for 1130 years, and limestone for 1310 years the land resources is an issue of shared responsibility
6WUDWHJLVNDLV LHWHNPHV X] YLGL QRYHUWHMXPV /DWYLMDV between the Ministry of Agriculture as the supervisor of
LOJWVSHMLJDV DWWLVWLEDV VWUDWHJLMDL OŝG] JDGDP the land used for agriculture and forestry, the Ministry
and in compliance with the Environmental Report of of Regional Development and Municipalities as the
the Strategic Environmental Impact Assessment, the institution coordinating the planning of territories and the
reserves of dolomite, gypsum rock, sand and gravel Ministry of Environment as the responsible institution for
ZLOO EH VXI¿FLHQW IRU \HDUV FOD\ IRU \HDUV the prevention of pollution, erosions and risk processes.
limestone for 11 thousand years, and the reserves of In addition, municipalities and land owners play an
SHDW ZLOO EH VXI¿FLHQW IRU PRUH WKDQ WKRXVDQG \HDUV important role. There are no legally binding documents
,HWHNPHV X] YLGL VWUDWHJLVND QRYHUWHMXPD ,W FDQ EH in the area of the land policy or soil protection in the
concluded that the overall provision of raw materials for EU; however, the Ministry of Regional Development and
construction materials in this country is good. The survey Municipalities is working on a package of regulatory
and use of new deposits of sand and sand-gravel can enactments on the Land policy. The quality standards on
be forecasted at places where large-scale construction soil and land have been developed and are applied in
works are planned, thus, reducing transportation costs. Latvia, the same refers to the regulations on the use of
Gypsum rock is among the most valuable land sludge for the improvement of agricultural land and the
resources; Latvia provides this resource to all the Baltic programme of nitrates.
States. Dolomite, in turn, is a widely spread mineral
resource and presents a major source of mechanically 2. Long-term development policy and
resistant stone materials in Latvia. Thirty the most UHVRXUFHWD[HVLQÀXHQFLQJH[WUDFWLRQVHFWRU
important deposits of gypsum rock, limestone, dolomite, Generally, the issues of the extraction and use of
FOD\ TXDUW] VDQG JUDYHO VDQG VWRQH DQG VDSURSHO mineral resources and their environmental impact are
are included in the list of mineral deposits of national touched upon in several policy planning documents and
importance. legal enactments in Latvia:

ISSN 1691-3078
Table 1
Reserves of mineral deposits and extraction volume in Latvia
Mineral deposit Units Reserves as on Extraction in 2010 Extraction in 2011

1 January 2012
Gypsum rock thou. m3 A - 3 721.65 80.23 98.16
N - 2 160.37
Limestone thou. m3 A - 60 239.57 570.31 629.18
N - 200 345.38
Dolomite thou. m3 A - 102 517.17 1375.82 1593.27
N - 498 157.00
&OD\ thou. m3 A - 50 211.46 221.01 271.86
N - 54 333.81
4XDUW]VDQG thou. m3 A - 787.69 1.62 14.89
N - 658.00
Sand-gravel thou. m3 A - 189 126.92 2746.34 2764.9
N - 219 672.53
Sand thou. m3 A - 144 122.37 2820.18 3557.71
N - 36 736.84
Sandy loam and thou. m3 A - 337.47 82.64 92.36
loam N - 148.90
Peat thou. t with 40% A - 134 262.60 703.81 946.95
humidity N - 46 065.45
Sapropel thou. t with 60% A - 233.29 0.13 0.2
humidity N - 0.00
&XUDWLYHPXG thou. t with 90% A - 682.08 1.73 0.46
humidity N - 129.54
1RWH6XUYH\HG&DWHJRU\$HVWLPDWHG&DWHJRU\1UHVRXUFHV
Sources: Derigo izraktenu (buvmaterialu izejvielu, kudras un dziedniecibas dunu) krajumu bilance par 2011. gadu, 2012
6RXUFH(FRQRP\ZLGH0DWHULDO)ORZ$FFRXQWVDQG'HULYHG,QGLFDWRUV$0HWKRGRORJLFDO*XLGH
Fig. 1.(FRQRP\ZLGHPDWHULDOEDODQFHVFKHPHH[FOXGLQJDLUDQGZDWHUÀRZV
— National Development Plan 2007-2013; — Guidelines of the Sustainable Development of

— National Development Plan 2014-2020; Latvia;
— Sustainable Development Strategy of Latvia up to — Land Policy Guidelines 2008 – 2017;
2030 (Latvia 2030); — National Plan of Waste Management 2006-2012;
— National Strategic Framework Document 2007– — Environment Monitoring Programme Guidelines
2013; 2009-2012;

ISSN 1691-3078
— Law on Environment Protection (adopted on QRW H[SHFWHG LQ WKH H[WUDFWLRQ RI UHVRXUFHV OLNH TXDUW]
2 November 2006); sand and sapropel. Along with resuming the application
— Law on Evaluation of Environmental Impact (adopted of lime to agricultural lands, the increase of the volume
on 14 October 1998); of extraction of limestone is possible. The volume of the
— Law on Natural Resources Tax (adopted on extraction of peat could increase in relation with the
15 December 2005); increase of the export volume; however, no considerable
— Law on Waste Management (adopted on increase of the extent of the use of peat in Latvia can be
4 December 2000); expected in the future.
— Law on Subterranean Depths (adopted on 2 May The assessment of the national nature capital should
1996); be focused on the physical and moral stock-taking of
— Law on Territory Planning (adopted on 22 May 2002); natural resources and ecosystems services as well as the
— Regional Development Law (adopted on 21 March estimation of monetary gains and losses. The long-term
2002); trends of the use of mineral resources are viewed within
— &DELQHW 5HJXODWLRQV 1R ³5HJXODWLRQV RQ WKH the context of the transition to the development model
1DWLRQDO (QYLURQPHQW ,QGLFDWRUV´ DSSURYHG RQ of low carbon emission economy in Latvia in comparison
24 February 2009). with other EU countries.
— &DELQHW5HJXODWLRQV1R³3URFHGXUHRI0DQDJLQJ The extraction of mineral resources and their use
WKH :DVWH RI WKH ([WUDFWLRQ RI 0LQHUDO 'HSRVLWV´ in the national economy is impacted by the taxation
(approved on 21.06.2011). SROLF\ DIIHFWLQJ WKH FRVWV DQG WKH SULFH RI WKH ¿QDO
The Strategy of Sustainable Development of Latvia up product). The application of economic means for the
to 2030 and the National Development Plan 2014-2020 implementation of the environmental policy is gaining an
are the long-term development documents of the highest increasing role both on the global scale and in Latvia. The
national level according to the hierarchy. According to importance of this role is increased also by the growing
WKHVHGRFXPHQWVWKHSULPDU\JRDOKDVEHHQGH¿QHGDV manufacturing and consumption as well as the increase
³WKHLQFUHDVHRIWKHSURGXFWLYLW\RIWKHKXPDQHFRQRPLF of the costs of the prevention of pollution. The application
social and nature capital, including the place and space, of economic means is aimed at the promotion of more
LQ UHVSRQVH WR WKH FKDOOHQJHV SRVHG E\ JOREDO WUHQGV´ HI¿FLHQW XVH RI QDWXUDO UHVRXUFHV DQG DW DFKLHYLQJ WKH
where two areas out of nine are closely related with decrease of pollution. Environmental taxes are among
QDWXUDOUHVRXUFHV³5HQHZDEOHDQGVDIHHQHUJ\´ZLWK the economic means, which are often used on the
the following goal: to maintain the leading position in the international scale. The effectiveness of the taxation of
EU in the area of the use of renewable energy resources the extraction of natural resources, and their use and
DQG FRPSUHKHQVLYH GHYHORSPHQW RI WKH ³JUHHQ HQHUJ\´ importance are emphasised also in the report by the
SRWHQWLDO ³1DWXUH DV WKH FDSLWDO IRU IXWXUH´ ZLWK WKH European Environment Agency on the effectiveness of
following goal: to take the leading position on the EU level environmental taxes and fees as regards the extraction
in the area of preserving, increasing, and sustainable use of sand, clay and other natural resources, and their
of the nature capital (Vides politikas pamatnostadnes management in certain EU countries (EEA Report/No
2009. – 2015. gadam (2009)). The forecast on the 2/2008 (2008)). Table 2 presents the natural resources
development of the situation during the time period until tax rate and its changes in Latvia compared with Estonia
2030 (Zero scenario) has been developed by describing and Lithuania.
the driving forces, the existing environment quality, and According to the data presented in Table 2, the
the expected trends of the changes of environmental natural resources tax rate applicable to several minerals
resources and their quality during the time period until used in the construction: sand, gypsum rock, limestone,
the year 2030. dolomite, etc. has increased during the studied period in
In compliance with the EU long-term development Latvia from 2009 to 2012. The natural resources tax rates
strategy, the direct role of mineral deposits is not for natural resources in Latvia, Lithuania, and Estonia are
emphasised within the long-term growth; however, it is different due to different resources; moreover, they are
among the issues of the industrial policy. According to not comparable in all the cases because the quality and
the long-term development strategy of Latvia until 2030, the composition of particular resources differ. It should
the growth of the demand for construction materials be noted that, in Estonia, several different tax rates
is forecasted, thus, the domestic manufacturers of are applicable to the same resource depending on the
construction materials will have opportunities to use purpose of the use of the resource.
domestic raw materials and mineral deposits more The equalisation and levelling of tax rates in
widely. Moreover, the mineral deposits have been comparison to Lithuania and Estonia as regards the
included within the spaces of national interest, which extraction of all the above resources is not possible
are described as territories and areas with outstanding because the tax rates in all the three countries are
value and importance for the sustainable national not based upon the same principles and criteria (the
development. It can be expected that the extraction of accessibility of resources, the surveyed reserves and
the raw materials required for the construction industry, volumes, the effectiveness of the use of resources, the
i.e. sand, sand-gravel, gypsum rock, and dolomite and purpose of use etc.).
their use for the production of construction materials For the purpose of extraction of natural resources
will continue during the period until 2014. As regards and the use thereof, it is necessary to receive the permit
the volume of extraction, the sector is balanced and of extraction of natural resources or the licence for the
the forecasted extraction volumes do not present any use of natural resources. In compliance with the Law
threat to the reserves of mineral deposits. Growth is ³2Q 6XEWHUUDQHDQ 'HSWKV´ WKH OLFHQFH IRU WKH XVH RI

ISSN 1691-3078
Table 2
Natural resources tax rate in Latvia, Lithuania, Estonia, in Lats
Latvia Lithuania Estonia

Type of Till From From From From From From
Unit
resources 31.12. 01.01. 01.01. 01.01. 01.01. 01.01. 01.01.
2009 2010 2011. 2012. 2010. 2011. 2012.
Dolomite m3 0.06 - 0.25 0.09 - 0.25 0.12 – 0.25 0.15 – 0.25 0.27 0.53 – 1.93 0.53 – 2.02
3
Sand-gravel m 0.10 0.15 0.20 0.25 0.12 0.40 – 1.19 0.40 – 1.31
Sand m3 0.01 – 0.05 0.04 -0.08 0.07 - 0.12 0.10 - 0.15 0.10 – 0.82 0.19 – 0.95 0.20 – 1.04
Limestone m3 0.10 0.13 0.16 0.20 0.35 0.58 – 1.50 0.58 – 1.65
&OD\ m3 0.10 0.10 0.12 0.15 0.16 – 0.40 0.37 – 0.69 0.39 – 0.72
Peat tonne 0.13 0.20 0.25 0.30 0.13 0.81 – 0.98 0.81 – 0.98
Sapropel m3 0.10 – 0.50 0.10 – 0.50 0.10 - 0.50 0.10 - 0.50 0.17 - -
Amber kg - - - - 7.12 - -
LTL 1 = LVL 0.2040; EUR 1 = LVL 0.7028
Source: authors’ construction based on Dabas resursu nodokla likums, Mokescio uz valstybinius gamtos isteklius
istatymas, Informativais zinojums “Par dabas resursu nodokla piemerosanas praksi dabas resursu ieguvei Latvija
salidzinajuma ar Igauniju un Lietuvu un izvertejumu un priekslikumiem par valsts ienakumiem ilgtermina saistiba ar
dabas resursu izmantosanu”
natural resources of the extraction of frequently found that none of these indicators relates with the extraction
natural resources is issued and the land owned by the of mineral resources.
state or a municipality is leased or transferred under 7KH IROORZLQJ DUH LGHQWL¿HG DV LVVXHV WKDW KDYH WR
possession for the purpose of the extraction of natural EH VROYHG E\ D GH¿QLWH JRYHUQPHQW SROLF\ LQ WKH ¿HOG
UHVRXUFHV RU WKH XVH RI EHQH¿FLDO IHDWXUHV RI WKH of the land resources, protection of the land deposits,
natural resources for a time period up to 25 years. and soil providing for the following: 1) in Latvia,
The user of the subterranean depths may engage geological risks or the land degradation is manifested
into gradual extraction of natural resources over the on the regional level only, the increasing erosion of the
whole period, however, taking into account the market sea coast, the erosion activities of certain rivers (for
situation, all the resources in the particular spot in example, several sections of the Gauja), landslides
compliance with the permitted volume may be (Turaida, the Gauja valley, the Abava valley over the
extracted in the beginning of the validity of the licence section Sabile - Kandava), and coastal processes are
or at the end of this period. This means that the tax QRW VXI¿FLHQWO\ WDNHQ LQWR DFFRXQW ZLWKLQ WKH WHUULWRU\
payments will be received into the central budget or planning; 2) the methodologies of the extraction,
the special municipal budgets for the environment accounting, control, and recultivation of mineral deposits
protection only after the extraction of the relevant LQ WKH ¿HOG RI XVH RI WKH ODQG GHSRVLWV KDYH WR EH
resources. improved in the future. It is noted that the recovery
In addition to the above, it should be noted that of the places of extraction of mineral deposits is
in Latvia the subterranean depths and all the natural LQVXI¿FLHQW $ FHUWDLQ SDUW RI SLWV WKDW ZHUH HVWDEOLVKHG
resources contained therein are fully owned by the during the Soviet Union period are currently abandoned
ODQG RZQHU &XUUHQWO\ LQ /DWYLD QR DGGLWLRQDO VSHFLDO and the recultivation has not been done there (e.g.
fee is applied to the lease or privatisation of the state Riteru quarry at Koknese county) (Vides politikas
or municipal land for the purpose of the extraction of pamatnostadnes 2009. – 2015.gadam (2009)).
natural resources in relation to the lease of the land for Summarising the information obtained in the research,
this particular purpose; this is different from many other it can be concluded that sustainable development
countries, including Lithuania. The value of subterranean planning documents of mineral resources in the economy
depths is not included in the cadastral value of the are not discussed in detail.
SURSHUW\,QIRUPDWLYDLV]LQRMXPV³3DUGDEDVUHVXUVX The analysis on the development of extraction and
8 November 2011). processing industry products following the accession
Regulations on the National Environmental Indicators to the EU leads to a conclusion that the external
)HEUXDU\ GH¿QH WKH LQGLFDWRUV IRU WKH trade of ready products has increased. Moreover,
evaluation of the effectiveness of the implementation the expansion of the domestic construction works
of environmental and sustainable development policy allowed to increase the volume of the extraction
and the compliance of the environmental situation to of mineral resources. The long-term importance of
the policy goals. The environmental policy is split in mineral resources in the development of the national
WKH IROORZLQJ ¿YH JURXSV DLU ZDWHU ODQG QDWXUH DQG economy will not decrease. This is attested by the
climate. Pursuant to the Environmental Policy Guidelines increasing volume of the external trade of end products
2009-2015, the evaluation has been performed based and the development perspective of the construction
upon the above-referred indicators. It should be noted industry.

ISSN 1691-3078
Conclusions, proposals, portal/environmental_accounts/documents/3.pdf.

Access: 28.12.2012.
recommendations
8. Europe 2020. Retrieved: http://eur-lex.europa.eu/
1. Global resource extraction is increasing over long
/H[8UL6HUY/H[8UL6HUYGR"XUL &20),1
term: the extraction of industrial and construction
:EN:PDF. Access: 15.12.2012.
minerals has increased from 12 to 30 bln tonnes
9. ,HWHNPHV X] YLGL VWUDWHJLVND QRYHUWHMXPD 9,'(6
during the period of 1980-2008.
PARSKATS. Nacionalajam attistibas planam
2. As regards the extraction of industrial and
2007. – 2013. Gadam. Retrieved: www.varam.gov.
construction minerals, Latvia accounts for just
OYLQBVLWHWRROVGRZQORDGSKS"¿OH ¿OHV.... Access:
0.02% on the global map.
04.01.2013.
3. The long-term strategies of the EU and Latvia do
10. ,QIRUPDWLYDLV ]LQRMXPV ³3DU GDEDV UHVXUVX QRGRNOD
not directly focus on the importance of mineral
piemerosanas praksi dabas resursu ieguvei Latvija
deposits; however, they contain indications as to
VDOLG]LQDMXPDDU,JDXQLMXXQ/LHWXYXXQL]YHUWHMXPX
their important role in the overall development.
un priekslikumiem par valsts ienakumiem ilgtermina
4. The industries of the extraction and processing of
VDLVWLEDDUGDEDVUHVXUVXL]PDQWRVDQX´
mineral resources in Latvia, like other industries
5HWULHYHG SROVLVPNJRYOY/RDG$WW¿OH'2&
of the national economy, will be impacted by
Access: 19.12.2012.
WKH (8 ORQJWHUP GH¿QHG GLUHFWLRQ WRZDUGV WKH
11. -HNDEVRQH 6 6WUDWHJLF &KRLFHV IRU WKH
model of low emissions and effective use of
Economic Development the Republic of Latvia as
resources.
EU Member State, European Integration Studies
5. Latvia should evaluate the ownership of
Research and Topicalities. No 6, Institute of Europe,
subterranean depths, whether these are owned by
Kaunas University of Technology, Kaunas, Lithuania,
the landowner or by the state, because Latvia is the
pp. 134-140.
only EU Member State where subterranean depths
12. 0RNHVFLR X] YDOVW\ELQLXV JDPWRV LVWHNOLXV
and all the natural resources found there are fully
istatymas (Taxes on State Natural Resources Law).
owned by the landowner.
Retrieved: http://www3.lrs.lt/pls/inter3/dokpaieska.
6. The importance of mineral resources in Latvia
showdoc_l?p_id=350741. Access: 05.01.2013.
will increase within the long-term development
13. Piekrastes telpiskas attistibas pamatnostadnes
perspective: both the extraction of the domestic
2011. – 2017. gadam (2011). Strategiskais
resources and the import thereof will increase to
LHWHNPHV X] YLGL QRYHUWHMXPV Vides parskats.
satisfy the domestic demand. The use of mineral
Riga. Retrieved: www.varam.gov.lv/in_site/tools/
resources in manufacturing will also affect the
GRZQORDGSKS"¿OH ¿OHV$FFHVV
increase of end products.
14. Sproge, I. (2008). Latvijas nodoklu politikas
ipatnibas. Tautsaimniecibas attistibas problemas
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Access: 03.12.2012. Policy in the Baltic States. June 2003. Retrieved:
6. Global Material Flows. Sustainable Europe Research KWWSZZZEHIOYGDWD¿OH3XEOLFDWLRQSGI. Access:
Institute 2013. Retrieved: KWWSZZZPDWHULDOÀRZV 04.01.2013.
net/data/. Access: 05.01.2013. 20. Vides politikas pamatnostadnes 2009. –
7. Economy-wide Material Flow Accounts and Derived 2015. gadam (2009). Vides ministrija, Riga.
Indicators. A Methodological Guide. Retrieved: Retrieved: http://www.varam.gov.lv/lat/pol/
http://epp.eurostat.ec.europa.eu/portal/page/ ppd/?doc=9338. Access: 04.01.2013.

ISSN 1691-3078
E. Pulmanis, Z. Ilmete Polycentric Development Projects Initialisation Process Problems in Latvia
POLYCENTRIC DEVELOPMENT PROJECTS INITIALISATION PROCESS

PROBLEMS IN LATVIA
Emils Pulmanis1+, PhD cand., MSc.proj.mgmt., Zaneta Ilmete2, Dr.oec.

1
Professional Association of Project Managers
2
Abstract. If adequate project plans are developed, then an important standard for monitoring, evaluating, and
controlling the application of project resources is available. The review of the project during its life cycle is greatly
impaired if the project plans are inadequate. On the changing economic scene, the available funding for polycentric
development projects is one of the tools aimed at the growth of the new European Union Member States. In the
planning period of 2007–2013, Latvia has EUR 4.5 billion available for the implementation of various projects.
The aim of this article is to study the polycentric development infrastructure and construction project initialisation, and
SUREOHPGH¿QLWLRQSURFHVVHVWKURXJKWKHDQDO\VLVRIWKHLUFRPSOLDQFHZLWKWKHSURMHFWPDQDJHPHQWPRGHOV
The performed study revealed that projects implemented by municipalities were not always developed and implemented
in line with the project management process models; there were many deviations during the implementation and
PRGL¿FDWLRQVZHUHQHFHVVDU\GXHWRLQVXI¿FLHQWTXDOLW\SURMHFWVXEPLWWDOV8SRQTXDOLWDWLYHDQDO\VLVRIWKHPHWKRGV
applied in project proposals elaboration process, the authors provide a new model appropriate for project management,
ZKLFKFDQEHXVHGWKURXJKSURMHFWSUREOHP±JRDOGH¿QLWLRQSURFHVV
Keywords:SURMHFWSUREOHPGH¿QLWLRQSURMHFWLQLWLDOLVDWLRQ
JEL code: O22
Introduction attractiveness in the frame of municipalities integrated in

7KH EDVLV IRU DQ\ LQYHVWPHQW HI¿FLHQF\ DQG the local development programmes. The programme
usefulness is the application of appropriate project EHQH¿FLDULHVDUH'DXJDYSLOV-HOJDYD-HNDESLOV/LHSDMD
management methods and principles. The authors of 5H]HNQH9DOPLHUD9HQWVSLOV$L]NUDXNOH&HVLV*XOEHQH
this article analysed the experience and issues of Latvian Kuldiga, Livani, Madona, Saldus, Smiltene, and Talsi.
municipalities in the development and introduction of 7KHPLQLPXPDYDLODEOH¿QDQFLQJIRUDSURMHFWLVGH¿QHG
WKHSURMHFWVXQGHUWKH$FWLRQSURJUDPPH³,QIUDVWUXFWXUH DV (85 WKH PD[LPXP DYDLODEOH ¿QDQFLQJ
DQG 6HUYLFHV´ 6XSSOHPHQW 3ULRULW\ ³3RO\FHQWULF LV WKH ZKROH TXRWD GH¿QHG E\ WKH &DELQHW UHJXODWLRQV
'HYHORSPHQW´ (YHQW ³6XSSRUW IRU 6XVWDLQDEOH The quota has been set based on statistical data about
8UEDQDQG8UEDQ5HJLRQ'HYHORSPHQW´$FWLYLW\ demographical situation and socio-economic indicators.
³(QFRXUDJLQJ 1DWLRQDO DQG 5HJLRQDO 6FDOH 'HYHORSPHQW The aim of this article is to study the polycentric
&HQWUH *URZWK IRU %DODQFHG 6WDWH 'HYHORSPHQW´ development infrastructure and construction project
The polycentric development framework ensures LQLWLDOLVDWLRQ DQG SUREOHP GH¿QLWLRQ SURFHVVHV WKURXJK
EUR 253,035,284 available for infrastructure and the analysis of their compliance with the project
construction projects, of which EUR 234,336,206 were management models.
disbursed on contracts by 1 March 2012. There are 7KHDXWKRUVGH¿QHWKHIROORZLQJWDVNVWRDFKLHYHWKH
EUR 18,699,078 remaining for public infrastructure and research aim:
construction projects. The authors analysed municipal 1) to contemplate theoretical aspects of project
project initialisation process and its compliance with LQLWLDOLVDWLRQDQGGH¿QLWLRQSKDVH
the generally accepted project management models. At 2) to analyse polycentric development project problems
WKH VDPH WLPH FRVWEHQH¿W DQDO\VHV DQG ULVN DQDO\VHV DQGVFRSHGH¿QLWLRQSURFHVV
for municipality-developed projects were made in the 3) WRSURYLGHDSURMHFWSUREOHP±JRDOGH¿QLWLRQPRGHO
research. The current development model of Latvia based on literature analysis and practical research.
FDQ EH FODVVL¿HG DV PRQRFHQWULF ZKHUHDV SURJUHVV
towards a polycentric development model is hampered
E\ LQVXI¿FLHQW JURZWK RI GHYHORSPHQW FHQWUHV 3RRUO\ Theoretical aspects of project problem
developed public services and lack of interest of DQGVFRSHGH¿QLWLRQ
entrepreneurs as potential investors, and of people as Projects are tools for attaining unique
potential residents represent the main impediments for achievements – which are certainly necessary for
the development of the above centres. dealing with global crises – and the project management
Polycentric development priority goal is to ensure the approach has proven useful in dealing with complex crises
JURZWK RI VSHFL¿F QDWLRQDO DQG UHJLRQDO GHYHORSPHQW &OHODQG-.HU]QHU+9UHFNR-7KH
centres (urban), providing support for projects in multi-project environment is a fact of the present time
urban competitiveness, development of accessibility and and development, while the developed model is strongly
___________________________
+
&RUUHVSRQGLQJDXWKRUTel.: + 371 26896748
E-mail address: Emils.Pulmanis@gmail.com

ISSN 1691-3078
Source: A Guide to the Project Management Body of Knowledge, 2008
Fig. 1. 3URMHFWGH¿QLWLRQSURFHVV
designed on the project base and it is project oriented. plan of action with accompanying policies, procedures,
7KH DQDO\VLV RI VFLHQWL¿F OLWHUDWXUH LQ WKH ¿HOG RI and resource allocation schemes, providing general
project management reveal that very a little role has direction of how the organisational effort will be used
EHHQSDLGWRSURMHFWLQLWLDWLRQDQGWKHSUREOHPGH¿QLWLRQ to accomplish project goals and project objectives.
importance in the frame of project management. The Simultaneous project planning is the process of having
study shows a very broad analysis and presents methods the project team consider all aspects, issues, and
and tools for project planning and problem solutions. The resources required for the project plan on a concurrent
%ULWLVK 35,1&( SURMHFW PDQDJHPHQW VWDQGDUG UHTXLUHV EDVLV &RQFXUUHQW SODQQLQJ PHDQV WKDW HYHU\WKLQJ WKDW
that, in some situations, a feasibility study might be can or might impact the project is reviewed during the
required to investigate the situation and determine planning phase to ensure that an explicit decision is made
RSWLRQVIRUWKHZD\DKHDG8VLQJ35,1&(WKHRSWLPXP concerning the role that all resources, however modest,
approach would be to handle the study as a separate might have on the project (Walton A., 1996).
and distinct project and then operate a second project to 7KH 3URMHFW VKRXOG EH GH¿QHG LQ WKH LQLWLDOLVDWLRQ
implement the results of the study. SKDVH DQG WKH GH¿QLWLRQ VKRXOG VKRZ WKDW WKH SURMHFW
The American national project management standard LVFRQGXFWHGLQDORJLFDODQGSURSHUPDQQHU&KDUYDW-
30%2. GH¿QHV SURMHFW VFRSH SODQQLQJ DV ³WKH SURFHVV 2002).
of developing a written scope statement as the basis Project problems are ordinarily complex, consisting
for future project decisions including, in particular, the of many aspects that require analysis and insight
criteria used to determine if the project or phase has (Heerkens R., 2007). One needs to invest an appropriate
EHHQFRPSOHWHGVXFFHVVIXOO\´30%2. amount of time to fully understand all aspects of the
Problem analysis LGHQWL¿HVWKHH[LVWLQJVLWXDWLRQDQG problem. Very often, what appears to be the problem is
establishes the ‘cause and effect’ relationships between actually masking a bigger, more fundamental problem.
the problems that exist. It involves three steps: Uncovering that fundamental problem is referred to as
1) SUHFLVH GH¿QLWLRQ RI WKH IUDPHZRUN DQG VXEMHFW RI identifying the true need.
analysis; Meanwhile, problem solving is an intellectual process,
2) LGHQWL¿FDWLRQ RI WKH PDMRU SUREOHPV DQG GDQJHUV which is the concluding part of the larger problem process
faced by target groups; WKDWLQFOXGHVSUREOHP¿QGLQJDQGSUREOHPVKDSLQJZKHUH
3) visualisation of the situation. SUREOHPLVGH¿QHGDVDVWDWHRIGHVLUHIRUWKHUHDFKLQJRI
Typical investment projects include construction of DGH¿QLWHgoal from a present condition that either is not
new buildings, hospitals, roads, power plants, water directly moving toward the goal, is far from it, or needs
reservoirs, and other infrastructure items; replacement of PRUH FRPSOH[ ORJLF IRU ¿QGLQJ D PLVVLQJ GHVFULSWLRQ
old facilities; renovation of existing facilities; acquisition of conditions or steps toward the goal (Altshuller G.,
of new facilities; or purchase of equipment. Investment 1973).
projects normally are large, non-recurring expenditures, The problem with most organisations is that setting
which involve multi-year funding, have a useful life strategic targets can occur quickly, while developing
JUHDWHU WKDQ ¿YH \HDUV DUH EDVHG RQ D FRPSUHKHQVLYH implementation plans and executing them are much
needs assessment, meet an essential public purpose, and VORZHUSURFHVVHV.HUW]QHU+
require public accountability for funds. An investment Latvia is characterised by a monocentric distribution
project always has direct implications for future operating of the population – there is one powerful centre, Riga,
budgets. The recurring costs of investment projects and a wide and evenly distributed network of towns.
on completion will have to be clearly understood and For a long time, such a distribution of population was
estimated by Public Bodies before embarking on the regarded as an obstacle for regional development;
decision to go ahead with the projects. Investment KRZHYHU LW KDV D VLJQL¿FDQW JURZWK SRWHQWLDO WKDW FDQ
projects may be funded from the government-owned be developed by implementing the concept of polycentric
resources, grants, or loans from foreign institutions and/ development. In the existing network of towns, in addition
or by the private sector. to the development of one major centre - Riga, the
According to A.Walton, project planning may be development of which is essential to ensure the national
considered a form of information development and competitiveness of the international scale, other centres
communications. As the project team develops the have to be purposefully developed until they become
project plan, the project team should learn more about strong enough to facilitate regional growth. The most
the project goals, strategies, and team member roles. important development problems of the development of
The project objectives then can be decided in terms of cities/ towns are outworn public infrastructure, including
cost, schedule, and technical performance. Satisfaction public transport, business, cultural etc. infrastructure
of project goals is accomplished through the completion as well as lack of public services and low administrative
of the project work packages. The project strategy is a capacity.

ISSN 1691-3078
The situation, in terms of regional development, is 5. The building into the decision of the action to carry
GLI¿FXOW WR LGHQWLI\ DQG PHDVXUH. It is true that certain it out.
tendencies in the EU Member States are very evident: 6. The feedback which tests the validity of the decision
regional disparities still exist; there is a core – periphery against the actual course of events (P.Drucker,
pattern in almost all states and between states; and 2007).
WKHUH LV JURZLQJ LQHTXDOLW\ EHWZHHQ WKH ³OHDUQLQJ The methodological basis for the article is made up of
HFRQRP\ÚHJLRQVDQGWKHDUHDVZKHUHGHFOLQLQJVHFWRUV the guidelines of the EU and the Republic of Latvia as well
and structural unemployment prevail. Nevertheless, as studies of foreign authors, and research carried out by
detailed and objective analysis is not easy due to the authors. The listing of literature provides references
varying positions regarding data interpretation and to papers of foreign authors, and sources of publicly
methodological constraints. The variety of regional available information.
(economic, social, and physical) development indicators
employed by the Member States is impressive. Still, the
3URMHFW SUREOHP GH¿QLWLRQ DQG LWV
uniform approach adopted by the EU relies heavily on
only two measures, namely, GDP per capita (indicating modelling
HFRQRPLF FRKHVLRQ DQG XQHPSOR\PHQW UDWH UHÀHFWLQJ The essence of planning is the opportunity to see the
social cohesion). Therefore, regional policy measures threats and remove them or to use them in decision-
are designed and implemented in an environment of PDNLQJ SURFHVV 3URMHFW SODQQLQJ GH¿QHV WKH SURMHFW
inadequate baseline information and decisions are management team’s responsibility, the allocation of
often arbitrary. This problem might be particularly costs, the division of labour, and the level of control
acute in the new Member States where indicators on (Starling G., 1993).
the sub-national level are often missing entirely or are -XVWL¿FDWLRQ RI D SUREOHP VLWXDWLRQ VKRXOG PDNH
unreliable. sure it describes a controversy, not just lists a number
In general terms, Latvia has favourable preconditions of various facts. A typical mistake is to indicate in the
for balanced and sustainable development, e.g. even project submission the desired situation, not describing
geographical distribution of urban areas in the territory the existing. In such a case, the problem justifying the
of the country, a pre-requisite for the development of need for the project is not demonstrated. Therefore, the
a polycentric state, high-quality and sparsely populated problem results from the problem situation; whereas, a
environment, satisfactory conditions of local natural problem situation is one that encourages formulating and
resources, and optimum distribution of transport solving the problem. If a problem situation is not analysed
infrastructure. At the same time, the further growth of LQVXI¿FLHQWGHWDLOWKHVROXWLRQFDQEHLQFRPSOHWHWRR7R
economy and sustainable territorial development are justify the necessity for the project, it is best to start by
impeded due to deteriorating infrastructure, inability to describing the issue in question or the problem topicality.
meet quality requirements set by the economic growth, Municipalities are forced in their work to solve problem
and low quality and availability of public services. The situations involving various target groups.
NSRF strategy is aimed at reducing the risks posed by 'H¿QLWHO\ WKH PRVW LPSRUWDQW WKLQJ LQ WKH SURMHFW
infrastructure and public service gaps that threaten the development process is the topicality of the problem and
rapid future growth of the economy and have a negative LWV DFFXUDWH GH¿QLWLRQ 7KH SURMHFW JRDO LV GHWHUPLQHG
impact on the quality of life of communities in different ZKHQ SHUIRUPLQJ WKH MXVWL¿HG SUREOHP DQDO\VLV 1H[W
areas of the country. WKH GH¿QLWLRQ RI SURMHFW SUREOHPV WDUJHW JURXSV DQG
Governments in some jurisdictions provide guidance goals is analysed in the project submissions of particular
RQKRZWRDSSUDLVHSURSRVDOVXVLQJFRVWEHQH¿WDQDO\VLV municipalities.
EHIRUH FRPPLWWLQJ VLJQL¿FDQW IXQGV )RU H[DPSOH WKH Analysis of the initiation documentation of the
governments of Australia, New Zealand, the United selected 74 projects reveals the main mistakes in the
Kingdom, and the United States provide guidance on the problem situation description:
issues and techniques that should be considered when 1) SURMHFW WRSLFDOLW\ LV QRW GHVFULEHG ± QR MXVWL¿FDWLRQ
assessing new regulatory, revenue or capital policies, RI WKH VLJQL¿FDQFH LPSRUWDQFH RI WKH SUREOHP IRU
programmes, and projects. Such guidance advises public WKHVSHFL¿FFLW\LQWKHSDUWLFXODUSHULRGRIWLPH
sector departments and authorities on how to undertake 2) some fragments mention the region or state in
conventional analysis; however, such guidance can offer general, others the municipality;
DGYLFHRQDEURDGHUHFRQRPLFFRVWEHQH¿WDQDO\VLVWKDW 3) terms are not understood;
can be more valuable to the public interest. 4) generally-known statements are used, not
P.Drucker commences by stating that an effective sustained by facts.
decision making process shall go through some basic Problem analysis methods are rarely used in
VWHSV7KHVHVWHSVZLOOQRW³PDNH´WKHGHFLVLRQ±LWZLOO the development of municipality projects. After the
always be a judgement call – but if the steps are ignored, summarisation of all the problems and target group
the decision is not likely to be effective nor right. The six needs mentioned in the problem situation, each problem
steps he recommends are as follows. should include planned actions to match it (several
1. 7KHFODVVL¿FDWLRQRIWKHSUREOHP problems could be solved by one action, and one problem
2. 7KHGH¿QLWLRQRIWKHSUREOHP could have several actions planned for its solution).
3. 7KHVSHFL¿FDWLRQVZKLFKWKHVROXWLRQWRWKHSUREOHP &RQFOXVLRQVGHVFULEHWKHLQÀXHQFHRIWKHSODQQHGDFWLRQV
PXVWVDWLVI\WKH³ERXQGDU\FRQGLWLRQV´ on the target group needs (Pulmanis E., Bruna S., 2011).
4. 7KHGHFLVLRQDVWRZKDWLV³ULJKWÚDWKHUWKDQZKDWLV The lack of a structured approach for decision-
acceptable, in order to meet the boundary conditions. making, project approval, and project execution is part

ISSN 1691-3078
Source: authors’ construction based on the qualitative analysis
Fig. 2. 3UREOHPGH¿QLWLRQPRGHO
RI WKDW SUREOHP $OO WKLV FDQ EH VDWLV¿HG ZLWK D VRXQG Step 1. Start with a problem – characterise it in
project management methodology. To describe the simple terms such that it would be clear to all who have
UROH RI SUREOHP GH¿QLWLRQ DQG LPSRUWDQFH LQ SURMHFW even peripheral understanding of it. What is wrong?
management, the authors have elaborated a system What is the root source of the problem?
G\QDPLF RULHQWHG PRGHO IRU SUREOHP GH¿QLWLRQ 6\VWHP 6WHS %HJLQ GH¿QLQJ WKH FDXVHV RI WKH SUREOHP
dynamics is a methodology and mathematical modelling One should start with a fact in the loop. State it in
technique for framing, understanding, and discussing sentences such that there is a relationship between cause
complex issues and problems. Originally developed in and effect.
the 1950s to help corporate managers improve their Step 3. Each cause becomes an effect of the next. To
understanding of industrial processes, system dynamics ¿QGDFDXVHRQHQHHGVWRDQVZHUWKHTXHVWLRQ:K\"7R
is currently being used throughout the public and private ¿QGRXWWKHHIIHFWRQHQHHGVWRGLVFRYHUZKDWKDSSHQV
sector for policy analysis and design. It is a probing process of Why’s. Directional relation of
Problem solving models attempt to capture important WKHORRSVJRHVIURP&DXVHWR(IIHFW
aspects of the problem solving process. As decision- Step 4. 6KRZWKHUHODWLRQEHWZHHQ&DXVHWR(IIHFW
making and problem solving are intimately related, as reinforcing (+) or negative (-). This does not indicate
it is not surprising then that the Simon model of the JRRGRUEDGLWMXVWPHDQVDVWKHFDXVHJRHVLQWHQVL¿HV
decision-making process is the foundation for a number effects does too (+) and as cause diminishes, effect
of problem solving models (Brightman, 1978; Van Gundy, does also (-). A negative or balancing loop (-) is referred
1988; Sprague, 1982). WR DV D ³goal seeking´ ORRS 7KHUH LV D PHFKDQLVP
3UREOHP GH¿QLWLRQ LQYROYHV ERWK WH[WXDO DQG in this loop that is trying to maintain some level of
graphical statements of problematic behaviour. stability.
&RQFHSWXDOLVDWLRQ HQWDLOV LGHQWLI\LQJ IHHGEDFN ORRSV In every project decision process, one should pay full
that are hypothesised to underlie observed patterns attention to processes inside the model to get the best
of system behaviour. Model formulation is the process UHVXOWVDQG¿QGDSSURSULDWHSUREOHPVROXWLRQ7KHDXWKRUV
of moving from a theory of underlying structure to a provided model shows input, process, and outputs for
IXOO\ VSHFL¿HG PDWKHPDWLFDO PRGHO VR WKDW WKH WKHRU\ GH¿QLQJSURMHFWSUREOHP,IWKHUHLVDQDGHTXDWHSUREOHP
can be tested. In this assignment, the skills involved description, one can set up appropriate goals and
LQ SUREOHP GH¿QLWLRQ DQG PRGHO FRQFHSWXDOLVDWLRQ DUH solutions to be achieved in the frame of project. Such a
treated separately. Later assignments will bring these model can be used in project management practice and
skills together with those of formulation and analysis academic disciplines as well as conducting the necessary
to focus on a variety of strategic and operational DQDO\VLV DQG HQVXULQJ WKH TXDOLW\ RI LQIRUPDWLRQ ÀRZV
problems. The attributes chosen differentiate a scenario It can be used to support the appraisal of the public
assignment from an action assignment. The constraints investment. Project managers in the public sector can
for value assignments prevent action assignments from play a central part in:
overriding scenario assignments. In short, a scenario — recognising the investment opportunity and
assigns values to attributes (variables) that the action subsequent assessment of the strategic impact and
component must treat as uncontrollable variables. These economic rationale of a potential investment;
YDOXHDVVLJQPHQWVUHÀHFWDQLQWXLWLYHDVVHVVPHQWRIWKH — determining the alternatives (many organisations
assumptions that the problem model will work under. require consideration of at least three alternative
By identifying some attribute assignments as scenarios, investment options in making decisions of any
SUREOHP VROYHUV JDLQ JUHDWHU ÀH[LELOLW\ LQ WHVWLQJ WKH materiality);
robustness of their problem solving actions under a range — ensuring that information is used in a way that leads
of different assumptions. to the selection of the best alternative;

ISSN 1691-3078
— aligning decisions with assessments of subsequent implementation and introduction phase, the results
managerial performance, for example, management of which follow from low-quality technical projects,
LQFHQWLYHV EDVHG RQ DFFRXQWLQJ SUR¿W FRXOG procurement documents, and incompletely developed
encourage actions that do not support sustainable ULVNDQDO\VLVDQGFRVWEHQH¿WDQDO\VLV
value generation to shareholders and other
stakeholders. A potentially good project (based on
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in municipalities that creates problems in the project Van Nostrand, R, p. 286.

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Z. Garanti, A. Zvirbule- Berzina 7RZDUGV0XOWL'LPHQVLRQDO5HJLRQDO&OXVWHU,GHQWL¿FDWLRQ
TOWARDS MULTI-DIMENSIONAL
REGIONAL CLUSTER IDENTIFICATION
Zanete Garanti1+, Mg.oec.; Andra Zvirbule-Berzina2, Dr.oec.

1
Research Assistant in the Department of Business Administration,
8QLYHUVLW\RI0HGLWHUUDQHDQ.DUSDVLD1RUWK&\SUXV
2
Assoc. prof. in the Faculty of Economics, Latvia University of Agriculture, Latvia
Abstract. Regional clusters are important driver force of the regional economy; thus, there is no consensus on single
GH¿QLWLRQDQGUHJLRQDOFOXVWHUSKHQRPHQDDQGPRUHRYHURQPHWKRGVLGHQWLI\LQJUHJLRQDOFOXVWHUV)URPWKHOLWHUDWXUH
UHYLHZVWDQGSRLQWWKHDXWKRUVGLVFXVVGLPHQVLRQVRIUHJLRQDOFOXVWHUVDQGVXJJHVWXVLQJFOXVWHUGH¿QLWLRQEDVHGRQ
¿YH GLPHQVLRQV WKDW LQFOXGH HQWHUSULVHV ZRUNLQJ LQ WKH VDPH LQGXVWU\ HQWHUSULVHV IURP FRPSOHPHQWDU\ LQGXVWULHV
JRYHUQPHQW LQVWLWXWLRQV DQG RWKHU LQVWLWXWLRQV WKDW DUH DOO LQ WKH JLYHQ JHRJUDSKLFDO DUHD $IWHU GH¿QLQJ UHJLRQDO
FOXVWHUVWKHDXWKRUVWXUQWRWKHPDLQSUREOHPRIWKHLVVXHLGHQWL¿FDWLRQRIUHJLRQDOFOXVWHUV7KHDXWKRUVUHYLHZ
DQG WHVW WZR PHWKRGV RI UHJLRQDO FOXVWHU LGHQWL¿FDWLRQ VKLIWVKDUH DQDO\VLV DQG ORFDWLRQ TXRWLHQWV DQG FRPH WR D
conclusion that statistical methods only identify two dimensions of regional clusters - enterprises working in the same
LQGXVWU\LQWKHFHUWDLQJHRJUDSKLFDODUHD,WLVQRWSRVVLEOHWR¿QGFRUUHODWLRQEHWZHHQWKHRXWFRPHVRIERWKPHWKRGV
Therefore, the authors develop a scheme to identify all of the cluster dimensions using different methods. For further
research, the authors suggest using the developed scheme to identify regional clusters.
Key words:UHJLRQDOFOXVWHUGLPHQVLRQVFOXVWHULGHQWL¿FDWLRQPHWKRGV
JEL code: O01; R11; L14
Introduction FOXVWHULGHQWL¿FDWLRQ7KUHHUHVHDUFKWDVNVDUHVHWXSWR
First discussed by Marshall in the 1920s (2009) reach the aim:
as industrial districts, clusters appeared in modern 1) to summarise theoretical aspects of regional clusters
economic literature with the studies of Porter (1990, DQGWRVXJJHVWGH¿QLWLRQRIUHJLRQDOFOXVWHUVEDVHG
D E F ZKR GH¿QHG FOXVWHU DV RQ¿YHGLPHQVLRQV
³D JHRJUDSKLFDOO\ SUR[LPDWH JURXS RI LQWHUFRQQHFWHG 2) to identify and test methods of regional cluster
FRPSDQLHV DQG DVVRFLDWHG LQVWLWXWLRQV LQ D VSHFL¿F LGHQWL¿FDWLRQ
¿HOG EDVHG RQ FRPPRQDOLWLHV DQG FRPSOHPHQWDULWLHV´ 3) WRVHWXSIUDPHZRUNRIUHJLRQDOFOXVWHULGHQWL¿FDWLRQ
7KLV GH¿QLWLRQ OHDYHV D ORW RI VSDFH IRU GLVFXVVLRQ method that covers all dimensions of regional cluster.
especially when it comes to searching and identifying The research methods IRU WKH ¿UVW VHFWLRQ LQFOXGH
regional clusters based on statistical data. The terms monographic descriptive, analysis and synthesis
like commonalities and complementarities are not easy PHWKRGV ,Q WKH ¿UVW VHFWLRQ WKH DXWKRUV SURSRVH
to identify, because they are too wide. For this reason, GH¿QLWLRQ RI UHJLRQDO FOXVWHUV EDVHG RQ ¿YH GLPHQVLRQV
VRPH UHVHDUFKHUV RIIHU UHJLRQDO FOXVWHU GH¿QLWLRQV and discuss the differences between regional clusters and
based on narrow indexes that are easy to identify with other forms of enterprise cooperation and collaboration
statistical methods. For example, Arthur (1990) and with each other or institutions in a particular geographical
6RUHQVRQ DQG $XGLD GH¿QHG FOXVWHUV DV area. The following section describes regional
companies that produce the same product. The problem FOXVWHU LGHQWL¿FDWLRQ PHWKRGV EDVHG RQ PRQRJUDSKLF
ZLWKWKHQDUURZGH¿QLWLRQVLVWKDWLWEHFRPHVYHU\KDUG descriptive, analysis and synthesis methods, and
WRGLVWLQJXLVKVSHFL¿FFKDUDFWHULVWLFVRIUHJLRQDOFOXVWHUV VWDWLVWLFDOO\ WHVWV WZR RI WKH LGHQWL¿FDWLRQ PHWKRGV
from other forms of industry location and cooperation. shift-share analysis and location quotients. The
&RPSDQLHVWKDWSURGXFHWKHVDPHSURGXFWFDQEHOLQNHG authors also search for correlation between the
with formal links (cooperatives), be geographically outcomes of these two methods. In the last section,
concentrated (agglomerations), be supported by the authors suggest framework to identify all the
JRYHUQPHQWWRORFDWHLQVSHFL¿FHFRQRPLF]RQHVSHFLDO dimensions of regional clusters, suggesting using a
HFRQRPLF ]RQHV DQG WKH\ FDQ OVR VKRZ VLJQV RI wide range of qualitative and quantitative methods.
collaboration between other industries and institutions, The authors suggest using the proposed framework for
or can have no signs of collaboration at all. Therefore, further research to identify regional clusters in Latvia.
the authors found an increasing need of regional cluster
GH¿QLWLRQ WKDW ZRXOG VKRZ FKDUDFWHULVWLFV RI UHJLRQDO 1. Theoretical and conceptual aspects of
FOXVWHU $IWHU SURSRVLQJ DQG GH¿QLWLRQ EDVHG RQ ¿YH regional clusters
dimensions, the authors faced another problem - lack 5HJLRQDO FOXVWHU FDQ EH GH¿QHG XVLQJ GLIIHUHQW
of methods to identify all the dimensions. The aim of measures. For some researchers, regional clusters are
the research is to propose multi-dimensional regional type of cooperation (Knorringa, Mayer-Stamer, 1998),
___________________________
+
(PDLODGGUHVV]KDQHWWH#JPDLOFRP

ISSN 1691-3078
Fig. 1. Regional cluster dimensions
YHUWLFDO DQG KRUL]RQWDO IRUP RI QHWZRUN 3DFKXUD education and government, and other related
&RRN FRPSDQLHV WKDW SURGXFH WKH VDPH institutions in the same region.
product (Arthur, 1990; Sorenson & Audia, 2000) and 1RW DOO WKH ¿YH GLPHQVLRQV ZLOO EH DOZD\V SUHVHQW
VKDUHFRPPRQYLVLRQDQGVXSSRUWLQIUDVWUXFWXUH&RRNH LQ WKH FOXVWHU $VSHFWV LQÀXHQFLQJ WKH SUHVHQFH RI
Huggins, 2003) in geographical proximity (Saxenian, cluster dimensions are cluster life cycle (Abernathy,
1994). In the previous research (Garanti, 2013), the Utterback, 1978; Andersson et al., 2004; Williams,
DXWKRUVXJJHVWHGGH¿QLQJUHJLRQDOFOXVWHUVEDVHGRQ¿YH .DPDUXO]DPDQ FOXVWHU W\SRORJ\ (GHQD
cluster dimensions as it is shown in Figure 1. Molt, 2002; Reinau, Dalum, 2008; Markusen, 1996), and
The main dimension of any type of cluster is others.
enterprises working in the same industry. Marshall (2009) Since the beginning of regional cluster theory in the
in the early 1890s built his industrial district theory based early 1990s, economic researchers have not come to
RQ FRPSDQLHV IURP WKH VDPH LQGXVWU\ &OXVWHU WKHRU\ VLQJOHGH¿QLWLRQRIUHJLRQDOFOXVWHULQLWLDWLYHV0RUHRYHU
nowadays suggests that companies from the same UHODWHG OLWHUDWXUH KDV LQWURGXFHG VHYHUDO GH¿QLWLRQV
industry cooperate and compete, and complement each and concepts, which describe the spatial distribution of
RWKHU 3RUWHU D E F &RPSDQLHV HQWHUSULVHV FROODERUDWLRQ ZLWK RWKHU ¿UPV RU VFLHQWL¿F
can be related with buying and selling relations, or institutions and links between industry and supportive
cooperate in innovation and development process of institutions. It leads to a number of related concepts
new product or service, or jointly work to attract skilled with common features, like agglomerations, industrial
ZRUNIRUFH&RUWULJKW0D\HU%DUNOH\+HQU\ districts, cooperatives and others. Based on literature
In the regional cluster companies from complementary studies, the authors show the differences of the cluster
industries and supportive institutions play an important FRQFHSW IURP RWKHU IRUPV RI ¿UPV¶ FRRSHUDWLRQ DQG
role in creating formal and informal relations between collaboration.
enterprises, government institutions, non-governmental — Industrial districts and clusters are used as
RUJDQLVDWLRQV ¿QDQFH HGXFDWLRQ UHVHDUFK DQG RWKHU synonyms in several studies (Reinau, Dalum, 2008;
institutions (Porter, 1998a, 1998b, 1998c, 2000; Belussi, 2004; Maskell, 2001; Asheim, Isaksen,
Saxenian, 1994; Shakya, 2009; Rocha, 2004; Rocha & &RRNH+XJJLQV0DUVKDOOLDQ,QGXVWULDO
Sternberg, 2005). All the previously mentioned factors districts (Marshall, 2009) as well as industrial districts
and dimensions are located in geographical proximity, in Italy (Becattini, 1979, 1989) are geographical
forming the most important dimension of regional cluster FRQFHQWUDWLRQRIVPDOODQGPHGLXPVL]HHQWHUSULVHV
(Porter, 2000; Delgado, 2010, 2012). in a particular area. Each enterprise is specialised
Based on previously described regional cluster in the production stage. In contrast, cluster concept
dimensions (Figure 1), the authors have developed LVZLGHUDQGPRUHÀH[LEOH%HOXVVL6FLHQWL¿F
GH¿QLWLRQ IRU UHJLRQDO FOXVWHU regional cluster is studies recognise industrial districts as one of the
informal form of cooperation and interaction cluster types (Markusen, 1996; Paniccia, 2006;
between companies in the same industry, involving Altenburg, Mayer- Stamer, 1999; Mayer- Stamer,
UHODWHG DQG FRPSOHPHQWDU\ EXVLQHVVHV VFLHQWL¿F Harmes- Lidtke, 2005).

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— Agglomeration, DOVRGH¿QHGDVVSDWLDOFRQFHQWUDWLRQ — Cooperatives as well as clusters are based on

of enterprises, workforce and resources (Marshall, voluntary action and cooperation that is mutually
&KDWWHUMHH LV WKH PDLQ SUHFRQGLWLRQ EHQH¿FLDO 3RUWHU D E 5RFKD
RI UHJLRQDO FOXVWHU GHYHORSPHQW *RUGRQ 0F&DQQ 6]DQ\L 7KH PDLQ GLIIHUHQFH EHWZHHQ
&KDWWHUMHH ;LDQJDQ <LQJFKXDQ cluster and cooperative is the type of agreements.
%RMD &OXVWHU LV DJJORPHUDWLRQ ZKHUH According to the legislation in the Republic of
enterprises and institutions are linked, and support Latvia (Kooperativo sabiedribu likums, 1998), work
and supplement each other (Porter, 1998; Krugman, of cooperative is based on legal agreements and
1991a; Palacios, 2005). From the literature studies, cooperative is a legal entity, while cluster is not
the authors concluded that all the regional clusters GH¿QHGDVOHJDOHQWLW\DQGLWZRUNVZLWKERWKIRUPDO
are agglomerations of enterprises and institutions and informal agreements between enterprises.
but not all the agglomerations are clusters. As the authors discussed the differences between
— Special economic zones (SEZ) are strategic clusters and other forms of companies cooperation
³WRS WR ERWWRP´ DSSURDFKHV ZKHUH WKH JRYHUQPHQW and collaboration, it is clear that cluster is a new way
offers tax, other discounts and infrastructure for the of organising cooperation and collaboration between
enterprises that are willing to work in the special enterprises, government institutions, and other
HFRQRPLF ]RQH $JJDUZDO ,Q FRPSDULVRQ institutions in a particular geographical area.
FOXVWHUV DUH QDWXUDO ³ERWWRP WR WRS´ IRUPDWLRQV
where initiative comes from cluster members (Zeng, 5HJLRQDOFOXVWHULGHQWL¿FDWLRQPHWKRGV
2011; Murphy et al., 2009). Although, some authors 7KH PDLQ SUREOHP DIWHU GH¿QLQJ UHJLRQDO FOXVWHU LV
(Zeng, 2011; Bhatt, Puri, Appolloni, 2012) argue to identify regional clusters. The authors found several
that it is possible to form clusters in the special PHWKRGV XVHG IRU UHJLRQDO FOXVWHU LGHQWL¿FDWLRQ VKLIW
HFRQRPLF ]RQHV LI WKH HQYLURQPHQW LV IDYRXUDEOH share analysis, location quotients, Ellison and Glaeser’s
for that. The authors discuss that both - special agglomeration index, Maurel-Sédillot index, and
HFRQRPLF ]RQHV DQG FOXVWHUV DUH JHRJUDSKLF 'HYHUHX[ *ULI¿WK 6LPSVRQ LQGH[ 7KH DXWKRUV GLVFXVV
concentrations of economic activities but in case and test two of the methods - shift-share analysis and
of SEZ the government support plays an important location quotients.
role, because the main aim is to establish enterprises Shift-share analysis is used to identify industries
in economically weaker regions. in the region that is growing faster than average in
— Supply chains and networks are strategic the country, showing competitiveness of industries
organisation of supplies, production, and distribution in the region (Aya-ay, Prantilla, 2007). The analysis
(Han, 2009; Kemppainen, Vepsalainen, 2003). was found in the 1960s by L.D. Ashby (1964) and
Supply chains and networks do not put emphasis V.R. Fuchs (1962). Nowadays, shift-share analysis is
on the geographical and regional dimension used in economic literature to identify regional clusters
but work nationally or globally (Han, 2009). (Altena, Heijman, 2007; Heijman, van der Heide, 1998;
&OXVWHU RI VPDOO DQG PHGLXP VL]H HQWHUSULVHV Acs, Ndikumwami, 1998; Zaccomer, Mason, 2011).
and supply chain or network can have similar Shift-share is a descriptive analysis that helps identify
functions, while theoreticians (Murphy et al., fast growing industries in the region, yet, the analysis
2009) emphasise that besides supply chain and is not giving any explanation how a region has gained
network, cluster also has supportive enterprises and advantage in the particular industry (Hoppes, 1997;
institutions. Stevens, Moore, 1980). Shift-share analysis is using
— Science and technology park is business support employment data and dividing employment growth into
and technology transfer initiative (Squicciarini, three components:
2008) formed to encourage and support start-ups, — national share (NS) - explains how much of the
incubation process, knowledge, and innovation regional industry’s growth is explained by the overall
based business development. It supports businesses growth of the national economy: if the nation’s entire
with environment and infrastructure to develop close economy is growing, it is expected to have positive
interaction with education and science institutions industry growth in the region;
WRJDLQPXWXDOEHQH¿WV)HUJXVRQ2ORIVVRQ — structural component/ industry mix (IM) - represents
Idea of science and technology parks is based on the share of the regional industry growth explained
the Triple Helix (university-industry-government) E\WKHJURZWKRIWKHVSHFL¿FLQGXVWU\RQWKHQDWLRQDO
LQWHUDFWLRQ(W]NRZLW]/H\GHVGRUII6WXG\E\ level;
WKH (XURSHDQ &RPPLVVLRQ 6DXEOHQV VKRZV — regional shift (RS) - explains how much of the
that science and technology parks provide special change in a particular industry is due to some unique
conditions for the development of partnerships competitive advantage that the region possesses.
between science and business, thus, contributing /RFDWLRQ TXRWLHQW /4 shows regional
to the development of the cluster. However, science specialisation that is an important factor in cluster
DQGWHFKQRORJ\SDUNVDUHQRW³DPXVW´SUHFRQGLWLRQ establishment and growth phase (Audretsch, Feldman,
for cluster creation or growth. The authors conclude 2004). The LQ method is widely used to identify regional
that science and technology parks and clusters are clusters (Guimaraes, Woodward, 2009). Porter’s cluster
interested in knowledge and technology transfer PDSSLQJSURMHFW&OXVWHU0DSSLQJ3URMHFW3RUWHU
but it is only one aspect of cluster growth and WKH(8FOXVWHUPDSSLQJSURMHFW&OXVWHU0DSSLQJ
GHYHORSPHQW &OXVWHU LV D ZLGHU WHUP WKDQ VFLHQFH DQG UHVHDUFKHUV 6]DQ\L 6]DQ\L HW DO
and technology parks. /D]]HUHWWL%RL[&DSRQHKDYHXVHGWKH/4

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Table 1
Industries with the highest regional share in Zemgale region, Latvia between 2005 and 2011
NACE
Industry NS IM RS
code
Manufacture of fabricated metal products, except machinery and equipment & -78 -105 756
Manufacture of wood and products of wood and cork, except furniture;
& -405 -546 720
manufacture of articles of straw and plaiting materials
Retail trade, except of motor vehicles and motorcycles G47 -1002 -722 660
Residential care activities Q87 -158 152 618
Wholesale trade, except of motor vehicles and motorcycles G46 -195 -141 550
Manufacture of fabricated metal products, except machinery and equipment & -78 -105 756
Source: authors’ calculations based on Equations 1,2,3
method to identify regional clusters. The method’s main advantage is its relatively simple application and calculation
using employment data; however, some researchers criticise the method because it is static and do not look at the trends
RYHUWKH\HDUV6]DQ\L6]DQ\LHWDO7RRYHUFRPHWKLVSUREOHPVRPHUHVHDUFKHUV3ULPRQW'RPD]OLFN\
2008) suggest using LQ together with shift-share and dynamic analysis. If LQ<1 - employment intensity in the region
is lower than the national average; if LQ=1- employment intensity in the region is equal to the national average;
if LQ>1 - employment intensity in the region is higher than the national average (region is specialised in the
particular industry).
The authors used Ashby (1964) methodology to calculate NS (Equation 1), IS (Equation 2) and RS (Equation 3) and
PHWKRGRORJ\GHYHORSHGE\3RUWHUDQG+DUYDUG%XVLQHVV6FKRROIRUWKH86&OXVWHU0DSSLQJ3URMHFW&OXVWHU0DSSLQJ
Project, 2003) to calculate Location Quotient (LQ) (Equation 4).
(1)
) (2)
(3)
, (4)
where:
NOD – number of employees;
v – country;
j – region;
k – industry;
t – reporting year (year 2011);
t-1 – base year (year 2005).
The authors test these two methods in Zemgale region of Latvia using statistical data from the years 2005 and
2011 (Employment Data, 2012). Results of shift-share analysis are summarised in Table 1 and location quotients in
Table 2.
Results of shift-share analysis in Zemgale region show that manufacture of fabricated metal products (except
machinery and equipment) has experienced the highest regional growth (RS), while the national average growth (NS)
and industry growth (IM) was negative between 2005 and 2011. Also, manufacture of wood and products of wood and
FRUN&UHWDLOWUDGH*UHVLGHQWLDOFDUHDFWLYLWLHV4ZKROHVDOHWUDGH*DQGPDQXIDFWXUHRIIDEULFDWHG
PHWDO SURGXFWV & DUH WKH LQGXVWULHV ZLWK KLJK UHJLRQDO JURZWK WKXV VKRZLQJ SRWHQWLDO FRPSHWLWLYH LQGXVWULHV
where regional clusters could be established.
Results of location quotient analysis in Zemgale region show that in 2011, the region was highly specialised in
manufacture of motor vehicles (in 2011, it had 4.35 times more employees in the industry in Zemgale than the national

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Table 2
,QGXVWULHVZLWKWKHKLJKHVWORFDWLRQTXRWLHQWLQ=HPJDOHUHJLRQ/DWYLDEHWZHHQDQG
NACE
Industry LQ2005 LQ2011 Changes
code
Manufacture of motor vehicles, trailers and semi-trailers & 3.26 4.34 1.08
Other manufacturing & 5.53 4.10 -1.44
&URSDQGDQLPDOSURGXFWLRQKXQWLQJDQGUHODWHGVHUYLFHDFWLYLWLHV A01 3.91 3.77 -0.15
Other mining and quarrying B08 4.25 3.75 -0.50
Residential care activities Q87 1.89 3.02 1.13
Source: authors’ calculations based on Equation 4
Fig. 2. Correlation between RS and LQ in Zemgale region
Fig. 3. Correlation between LQ and RS in Zemgale region
average) and its specialisation has increased by 1 point In a perfect situation, industries experiencing high
since 2005. Analysis also shows other industries that are regional growth (RS) are also highly specialised in
located in Zemgale region, like other manufacturing, crop the region (LQ>1) - that would indicate the presence
and animal production, and others. of regional clusters. In Zemgale region, the authors

ISSN 1691-3078
Step 1: Identify competitive enterprises specialised in the particular industry and located in the
particular region
— Shift-share analysis
— Location quotient
— Ellison and Glaeser’s agglomeration index
— Maurel-Sédillot index
— 'HYHUHX[*ULI¿WK6LPSVRQLQGH[
Step 2: Map government institutions and other institutions around agglomerated industries
Research needed for links between industry and institutions using qualitative research methods:
— interviews,
— questionnaires,
— focus groups,
— document analysis etc.
Step 3: Provide evidence of existing linkage between agglomerated industry and

complementary industries
— Input-output model
— Qualitative research methods
Step 4: Complete the analysis

Summarise statistical and research data to identify regional clusters
Fig. 4. )UDPHZRUNIRUFRPSOHWHUHJLRQDOFOXVWHUGLPHQVLRQLGHQWL¿FDWLRQ
could only identify one industry with high RS and LQ - information on the industries where it could be possible
residential care activities. Positive aspect is high LQ in WR ¿QG UHJLRQDO FOXVWHUV 7KHUHIRUH LW KHOSV WR IRFXV
manufacture of motor vehicles, trailers, and semi-trailers on a few fast growing industries that are concentrated
industry, where RS is also positive. Though, there are in the particular region. For the following steps, it is
number of industries that show high specialisation and complicated to have any statistical information, so the
negative regional growth and vice versa. The authors authors suggest using quantitative analysis. Step two
analyse the correlation between data in Figure 1 and requires to map government and other institutions
Figure 2. DURXQG WKH LQGXVWULHV LGHQWL¿HG EHIRUH 0DSSLQJ LV
It is obvious that there is no relationship between an easy task but in case of regional clusters, these
LQ and Shift-share analysis and vice versa. In other institutions have to cooperate and collaborate with the
words, industries that are highly specialised in the LQGXVWU\7KHVHOLQNVFDQEHLGHQWL¿HGRQO\ZLWKTXDOLWDWLYH
particular region can have negative regional growth and analysis. From wide range of possible qualitative
industries having high regional growth are not analysis, the authors suggest using interviews,
necessary specialised in that region. Results show that questionnaires, focus groups, and document analysis
using only two methods to identify regional cluster (Bryman, 2012), to identify links between industry
is not enough, because it is not possible to come to and institutions. Interviews and questionnaires
a single conclusion on industries dominating in the with management will give information on informal
region and forming regional clusters. Therefore, the links, while document analysis will show formal links
authors develop framework to indentify regional cluster that are made between companies and institutions.
and its dimensions in the next section. Step tree requires detailed information and evidence
on existing links between industry and complementary
3. Framework to identify regional clusters industries. Theoretical and practical studies (Hofe,
The authors argue that all the methods using Bhatta, 2007) use Input-output model to identify inter-
available statistical data are only identifying two industry linkages (Hirschman, 1958) that help recognise
cluster dimensions that are enterprises working ³NH\´ LQGXVWULHV ZLWK EDFNZDUG DQG IRUZDUG OLQNDJHV
LQ WKH VDPH LQGXVWU\ LQ WKH VSHFL¿F UHJLRQ ,Q /DWYLD Qualitative research (interviews, questionnaires,
and also in other countries, statistical information focus groups, document analysis) is another way to
is limited to identify other cluster dimensions. recognise linkages between potential cluster industry
Therefore, the authors suggest using the following and other industries. Both methods have drawbacks,
framework (Figure 4) when identifying regional e.g. data availability for input-output method,
clusters. and time and resource consumption in qualitative
In the framework, the authors develop four steps for UHVHDUFK 7KH ¿QDO VWHS RI UHJLRQDO FOXVWHU
WKH FRPSOHWH UHJLRQDO FOXVWHU GLPHQVLRQ LGHQWL¿FDWLRQ analysis includes summary that shows potential
The methods described and tested in Section 2 only or existing regional cluster based on previous
UHIHU WR WKH ¿UVW VWHS 7KH ¿UVW VWHS FDQ KHOS REWDLQ analysis.

ISSN 1691-3078
Conclusions, proposals, RI &KDQJH. Survey of Current Business, October,

pp. 13-21.
recommendations
9. Asheim, B., Isaksen, A. (2002). Regional Innovation
Regional clusters are important driver force for
Systems: the Integration of Local Sticky and Global
regional, national, and even international economy;
Ubiquitous Knowledge. Journal of Technology
KRZHYHU WKHUH LV QR FRQVHQVXV RQ GH¿QLWLRQ RI
Transfer, Volume 27, Issue 1, pp. 77- 86.
regional clusters. In this paper, the authors suggest
10. Audretsch, D.B., Feldman, M.P. (2004). Knowledge
XVLQJ GH¿QLWLRQ ZLWK ¿YH GLPHQVLRQV RI UHJLRQDO
Spillovers and the Geography of Innovation. In:
clusters that includes enterprises working in the
Henderson V., Thisse J.F. Handbook of Regional and
industry, enterprises from complementary industries,
Urban Economics. Holland: Elsevier, pp. 2713-2793.
government, and other institutions in the particular
11. Aya-ay, R.M., Prantilla, E.B. (2007). A Shift-Share
JHRJUDSKLFDO DUHD $IWHU SURSRVLQJ GH¿QLWLRQ WKH
Analysis on Regional Employment Growth in the
authors faced the main problem that was the presence
Philippines. National Convention on Statistics.
of different regional cluster methods that identify only
5HWULHYHG KWWSZZZQVFEJRYSKQFVWK1&6
one or few dimensions of regional clusters. In this paper,
papers/invited%20papers/ips-22/ips22-04.pdf.
the authors tested two methods to identify agglomerated
Access: 22.12.2012.
industries - shift-share analysis and location quotients.
12. Barkley, D.L., Henry, M.S. (1997). Rural Industrial
The authors found that there was no correlation
'HYHORSPHQW 7R &OXVWHU RU 1RW WR &OXVWHU" Review
between the results of these two methods. Therefore,
of Agricultural Economics, Volume 19, No. 2,
information that is more detailed is needed to identify
pp. 308-325.
regional clusters. For this reason, the authors
13. Becattini, G. (1979). Sectors and/or Districts:
propose framework to identify regional clusters that
6RPH 5HPDUNV RQ WKH &RQFHSWXDO )RXQGDWLRQV RI
LQFOXGH IRXU VWHSV LGHQWL¿FDWLRQ RI FRPSHWLWLYH
Industrial Economics. Rivista di Economia e Politica
agglomerated industries in a particular geographical
Industriale, pp. 123-135.
area, mapping government and other institutions around
14. Becattini, G. (1989). Sectors and/or Districts: Some
agglomerated industries, providing evidence of inter-
5HPDUNVRQWKH&RQFHSWXDO)RXQGDWLRQVRI,QGXVWULDO
industry linkages and summarising the research, and
Economics II. In: Small Firms and Industrial
showing existing or emerging regional clusters. The
Districts in Italy, London: Routledge, pp. 123-135.
SURSRVHG IUDPHZRUN FRYHUV DOO ¿YH FOXVWHU GLPHQVLRQV
15. Belussi, F. (2004). In Search of a Useful Theory
thus, it is a step towards multi-dimensional regional
RI 6SDWLDO &OXVWHULQJ DRUID Summer Conference
FOXVWHU LGHQWL¿FDWLRQ ,Q IXUWKHU VWXGLHV WKH DXWKRUV
2004: Industrial Dynamics, Innovation and
will apply the suggested framework to identify regional
Development: selected papers, 14-16 June 2004,
clusters in Latvia.
(OVLQRUH'HQPDUNS&'
16. Bhatt, A., Puri, M., Appolloni, A. (2012). SEZ
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of the Literature on Shift-share as a Forecasting Washington: World Bank, p. 51.

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L. Melece Innovative Solutions for Rural Areas: Development of Social Capital
INNOVATIVE SOLUTIONS FOR RURAL AREAS:

DEVELOPMENT OF SOCIAL CAPITAL
Ligita Melece 1, Dr.oec.

Head of Department of Latvian State Institute of Agrarian Economics
Abstract. The paper presents results of studies devoted to clarifying the role of social capital, and its relation to
innovations and development, particularly, in rural areas. The latest understandings on types and forms of social
capital in the economic context are described in the paper. The research provides some consideration towards social
capitals’ measuring and evaluation. The development of cooperatives in rural areas has been evaluated as example
of indicator or category of social capital. It is concluded that social capital can support innovation in several ways and
WKHGLIIHUHQWGLPHQVLRQVRIVRFLDOFDSLWDOPLJKWLQÀXHQFHLQQRYDWLYHDFWLYLW\0RUHRYHUWKHLQQRYDWLRQLVDQLPSRUWDQW
channel by which social capital improves well-being and economic growth. Analysing the development of cooperatives
in rural areas or communities, the results, however, show that the number of cooperatives is nearly constant in the
SDVWIHZ\HDUVZKLOHWKHQHWWXUQRYHUDQGPHPEHUVRIFRRSHUDWLYHVKDYHVLJQL¿FDQWO\LQFUHDVHGVWDWLVWLFDOO\6RPH
DUHDV IRU IXUWKHU UHVHDUFK DUH LGHQWL¿HG HJ WR LQYHVWLJDWH WKH WUHQGV RI GHYHORSPHQW RI RWKHU QRQJRYHUQPHQWDO
institutions such as Rural Partnership associates, which operate on the local level.
Key words: social capital, innovativation, cooperative, rural.
JEL code: J 24, L 31, O 15, O 31, P 25.
Introduction of social capital; 2) to investigate the social capital

Social capital is a rapidly expanding research relationship with innovations and further sustainable
theme within economics and more broadly across the development of rural communities; and 3) to evaluate
social sciences; it has also become a popular concept some categories of social capital (non-governmental
with policy makers in both developed and developing institutions, particularly, cooperatives) development
countries (World Bank, 2011). Social capital is a topic in rural areas (communities) of Latvia. The principal
of considerable interest to a wide range of people materials used for the study are as follows: different
because of its links to individual and community well- sources of literature, research papers, and the reports
being. It is a multidimensional concept and different of institutions. The suitable qualitative and quantitative
elements of the framework may be appropriate for research methods have been used for various solutions
GLIIHUHQW SXUSRVHV 2(&' 6RFLDO FDSLWDO UHODWHV in the process of study: monographic, analysis and
with the resources available within communities in synthesis; logical and abstractive constructional; data
networks of mutual support, reciprocity, and trust grouping and comparing; correlation and regression
(Davis, 2005). The social capital of a society includes the analysis; expert and other methods.
institutions, the relationships, the attitudes, and values Only the results of studies of non-governmental
that govern interactions among people and contribute institutions’ development in rural areas – the development
WR HFRQRPLF DQG VRFLDO GHYHORSPHQW *URRWDHUW & of cooperatives movement - are presented in the paper
due to the limited space.
van Bastelaer T., 2002). Social capital and increasing
evidence shows that social cohesion is critical for
societies to prosper economically and for development Research results and discussion
to be sustainable (World Bank, 2011). Social capital 1. Innovations and social capital
is a relatively new concept in economics (Pugno M., Social capital should ultimately be seen in the context
Verme P., 2012) and social capital research remains in its of contribution it makes to sustainable development.
initial phases (Adam F., 2008), inter alia, in Latvia. 6XVWDLQDEOHGHYHORSPHQWKDVEHHQGH¿QHGDVDSURFHVV
The hypothesis of the study is that social capital whereby future generations receive as much or more
is fostering innovations and economic growth; and capital per capita as the current generation has available
cooperatives as category or type of social capital have 81(6&27UDGLWLRQDOO\WKLVKDVLQFOXGHGQDWXUDO
developed and play a crucial role in the development capital, physical or produced capital, and human capital
of rural areas (communities), inter alia, rural areas of as the wealth of nations on which economic development
Latvia. DQG JURZWK DUH EDVHG *URRWDHUW & 9DQ %DVWHODHU 7
The aim of the study or overview is to assess social 2002). It is now recognised that these three types of
capital and innovation relationship; to evaluate social capital determine only partially the process of economic
capital and its categories (non-governmental institutions, growth because they overlook the way in which the
particularly, cooperatives), and to assess the development economic actors interact and organise themselves to
of cooperatives in the rural areas (communities) of Latvia. generate growth and development, where the missing
The tasks of the study are: 1) to clarify the concept link is social capital (Ibid). Human capital includes the
___________________________
1
E-mail address: ligita.melece@lvaei.lv

ISSN 1691-3078
Source: author’s construction based on Falk I., 2000; Grootaert C., Van Bastelaer T., 2002; Woolcock M., 2001
Fig. 1. Forms of capital for well-being and economic growth
skills and knowledge, which has been gathered in formal emerges naturally from a discipline that emphasises
and informal learning, while the social capital has been methodological collectivism and structure as opposed to
built through interactions between people, facilitated the individualism and agency of economics (Gannon B.,
the learning, and use of these skills and knowledge Roberts J., 2012). The economic approach to social
(Falk I., 2000). The relationship of all four forms of capital is critically reviewed by Durlauf and Fafchamps
capital (natural, physical, human, and social) is (Gannon B., Roberts J., 2012) who identify three key
presented in Figure 1. However, there is an opinion ideas: 1) social capital generates positive externalities
(Forum for the Future, 2011) that physical or produced for members of a group; 2) these externalities are
capital will be divided into two different capitals: achieved through shared trust, norms and values; and
PDQXIDFWXUHGFDSLWDODQG¿QDQFLDOFDSLWDO 3) shared trust, norms and values arise from informal
A number of studies that focused on social capital forms of organisations based on social networks. The
and the overall well-being of societies support the aspect of social capital to which economists have paid
arguments for the positive effect of social capital on most attention in the literature is its importance for the
innovation. Social capital, e.g. trust and cooperation HFRQRPLFJURZWK3HUH])HWDO
between individuals, and between them and public 7KHUH DUH WKXV QXPHURXV GH¿QLWLRQV RI VRFLDO
institutions, can encourage innovation and the capital found in literature (Adler P.S., Kwon S., 2002),
adoption of knowledge (Adler P.S., Kwon S.W., 2002; IRU H[DPSOH ³«VRFLDO FDSLWDO FRPHV DERXW WKURXJK
0LJXHOH] ( HW DO 0RUHRYHU 0LJXHOH] DQG FR changes in the relations among persons that facilitate
authors (2011) argue that the social capital positively DFWLRQ´ &ROHPDQ - 6HYHUDO VFKRODUV HJ
correlates with innovation. Higher levels of human capital &ODULGJH7*URRWDHUW&YDQ%DVWHODHU7
enhance social capital, and social capital can support 2002; Gannon B., Roberts J., 2012; Woolcock M.,
innovation in several ways, predominantly through Narayan D., 2000; Woolcock M., 2001) argue that the
its effect on trust, shared norms, and networking, GH¿QLWLRQRIVRFLDOFDSLWDOLQFOXGHVQRWRQO\WKHVWUXFWXUH
ZKLFK LPSURYH WKH HI¿FLHQF\ DQG H[FKDQJH RI of networks and social relations but behavioural
NQRZOHGJH 2(&' $NFRPDN DQG :HHO dispositions (such as trust, reciprocity, honesty) and
have argued that innovation is an important mechanism institutional quality measures (rule of law, contract
that transforms social capital into higher income enforceability, civil liberties etc.), where the relations have
levels; higher innovation performance is conducive been organised by way of conscious association, of self-
to per capita income growth; and social capital organisation and organised communication (Narayan D.,
affects this growth indirectly by fostering innovation. &DVVLG\0)7KHPRVWFRPPRQLVWKHGH¿QLWLRQ
Moreover, the innovation is an important channel by RI VRFLDO FDSLWDO E\ WKH 2(&' GH¿QHG DV ³QHWZRUNV
which social capital improves income growth (Ibid) together with shared norms, values, and understandings
and the different dimensions of social capital might WKDW IDFLOLWDWH FRRSHUDWLRQ ZLWKLQ RU DPRQJ JURXSV´
LQÀXHQFHLQQRYDWLYHDFWLYLW\LQGLVVLPLODUZD\V.DDVD$ .HHOH\%1DUD\DQDQG&DVVLG\LGHQWL¿HG
'DNKOL DQG 'H &OHUFT KDYH DUJXHG WKDW four dimensions of social capital: informal social ties,
trust, both within organisations and in inter-organisational formal social ties, trust, and norms of collective action.
settings, may foster innovation. Moreover, World Bank (2011) stresses that social capital
Despite social capital not having a clear, undisputed refers to the institutions, relationships, and norms that
PHDQLQJ 'ROIVPD : 'DQQUHXWKHU & shape the quality and quantity of a society’s social
social capital is a very old idea in sociology, and LQWHUDFWLRQV &LYLO VRFLHW\ LV GRPDLQ FUHDWHG E\ SHRSOH

ISSN 1691-3078
Table 1
(YDOXDWLRQTXHVWLRQVDQGLPSDFWLQGLFDWRUVIRUWKHVRFLDOFDSLWDO
Assessment criteria (YDOXDWLRQTXHVWLRQVUHODWHGZLWK Suggested impact indicators

social capital
Local identity To what extent have the RDP measures — Number of people participating in
and coherence increased the interaction amongst actors collective investments and composition of
strengthened (usually to promote a sense of place and to participants in projects of this type.
associated with strengthen community ties?
Social capital
bounding social To what extent have co-operation and — Relative number and volume of
capital) networking increased the economic business/employment arising from
performance of the area? cooperation and networking relationships.
Networking and To what extent have the RDP measures — Number of newly established external
openness fostered enhanced the actors’ capacity to identify UHODWLRQVKLSVWRNH\VWDNHKROGHUVGH¿QHG
(usually associated and take up new ideas, tacit skills etc. as such stakeholders playing a dominant
with bridging social and turn them into innovation? UROHLQÀRZVRINQRZOHGJHÀRZVRI
capital) ¿QDQFHEHVWRZLQJOHJLWLPDF\
Source: based on Grieve J., Weinspach U., 2010
through their associations, bonds and allegiances GHYHORSPHQW 'ROIVPD : 'DQQUHXWKHU &
separate from the state and the market (Day P., 2010). SDUWLFXODUO\UXUDODUHDV:LHVLQJHU*=KDQJ&
These relation networks are formed for the sake of Zhang N., 2008).
family, faith, interest and ideology by way of conscious
association of self-organisation and organised 2. Categories of social capital in rural areas
communication (Ibid). There are two distinct types and its evaluation
RI VRFLDO FDSLWDO KRUL]RQWDO UHÀHFWLQJ WLHV DPRQJ /LNH KXPDQ FDSLWDO VRFLDO FDSLWDO LV GLI¿FXOW LI QRW
individuals or groups of equals or near-equals, and impossible, to measure directly; for empirical purposes
2) vertical (also referred to as linking social capital), the use of proxy indicators is necessary. Years of
stemming from hierarchical or unequal relations due education and years of work experience have a long
to differences in power or resource bases and status tradition as proxies for human capital and have proven
%HQ &DYH $VVRFLDWHV $GGLWLRQDO GLVWLQFWLRQV WKHLUYDOXHLQQXPHURXVHPSLULFDOVWXGLHV*URRWDHUW&
KDYHEHHQGUDZQZLWKLQKRUL]RQWDOVRFLDOFDSLWDOQDPHO\ Van Bastelaer T., 2002).
bonding social capital (also called localised social It is suggested (Grieve J., Weinspach U., 2010)
capital) and bridging social capital. These types are very on the European level that some indicators will be
important and the author will look at them in more detail. used to evaluate the impact of the Rural Development
There is much debate over the various forms that Programme (RDP) of the European Union on social
social capital takes but one fairly straightforward capital’s development (Table 1). Suggested impact
approach (e.g. Day P., 2010; Keeley B., 2007; indicators incorporate impact of cooperation activities
Woolcock M., Narayan D., 2000) divides it into three and networking. Table 1 offers not only impact indicators
main categories: but also the suggested evaluation questions.
Bonding social capital: links to people based on a There are three major methodological approaches
sense of common identity (e.g. among family members to evaluate the social capital. The micro-approach
or heterogeneous groups such as family, close friends emphasises the nature and forms of cooperative
and people who share our culture or ethnicity); behaviour; the macro-approach focuses on the
Bridging social capital: links that stretch beyond conditions (favourable or unfavourable) for cooperation;
a shared sense of identity (e.g. across heterogeneous and the meso-approach highlights structures that
groups such as distant friends, colleagues and associates); enable cooperation to take place (Franke S., 2005).
and 7KLV DSSURDFK GH¿QHV VRFLDO FDSLWDO DV WKH SRWHQWLDO
Linking social capital: links to people or groups of these cooperative strategies (groups, associations
further up or lower down the social ladder (e.g. between etc.) to strengthen collective capacities, where
groups/individuals with differing levels of power or social social capital is seen as 1) the product of the actors’
status). motivations for forming an association (the values and
7KH EHQH¿WV LQ GHYHORSLQJ VRFLDO FDSLWDO DUH aspirations that underpin the co-operative relationship);
cooperation between groups; reduction of the costs WKHLUEHKDYLRXUW\SHVRIDVVRFLDWLRQWKDWGH¿QHKRZ
of conducting day-to day affairs and doing business; actors co-operate); and 3) their perception of collective
facilitating the spread of knowledge and innovation; LVVXHVFXOWXUDOEHOLHIVDQGLQÀXHQFHVHWF,ELG
and promoting cooperative and/or socially minded
behaviour in situations where narrow self-interests 3. Cooperatives as social capital in rural areas
alone do not generate good outcomes for society 0HDVXULQJ VRFLDO FDSLWDO PD\ EH GLI¿FXOW EXW LW LV
(Adler P.S., Kwon S., 2002). Increasing evidence shows not impossible, and several excellent studies have
that social cohesion - social capital - is critical for LGHQWL¿HGXVHIXOSUR[LHVIRUVRFLDOFDSLWDOXVLQJGLIIHUHQW
poverty alleviation and sustainable human and economic types and combinations of qualitative, comparative,

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Table 2
6RFLDOFDSLWDODFTXLVLWLRQVIURPWKHFRRSHUDWLYH
General social capital Cooperative social capital

Structural — the number of non- — the number of associations or organisations, which the cooperative
dimension member customers joins for business purposes;
— the number of related cooperative associations or organisations,
which the cooperative joins for business purposes;
— the number of business partners, which the cooperative deals with
for business purposes cognitive dimension.
&RJQLWLYH — customer loyalty or — reliability of the partners or organisations that are counted in the
dimension satisfaction structural dimension
&ROOHFWLYH — the number of meetings with partners or organisations that are
actions counted in the structural dimension;
— the number of joint projects or alliance with others
Source: adapted from Hong G., Sporleder T.L., 2010
y = 0.6333x + 46.944
70 64
R2 = 0.0362
60 55 55
52 51
48 47 49
50
Number
40
30
30
20
10
0
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: author’s construction based on Latvijas Lauksaimniecibas kooperativu asociacija, 2012
Fig. 2. Numbers of agricultural cooperatives in Latvia, 2004-2012
and quantitative research methodologies (Woolcock M., capital from the cooperatives’ activities are of two types:
Narayan D., 2000; World Bank, 2011). One quantitative 1) general social capital and 2) cooperative social capital
indicator of social capital development measuring is (Table 2).
membership in non-governmental institutions; inter Analysing the development of cooperatives in the
alia, FRRSHUDWLYHV :LHVLQJHU * &RRSHUDWLYH rural areas of Latvia, one can conclude that the number
ownership of the business is a unique social capital- cooperatives has been nearly constant in the past few
fostering characteristic (Allahdadi F., 2011; Majee W., \HDUV DQG WKH WUHQG RI QXPEHU LV FRQVWDQW FRHI¿FLHQW
Hoyt A., 2010). As members, they are motivated to work RIFRUUHODWLRQU OHYHORIVLJQL¿FDQFHĮ!
not only by themselves but also by the realisation of The net turnover of agricultural cooperatives has
RWKHU EHQH¿WV VXFK DV ORFDO HPSOR\PHQW RSSRUWXQLWLHV LQFUHDVHG )LJXUH VWDWLVWLFDOO\ VLJQL¿FDQW IURP
provision of needed services to local people, and WRZKHUHU ĮDQGUHDFKHGDERYH
ownership of the business (Majee W., Hoyt A., 2010). LVL 200 million in 2012.
7KHLQWHUQDWLRQDOO\UHFRJQLVHGGH¿QLWLRQRIFRRSHUDWLYHV The number of members (farmers) of agricultural
LV JLYHQ E\ WKH ,QWHUQDWLRQDO &RRSHUDWLYH $OOLDQFH FRRSHUDWLYHV LQ /DWYLD KDV VLJQL¿FDQWO\ LQFUHDVHG
,&$ ³$Q DXWRQRPRXV DVVRFLDWLRQ RI SHUVRQV XQLWHG )LJXUHVWDWLVWLFDOO\U ĮDQGH[FHHGHG
voluntarily to meet their common economic, social, and 9,200 members in 2012.
cultural needs and aspirations, through a jointly owned &HUHDOV FRRSHUDWLYHV DUH RI DOO FRRSHUDWLYHV
DQG GHPRFUDWLFDOO\ FRQWUROOHG HQWHUSULVH´ %LUFKDOO - and they top the list by the number of agricultural
.HWLOVRQ / + &RRSHUDWLYHV DUH DOVR JXLGHG cooperatives; milk cooperatives are in the second place
by seven cooperative principles: voluntary and open with the share of 35%; and multipurpose cooperatives
membership; democratic member control; member rank third with the share of 10% (Figure 5).
economic participation; autonomy and independence; There are four fruit and vegetable cooperatives, and
education, training, and information; cooperation one of them (Latvijas Republikas Zemkopibas Ministrija,
among cooperatives; and concern for community (Ibid; 2012) is an organic fruit and vegetable cooperative. Honey
6WUDVKRN & 'DOH $ 7KH DFTXLVLWLRQV RI VRFLDO cooperatives have stopped operating in the past few

ISSN 1691-3078
250.0 y = 20.485x + 21.353

R2 = 0.8706
200.0
Million, LVL
150.0
100.0
50.0
0.0
2004 2005 2006 2007 2008 2009 2010 2011 2012
6RXUFHDXWKRU¶VFRQVWUXFWLRQEDVHGRQ/DWYLMDV/DXNVDLPQLHFŝLDVNRRSHUDWLYXDVRFLDFLMD
Fig. 3. Net turnover of agricultural cooperatives in Latvia, 2004-2012
12000 y = 598.6x + 4442.3

R2 = 0.885
10000 9150 9193
8422 8566
7430 7727
8000 7140
Number
6000 5010
4280
4000
2000
0
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: author’s construction based on Latvijas Lauksaimniecibas kooperativu asociacija, 2012
Fig. 4. Number of members of agricultural cooperatives in Latvia, 2004-2012
Milk Cereals
35% 39%
Multipurpose Fruits
Services Meat
10% vegetables
4% 4% 8%
Source: author’s construction based on Latvijas Republikas Zemkopibas ministrija, 2012
Fig. 5. The share of number of agricultural cooperatives by branches in Latvia, 2012

ISSN 1691-3078
\HDUV &RQVLGHULQJ WKH LQFUHDVLQJ SURGXFWLRQ RI KRQH\ Nepal. World Development, Volume 38, Issue 2,
it will be preferable to re-establish honey cooperatives. pp. 184–194.
3. $GOHU36.ZRQ66RFLDO&DSLWDO3URVSHFWV
IRU D 1HZ &RQFHSW Academy of Management
Review, Volume 27, Issue 1, pp. 17-40.
recommendations 4. Akcomak, I.S., Weel, B. (2009). 6RFLDO &DSLWDO
1. The scholars recognise that four types of capital Innovation and Growth: Evidence from Europe.
((natural, physical, human, and social) determine European Economic Review, Volume 53, Issue 1,
the process of sustainable economic growth and pp. 544-567.
development, inter alia, well-being of the society. 5. Allahdadi, F. (2011). A Theoretical Study of Social
2. The social capital positively correlates with &DSLWDO LQ $JULFXOWXUDO &RRSHUDWLYHV Journal of
innovation. Social capital can support innovation American Science, Volume 7, Issue 12, pp. 532-535.
in several ways, predominantly through its effect 6. Birchall, J., Ketilson, L. H. (2009). Responses to the
on trust, shared norms, and networking. Scholars Global Economic Crisis: Resilience of the Cooperative
have argued that innovation is an important Business Model in Times of Crisis. Geneva:
mechanism that transforms social capital into ,QWHUQDWLRQDO/DERXU2I¿FHS
higher income levels and higher innovation 7. &ODULGJH 7 'LPHQVLRQV RI 6RFLDO &DSLWDO
performance. Theory. Retrieved: http://www.socialcapitalresearch.
3. Social capital is divided into three main categories: com/. Access: 1.12.2012.
bonding social capital (links to people based on a 8. &ROHPDQ-6RFLDO&DSLWDOLQWKH&UHDWLRQRI
sense of common identity); bridging social capital +XPDQ&DSLWDOThe American Journal of Sociology,
(links that stretch beyond a shared sense of identity); Volume 94, pp. S95–S120.
and linking social capital (links to people or groups 9. &UDQH $ 0DWWHQ ' Business Ethics:
further up or lower down the social ladder). Managing Corporate Citizenship and Sustainability
4. There are three major methodological approaches in the Age of Globalization. Third Edition. Oxford:
to evaluate the social capital: the micro-approach Oxford University Press, p. 614.
emphasises the nature and forms of cooperative 10. 'DNKOL 0 'H &OHUFT ' +XPDQ &DSLWDO
behaviour; the macro-approach focuses on the 6RFLDO &DSLWDO DQG ,QQRYDWLRQ D 0XOWLFRXQWU\
conditions (favourable or unfavourable) for Study. Entrepreneurship and Regional Development,
cooperation; and the meso-approach highlights Volume 16, pp. 107-128.
structures that enable cooperation to take place. 11. 'D\ 3 &RPPXQLW\ 'HYHORSPHQW &LYLO
Membership in non-governmental institutions, inter 6RFLHW\ 6RFLDO &DSLWDO 5HWULHYHG KWWSZZZ
alia, cooperatives is one of quantitative indicators of socialcapitalresearch.com/. Access: 11.12.2012.
social capital development measuring. 12. 'ROIVPD:'DQQUHXWKHU&6XEMHFWVDQG
5. The results of investigation of development of
%RXQGDULHV&RQWHVWLQJ6RFLDO&DSLWDO%DVHG3ROLFLHV
cooperatives in the rural areas (communities)
Journal of Economic Issues, Volume 37, Issue 2,
of Latvia show that the number of agricultural
pp. 405-413.
cooperatives has been nearly constant in the past
13. )DON , +XPDQ &DSLWDO DQG 6RFLDO
few years, while the net turnover and the number
&DSLWDO :KDW¶V WKH 'LIIHUHQFH" $GXOW /HDUQLQJ
RI PHPEHUV RI FRRSHUDWLYHV KDYH VLJQL¿FDQWO\
&RPPHQWDU\ 5HWULHYHG KWWSZZZDODDVQ
increased.
au/public/commentaries/Falk1810.pdf. Access:
6. &RPSDULQJ WKH QXPEHU RI FRRSHUDWLYHV E\ EUDQFK
5.12.2012.
results show that cereals cooperatives make 39% of
14. )RUXP IRU WKH )XWXUH 7KH )LYH &DSLWDOV
all cooperatives and they top the list by the number
Retrieved: http://www.forumforthefuture.org/
of agricultural cooperatives; milk cooperatives are
SURMHFW¿YHFDSLWDOVRYHUYLHZ$FFHVV
in the second place with the share of 35%; and
15. )UDQNH 6 0HDVXUHPHQW RI 6RFLDO &DSLWDO
multipurpose cooperatives rank third with the share
5HWULHYHG KWWSZZZKRUL]RQVJFFDGRFOLE
of 10% .
Measurement_E.pdf. Access: 11.12.2012.
7. 7KHUHDUHVRPHDUHDVLGHQWL¿HGIRUIXUWKHUUHVHDUFK
16. Gannon, B., Roberts, J. (2012). Social Capital:
e.g. to investigate the trends of development of
Bridging the Theory and Empirical Divide 6KHI¿HOG
other non-governmental institutions such as Rural
Economic Research Paper Series SERP Number:
Partnership associates, which operate on the local
6KHI¿HOG8QLYHUVLW\RI6KHI¿HOGS
level; to study the social networks and professional
17. *URRWDHUW & YDQ %DVWHODHU 7
networks’ development, and inhabitants participation
Understanding and Measuring Social Capital:
degree of urban and rural societies.
A Synthesis of Findings and Recommendations
from the Social Capital Initiative:DVKLQJWRQ'&
Bibliography The World Bank, p. 31.
1. $GDP ) 6RFLDO &DSLWDO DFURVV (XURSH 18. *URRWDHUW & YDQ %DVWHODHU 7
Findings, Trends and Methodological Shortcomings of Understanding and Measuring Social Capital: A
&URVV1DWLRQDO6XUYH\VSocial Science Information, Multidisciplinary Tool for Practitioners. Washington,
Volume 47, Number 2, pp. 159-186. '&:RUOG%DQNS
2. Adhikari, K.P., Goldey, P. (2010). 6RFLDO &DSLWDO 19. Hong, G., Sporleder, T.L. (200 6RFLDO &DSLWDO
DQG LWV ³'RZQVLGH´ 7KH ,PSDFW RQ 6XVWDLQDELOLW\ LQ $JULFXOWXUDO &RRSHUDWLYHV $SSOLFDWLRQ DQG
RI ,QGXFHG &RPPXQLW\%DVHG 2UJDQL]DWLRQV LQ Measurement. Retrieved: http://www.usaskstudies.

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c o o p / s o c i a l e c o n o m y/ f i l e s / c o n g r e s s 0 7/ h o n g _ and Growth: an Economic Methodology. Bilbao:

sporleder.pdf. Access: 21.05.2012. Fundacion BBVA, p. 64.
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RI 6RFLDO &DSLWDO RQ ,QQRYDWLYH $FWLYLW\ (YLGHQFH &DSLWDO DQG WKH %RQGLQJ%ULGJLQJ 1H[XV 3ROLF\
from Europe at the Regional Level. Technovation, 5HVHDUFK :RUNLQJ 3DSHU :DVKLQJWRQ '&
Volume 29, Issue 3, pp. 218-233. The World Bank, p. 34.
21. Keeley, B. (2007). Human Capital: How what You 30. 6WUDVKRN & 'DOH $ 7KH &RRSHUDWRUV
Know Shapes Your Life3DULV2(&'S *URXS /LPLWHG $ &RRSHUDWLYH %XVLQHVV 0RGHO
22. Latvijas Lauksaimniecibas kooperativu asociacija Royal Roads University. Retrieved: http://
(2012). .RRSHUDFLMDV DWWLVWLED ODXNVDLPQLHFŝED crcresearch.org/community-research-connections/
un attistibas strategija 2013. – 2020. gadam. crc-case-studies/co-operators-group-limited-co-
Riga: Latvijas Lauksaimniecibas kooperativu operative-business-mod. Access: 9.11.2012.
asociacija, 38 lpp. 31. 81(6&2 7HDFKLQJ DQG /HDUQLQJ IRU D
23. Latvijas Republikas Zemkopibas ministrija (2012). Sustainable Future. Retrieved: http://www.unesco.
Latvijas lauksaimnieciba. Riga: Latvijas Republikas org/education/tlsf/docs/module_2.doc. Access:
Zemkopibas ministrija, 133 lpp. 19.12.2012.
24. Majee, W., Hoyt, A. (2010). Are Worker-owned 32. Wiesinger, G. (2007). The Importance of Social
&RRSHUDWLYHV WKH %UHZLQJ 3RWV IRU 6RFLDO &DSLWDO" &DSLWDO LQ 5XUDO 'HYHORSPHQW 1HWZRUNLQJ
Community Development, Volume 41, Issue 4, and Decision-Making in Rural Areas. Journal
pp. 417-430. of Alpine Research, Volume 95, Issue 4,
25. 0LJXHOH] ( 0RUHQR 5 $UWLV 0 Does pp. 43-56.
6RFLDO &DSLWDO 5HLQIRUFH 7HFKQRORJLFDO ,QSXWV LQ WKH 33. :RROFRFN 0 1DUD\DQ ' 6RFLDO &DSLWDO
&UHDWLRQ RI .QRZOHGJH" (YLGHQFH IURP WKH 6SDQLVK Implications for Development Theory, Research, and
Regions. Regional Studies, Volume 45, Issue 8, Policy. :RUOG %DQN 5HVHDUFK 2EVHUYHU, Volume 15,
pp. 1019-1038. Issue 2, pp. 225-249.
26. 1DUD\DQ ' &DVVLG\ 0) $ 'LPHQVLRQDO 34. :RUOG %DQN :KDW LV 6RFLDO &DSLWDO"
$SSURDFKWR0HDVXULQJ6RFLDO&DSLWDO'HYHORSPHQW Retrieved: http://go.worldbank.org/K4LUMW43B0.
DQG9DOLGDWLRQRID6RFLDO&DSLWDO,QYHQWRU\Current Access: 15.12.2012.
Sociology, Volume 49, pp. 59-102. 35. =KDQJ & =KDQJ 1 7KH &XOWLYDWLRQ RI
27. 2(&' Skills for Innovation and Research, )DUPHUV¶ 6RFLDO &DSLWDO IURP WKH 3HUVSHFWLYH RI
3DULV2(&'S WKH 1HZ 5XUDO &RQVWUXFWLRQ International Journal
28. 3HUH] ) GH *XHYDUD ) 6HUUDQR - 9LFHQWH / of Business and Management, Volume 3, Issue 7,
Vicente, M. (2006). Measurement of Social Capital pp. 76-82.

ISSN 1691-3078
J. Jasaitis Rural Development in Baltic States: Case Study of Lithuania
(Survey of the Last Century)
RURAL DEVELOPMENT IN BALTIC STATES: CASE STUDY OF

LITHUANIA (SURVEY OF THE LAST CENTURY)
Jonas Jasaitis1, Dr., assoc. prof.

5XUDO'HYHORSPHQW5HVHDUFK&HQWUH
Siauliai University, Lithuania
Abstract. Aim of the paper: in order to create the new most appropriate model of rural development
LQ /LWKXDQLD LW LV QHFHVVDU\ WR DQDO\VH VSHFL¿F VLWXDWLRQ FUHDWHG XQGHU WKH LQÀXHQFH RI WKH ODVW FHQWXU\
historical events and its long-term consequences. Lithuania, as well as other Baltic states, has created the
agrarian sector under the very complicated economical, social, and cultural circumstances. Each Baltic state
/LWKXDQLD /DWYLD DQG (VWRQLD KDG VRPH VSHFL¿F IHDWXUHV RI UXUDO GHYHORSPHQW ZKLFK ZHUH IRUPHG GXULQJ
WKH ODVW FHQWXU\ 7KH ODQG UHIRUP FDUULHG RXW GXULQJ WKH ¿UVW SHULRG RI LQGHSHQGHQFH LQ WKH ¿UVW KDOI RI WKH
twentieth century (1918-1940) led to the formation of farmer’s social stratum, which comprised the majority
of freshly created middle class in Lithuania. Growing family farms became as the main form of management in
agrarian sector. But occupation and annexation of Lithuania interrupted the fast economic growth. Expropriation
and enforced collectivisation of agricultural land completely destroyed farmers as a social class, and rural
inhabitants became as state farmhands.
After the restoration of Lithuania’s independence in 1990, the restitution of private land property was started. But
implementation of democratic reforms became a very complicated process. Lithuania is still looking for optimal
GHFLVLRQVRIPRGHUQUXUDOGHYHORSPHQW&RQFHSWRIWKHQHZUROHRIFRXQWU\VLGHLVSUHVHQWHGLQWKHSDSHU
Keywords: last century, historical circumstances, rural development, system of modern functions, anthropological
strategic methodology.
JEL code: P20, P21
Introduction Methods of the research: 1) monographic method,

In the beginning of the 21st century situation of based on analysis of historical sources; 2) survey of
Lithuanian as well as Latvian or Estonian rural areas is WKH ODWHVW UHVHDUFKHV SHUIRUPHG LQ VRPH VFLHQWL¿F
quite complicated and determined by complex of objective LQVWLWXWLRQV RI /LWKXDQLD VXPPDUL]LQJ RI WKH RZQ
and subjective factors. There are no such analogues in researches, performed in Rural Development Research
Western Europe (Aleksa, J.P., 1999; Apanavicius, R., &HQWUHRI6LDXOLDL8QLYHUVLW\GXULQJ
&HSDLWLHQH $ 'X]LQVNDV 5 The new role of non-urbanised and low urbanised areas
Grigas, R., 2009; Jasaitis, J.; 2006, Knasys, V., 2009; in the so-called network society is stressed in the paper.
Luobikiene, I., 2012; Treinys, M., 2006 and 2011; We have presented changes in the concept of modern
Svirskis, A., 2008). It is also very different even from W\SHVRIUXUDOUHVLGHQFHSRVVLELOLWLHVRIGLYHUVL¿FDWLRQRI
WKH VLWXDWLRQ RI &HQWUDO (XURSHDQ FRXQWULHV IRUPHUO\ rural businesses, optimal exploitation of local geographic,
EHORQJHG WR 6RYLHW LQÀXHQFH UHJLRQ 7KHUH LV QR natural and human resources, improvement of local
exhaustive information about consequences of the infrastructure, creating the system of moral values for
soviet regime in the majority of textbooks for students the organising of new rural-urban partnership.
of secondary schools, colleges, and universities of many
European countries. That is why so hard to understand
VSHFL¿FV RI WKH %DOWLFV IRU WKH (8 FHQWUDO LQVWLWXWLRQV
during the creation of common rural development policy. 1. Development of rural society in the early
Objective of the paper is to present main stages of 1900s
rural development during the 20th century and beginning Before the World War I, Lithuania was erased from
of the 21st century in Lithuania as a sample of the the world map (Jasaitis, J., 2007; Treinys, M., 2011).
Baltic States transformations. Tasks of the research: 2QO\ IHZ KLVWRULDQV DQG SXEOLF ¿JXUHV ZHUH IDPLOLDU
WR VXUYH\ DQ UHDOLVDWLRQ RI WKH ¿UVW ODQG UHIRUP with the history of the Great Duchy of Lithuania as
in the 3rd decade of the 20th century and to describe one of the high-powered states in the medieval Europe
increasing role of farmers in society; 2) to highlight (Valionyte, B., 2009). Over the century Lithuania was
PDLQ RXWFRPHV RI ¿YH GHFDGHV RI VRYLHW UHJLPH IRU DQQH[HG E\ F]DULVW 5XVVLD¶V HPSLUH DQG QDPHG DV LWV
the rural areas and their inhabitants; 3) to present so-called North-West Land. Majority of landowners
VSHFL¿FSRVVLELOLWLHVRILPSOHPHQWDWLRQRIWKHVXVWDLQDEOH were persons, not connected with Lithuanian nation,
rural development model in the post-soviet area and mostly arrived or re-settled from Russia, Poland, and
creating of long-term strategy for rural-urban partnership Germany. Local landless people were forced to work in
in the network society. their farms. In the beginning of the 20th century, rural
___________________________
1
&RUUHVSRQGLQJDXWKRUE-mail: kptc@smf.su.lt

ISSN 1691-3078
areas of Lithuania, as other neighbouring countries, art and national heritage. The number of local land-
annexed by Russian empire, were perceived to be surveyors, architects as well as teachers and doctors has
isolated and stagnant areas used for primitive agriculture LQFUHDVHGVLJQL¿FDQWO\([WUHPHDWWHQWLRQZDVSDLGWRWKH
only (Svirskis, A., 2008). Lack of infrastructure and development of the science and education system.
PHDQV RI FRPPXQLFDWLRQ DQG WUDQVSRUWDWLRQ FRQ¿UPHG Economic activity of farmers and other rural workers
this opinion, in spite of that most of the population lived helped Lithuania to avoid some heavy outcomes of
and worked in the countryside. During the World War I the world economic crisis, named Great Depression
and Bolsheviks’ upheaval, majority of landlords withdrew (Valstybininkas ir mokslininkas…, p.36-37). In 1934-
from Lithuania or became as missing in this turbulent 1940, export of food and other agrarian and forestry
time. Their farms were derelict, overburden with huge production was extended and became the basis
debts, and untended (Aleksa, J., 1999). for strengthening the national currency. Lithuanian
currency – Litas – was recognised as convertible.
2. Independent Lithuania (1918-1940) Farmers became a politically active social class: their
On 16 February 1918/LWKXDQLDQ&RXQFLOGHFODUHG representatives used to work in municipalities, districts’
the Act on Restoration of Lithuania’s Independence. institutions as well as in national Parliament (Seimas),
Majority of the new organised Lithuanian Army consisted etc. Lithuania successfully developed its energy
of young rural people who clearly understood, that the supplying system, light and alimentary (food) industry,
future of Independent Lithuania was in their hands. They highroads and railway system as well as aviation.
organised the defence of the native land against remains $ À\LQJ VTXDGURQ RI /LWKXDQLDQPDGH DLUSODQHV
of Kaiser German army, Bolsheviks’ gangs, and some ANBO-IVL visited 12 capitals of European countries:
just re-established Polish military units. In the beginning 6WRFNKROP&RSHQKDJHQ$PVWHUGDP%UXVVHOV/RQGRQ
of the 3rd decade of the 20th century, the Republic of Paris, Roma, Vienna, Prague, Budapest, Bucharest,
Lithuania was recognised de jure and came back to the DQG 0RVFRZ $ WRWDO GLVWDQFH RI WKLV ÀLJKW ZDV
family of independent democratic states. over 9 thousand kilometres.
The 1922-1926 period was very important for In 1938–1940, approximately 75% of Lithuanian
the state economy. The 1st land reform was started as population used to live in the countryside, although
expropriation of landlords land use system and creation VLJQL¿FDQW SDUW RI WKHP KDG MREV LQ FLWLHV DQG RWKHU
of local family farms. There was shortage of food, but urbanised areas. Majority of urban people were
then managers of landlord’s estates didn’t organise any connected with rural economics. Small and medium
agrarian activity. In some cases, there was a direct industrial or public utilities enterprises were located in
sabotage, pointed against society needs. Lithuanian townships, and it helped to employ rural inhabitants who
authorities (Aleksa, J., 1999, Treinys, 2006) decided to wanted to obtain new, non-agrarian professions. Many of
organise the family farms system as the most effective them became owners of private businesses. Lithuania’s
way for restoration of the state agrarian sector. During economics reached the same level as Finland, Denmark,
expropriation of the landlords land use system, 80 ha or the Netherlands.
(later, 150 ha) were left for former owners. No one had
the right to own more land for any purpose (agrarian 3. The Second World War and annexation of
or non-agrarian). Rural landless people, former cottars, the Baltic States (1939-1945)
received 8-10 or even 15-20 ha from the State Land The peaceful development of Lithuania as well as
5HIRUP&RPPLVVLRQDFFRUGLQJWRWKHODQGTXDOLW\RUWHUPV Latvia and Estonia was interrupted in June 1940. The
of service in Lithuania’s army and units of state border tragedy of the many European nations was approaching.
protection. Former soldiers – volunteers, homeland Two dictators, Stalin and Hitler, were planning to manage
SURWHFWRUV±EHFDPHWKH¿UVWJURXSRIQHZODQGRZQHUV the whole world, but later they decided to prove their
7KHV\VWHPRIVPDOODQGPHGLXPVL]HIDUPVZDVFUHDWHG VXSHULRULW\LQWKHZDU¿HOG0DQ\RIWKHFXUUHQWJHQHUDWLRQ
and cooperation of farmers, food industry, and domestic of historians did not have any information about the
market as well as exporters was organised. This land MRLQW 6RYLHW DQG 1D]L PLOLWDU\ SDUDGH LQ %UHVW/LWRYVN
reform was performed in a relatively short time: essential (now a city in Belarus) in the autumn of 1940, after
shifts were made throughout three and a half years. occupation of Poland. Only few of them know about the
The system of farmers’ homesteads was created in PDVVNLOOLQJVRI3ROLVKDQG/LWKXDQLDQRI¿FHUVLQ.DW\QH
1925-1934 (Valstybininkas ir mokslininkas…, 2011). or sending them to Vorkuta, Norilsk, and other death
There was organised a purveyance of agricultural camps. There is no exhaustive information about these
machinery and other equipment. Lithuanian Academy Stalin’s regime crimes in many textbooks for students
of Agriculture was established as well as the system of of secondary schools, colleges, and universities of many
local schools for farmers and educational institutions European countries.
for young (future) farmers were created. Model farms In 1940, four European states (Lithuania, Latvia,
for demonstration of advanced agrarian technologies Estonia and Finland) received Stalin’s ultimatum: let
were established in all rural regions. Newly created Soviet army units come in and then become a part of
IDUPHUV¶ DVVRFLDWLRQV RUJDQLVHG WKH ¿UVW H[KLELWLRQV RI %ROVKHYLN (PSLUH 2QO\ )LQQV ZHUH DEOH WR VD\ ³1R´
agrarian products, pedigree cattle (cows, pigs, horses, and they immediately organised the defence of their
etc.) and national handicraft production. Handicraftsmen homeland. Now Finland knows everybody who lost one’s
(woodworkers, carvers, stonemasons, stove-makers, life during the winter of 1940. Finns also lost a part of the
blacksmiths, tailors, bakers, shoemakers, weavers and state territory, but saved the state’s independence.
knitters, etc.) became as a part of the rural society. Lithuania was occupied on 15 June 1940 by the
Their original products became also a part of folk Soviet Union. After one year of annexation regime,

ISSN 1691-3078
on 14-15 June 1941, WKH ¿UVW PDVV GHSRUWDWLRQ RI The Soviet occupation period had the horrible
Lithuania’s people was organised. During night time, outcomes for the whole agrarian sector and life of all
over 36,000 deportees, i.e. teachers, engineers, artists, rural areas. Local rural population was forced to leave
state workers, farmers, priests, etc., were placed in their native birthplaces. The Soviet model of agriculture
wagonloads designed for transportation of animals and and industrialisation caused big losses for the landscape.
were deported to the Russia’s North where even grass For example, sewage from huge piggery built on the
doesn’t grow. Majority of them lost their lives under the Nemunas river (the biggest river of Lithuania) shore
Arctic cold and starvation. ÀRZHG XS WR WKH VRLO WR XQGHUJURXQG ZDWHU DQG HYHQ
Then in the end of June 1941, Hitler’s army WR WKH ULYHU &ROOHFWLYH IDUPV¶ ¿HOGV ZHUH SROOXWHG ZLWK
re-occupied Lithuania and Hitlerian terror was started. nitrates and other remains of fertilisers, liquid dung,
A Lithuanian proverb describes these tragic events and and pesticides. Deforestation and intensive but slapdash
ERWK RFFXSDQWV ³2QH LV UHG OLNH 6DWDQ WKH RWKHU LV irrigation connected with efforts to destroy the traditional
EURZQOLNHDUDELGGRJ´ structure of farmers’ homesteads as soon as possible
caused a huge erosion of soil. Surface of many rural places
4. The Soviet occupation period (1944–1990) ZDV FKDQJHG E\ XVLQJ KHDY\ WUDFWRUV EXOOGR]HUV DQG
At the end of WW II, in 1944, the Red Army occupied earthmovers. Now the soil erosion is a heavy subsequence
Lithuania again. This rural country was re-annexed until after moving out trees or bushes, many years serving for
1990. Throughout almost the whole decade (1944– protection of crops against strong winds. Many industrial
/LWKXDQLDQV WULHG WR ¿JKW IRU WKH UHVWRUDWLRQ RI factories became locations of pollution of air, surface,
their homeland’s independence, but national resistance DQGXQGHUJURXQGZDWHU)RUH[DPSOHWKHÀRZRIVHZDJH
was strangled. Majority of resistants were killed in from a Siauliai packinghouse was funnelled to a small
the battles or died later in prisons and death camps. river, running around the well-known around the world
During 1940–1990, Lithuania lost one third part of its KROO\SODFHWKH+LOORI&URVVHV
own population. In 1940–1944, thousands of Lithuania’s Natural wetlands, small forests and birds’ breeding-
residents went into exile to some West countries: grounds were completely destroyed. Military camps
*UHDW %ULWDLQ )UDQFH &DQDGD WKH 86$ $XVWUDOLD HWF and bases with nuclear weapons have been built up in
Hundreds of thousands of our villagers (former farmers) Lithuanian forests. These places became heavy polluted
ZHUH GHSRUWHG GXULQJ WKH ¿UVW SRVWZDU GHFDGH WR WKH with oil products, broken pieces of constructions materials,
shore of Arctic Ocean, to Siberian tundra, and other various trashes, broken glass, and pieces of metal.
Gulag’s death camps. A lot of them passed away during These bases were declared as secret places, the so-called
the deportation or died under the starvation, terrible ³QRJR DUHDV´ ZKHUH RQO\ PLOLWDQWV KDG D SHUPLVVLRQ
cold, or heavy work conditions etc. Only a small amount to work and live. Now tourists visiting Lithuania have
of them was able to come back after Stalin’s death. Now a chance to see the former Plokstine missile base
DOPRVWDOOGHSRUWHHVDUHLGHQWL¿HGDQGWKHUHDUHQRPRUH near a scenic Lake Plateliai in Plunge district, designed as
speculations on this issue. D&ROG:DU0XVHXP
Nevertheless, the impact of these traumatic events However, the most negative and long-lasting impact
on the rural areas’ development has not been properly of the Soviet era on rural development was made on
evaluated until now. In reality, it is very hard to calculate the behaviour pattern of rural inhabitants. All positive
all these losses and destructions. The social stratum of features of Lithuania’s land reform carried out in 1922–
Lithuanian farmers was disrupted completely in 1945– 1926 were liquidated. The land was declared as the state
1949. The enforced collectivisation of agricultural SURSHUW\ DQG KXJH VRFDOOHG ³FROOHFWLYH´ DQG ³6RYLHW´
land destroyed farmers as a social class, and the civic farms have been established. Former farmers became
activities of rural inhabitants were devaluated. Rural workers of state-owned farms. There was no possibility
people’s impact on state development was diminished. for developing their entrepreneurship, strategic
Their private farmsteads were swept away, and new management skills, and private responsibility. Fifty years
settlements, even consisting of blockhouse villages, OLYLQJLQWKHVRFDOOHG³SODQQHGHFRQRP\´GLVDFFXVWRPHG
were formed (Svirskis, A., 2008, Treinys, M., 2011). UXUDO SHRSOH IURP VHOIVXI¿FLHQW IDUPLQJ SHUIRUPDQFH
In accordance to the Soviet law, private business was (Vosyliute, A., 2010; Luobikiene, I., 2012).
declared as illegal and forbidden. Majority of craftsmen
were replaced by industry. 5. Restoration of independence and restitution
Lithuania’s urbanisation was very intensive after of private land property
WKH :: ,, $JULFXOWXUDO SURGXFWLRQ ZDV LQWHQVL¿HG DQG 7KH ¿UVW VLJQV RI SRVLWLYH VKLIWV LQ UXUDO HFRQRP\
the industrialisation was rapid. A number of people, appeared in Lithuania in the middle of 1989, after passing
directly involved in primary agricultural activities, the Peasant Farm Bill. Then, after breakdown of the
decreased very rapidly. A lot of rural inhabitants Soviet-era and restoration of Lithuania’s independence on
were forced to move into cities. The mechanisation of 11 March 1990, the restitution of private land property
agriculture dismissed the labour force; these people was started. Nevertheless, implementation of democratic
had to look for new jobs in urban areas. These changes reforms became a very complicated process under the
made a sharp impact on education, professional LQÀXHQFH RI LQWHUQDWLRQDO DQG GRPHVWLF FLUFXPVWDQFHV
structure, residence, and even on everyday life. (Kaimas luzio metais, 2008; Knasys V., 2009). The
Lithuania became like a huge cow-house and piggery ¿UVW ODZ DFW GHWHUPLQLQJ WKH SRVW6RYLHW ODQG UHIRUP LQ
producing milk and meat products for Moscow, Leningrad Lithuania was passed in 1991EXWLWLVVWLOOXQ¿QLVKHG±
(now – St Petersburg), and other Soviet Empire even after two decades. Former collective farms’ chiefs
cities. and Soviet collaborators permanently tried to block all

ISSN 1691-3078
the necessary reforms. The main law content about the investigations showed that the professional structure
restitution of private land property was changed many of the rural population again had changed dramatically.
times. Because the former collective farms leaders have The population of rural residents working in the urban
a possibility to manage the whole information, many of areas had increased from 35 to 45 % and the population
them now became powerful landlords. Some of them have of rural business people involved in a non-agricultural
14,000–34,000 ha farms, using the so-called offshore sector had increased only from 2 to 4 %. Retired and
companies, former networks and their economically and disabled people constituted approximately 30 %.
SROLWLFDOO\LQÀXHQWLDOFRQWDFWV Unemployed people on welfare schemes constituted
As it was mentioned above, the generation of former approximately 10 % (Jasaitis, J., 2009; Jasaitis, J.,
ODQGRZQHUV ZDV GHVWUR\HG GXULQJ ¿IW\ \HDUV RI 6RYLHW Ratkeviciene, V., 2012).
regime. The whole infrastructure of private farms and When Lithuania joined the EU in 2004, agricultural
former style of living was also destroyed. Only few workers constituted 13 % of the total employable
survivors were able to start the farming, but even they population. The agricultural sector was affected by the
had no agriculture machinery adapted to the modern EU policies and subsidies and an increasing number of
private farming and no experience in building strategy of rural inhabitants could have training for jobs outside the
agricultural business in accordance with the western style agricultural sector. Unfortunately, development of private
free market economy. individual or local community business is proceeding very
There were no continuity in the rural development slowly. An extreme and ultimate individualism determined
policy between the 1st (1922–1926) and the 2nd (started by the extra-liberal attitudes, spread throughout two
LQ EXW VWLOO XQ¿QLVKHG ODQG UHIRUPV 6RPH TXLFN recent decades in the mass media is the main obstacle
decisions were taken without comprehensive economic for cooperation among individual producers. There is
evaluation and became negative for a new stratum of much of distrust and jealousy as well as disrespect to the
farmers as well as for former workers of collective farms. law in the contemporary post-Soviet society.
For example, farmland always was a real estate but under In 2008–2009, Lithuania was struck particularly
the land reform rule a landowner now had the right to get KDUG E\ WKH ¿QDQFLDO FULVLV ,Q WKH UHDO *'3
the same amount of farmland in another location of the decreased by 18.5 %. This caused high unemployment,
state, near his or her current residence or work place. This FXWVLQSXEOLFVSHQGLQJGLI¿FXOWLHVWRLQYHVWHWF,Q2012,
decision has become a direct contrast to the economic unemployment of rural employable inhabitants has
logic because the real value of farmland always depends reached 20%. Each third young person has no permanent
on its geographic location, productivity, landscape, etc. job. Despite that, the agrarian sector remains one of the
This rule caused a lot of confusion, distorted the land most stable sources not only for domestic market, but
market and even created prerequisites for corruption also for the export. Lithuanian organic food production
among some land reform administrators (Kaimas luzio is much-liked in eastern and western markets. Some
metais, 2008; Agrosocialiniu mokslu ir studiju …, 2006, of food products are recognised in the EU as pieces of
Apanaviciute, K., 2011). national heritage.
In 1990–1994, the agricultural production decreased
by 50%. Unemployment increased rapidly, and health 6. Nowadays situation
care and other social welfare structures were also The rural parts of the country still bear a negative
neglected, since these were usually connected with former image among urban people, and this prevails even among
state industrial companies or state farms organisations. decision-makers. The popular belief is that the main task
,W FUHDWHG GLI¿FXOWLHV DQG GLVDSSRLQWPHQW QRW RQO\ of rural areas is the agricultural sector. Decisions affecting
IRU XQTXDOL¿HG UXUDO SHRSOH EXW DOVR IRU H[SHULHQFHG UXUDOFLWL]HQVDUHPDGHPRVWO\ZLWKRXWWKHLUSDUWLFLSDWLRQ
specialists: economists and agronomists, stockbreeding DQGWKLVGLYLGHVWKHVRFLHW\7KHSURORQJHGEXWXQ¿QLVKHG
workers and veterinarians, librarians, organisers of land reform and many other policies discourage educated
cultural activities, teachers, etc. The last decade of the people from working in rural areas.
20th century was a very complicated period for rural The landscape is sometimes destroyed by vandals or
DUHDVWKHUHZHUHQRGH¿QHGVWUDWHJ\RIDJULFXOWXUHDQG simply irresponsible people and by activities from fast
no clear perspectives for development of alternative non- SUR¿W VHHNLQJ EXVLQHVVHV )RU LQVWDQFH GHIRUHVWDWLRQ
agrarian business. Due to the recession in industry as is a common problem, causing loss of biodiversity and
well as in utility services, cities were unable to provide increased erosion. Local rural roads are damaged by
jobs for unemployed rural people. heavy vehicles, used in the primitive forest business
1HYHUWKHOHVVDIWHUWKH¿UVWGLI¿FXOW\HDUVRIQHJDWLYH (total lumbering without re-forestation) and heavy
WUHQGV OLYLQJ VWDQGDUGV URVH UDSLGO\ GXULQJ WKH ¿UVW agricultural machinery, but necessary maintenance is not
decade of the 2000s. In 2001–2008XQWLOWKH¿QDQFLDO being organised. Agricultural land is left untilled, ruins
crisis hit the world in 2008, Lithuania had one of the of useless Soviet-era buildings and wrecks of damaged
fastest growing economies in Europe. New advanced machinery make the rural landscape ugly. Over half of
agrarian technologies, especially in arable farming and million hectares is still unused and mostly neglected.
crop producing, came into Lithuanian villages. Farmers Outskirts of local small forests have become a dump, with
VWDUWHGXVLQJQHZVLJQL¿FDQWO\PRUHSURGXFWLYH:HVWHUQ no one responsible for cleaning it up.
style agricultural machinery, new productive species of Fortunately, some new positive trends have
crops, etc. recently appeared. New forms of traditional and non-
The globalisation trends have had much more impact traditional farming are being developed, new commercial
on rural economy and structure of rural inhabitants products and other activities are being created in the
after joining the EU. During 2002–2007 VFLHQWL¿F countryside, and new concepts of residence in suburban

ISSN 1691-3078
or rural areas are beginning to be implemented VPDOOÀH[LEOHEXVLQHVVFRPSDQLHVLQUHVLGHQWLDOKRXVHV

(Melnikiene, R.; Vidickiene, D., 2010, Isoraite, M., 2008, and modern industrial factories can be established in
Jasaitis, J., 2010). suburban areas where good infrastructure (highways,
etc.) and fast Internet networks have been installed.
7. People and nature The understanding of personal (family) spiritual life
The latest social science research works have recently and communication between generations is another area
EHHQ FDUULHG RXW WR LQYHVWLJDWH FLWL]HQV¶ LGHDV RQ IXWXUH investigated through interview surveys. Possibilities for
sustainable development in rural Lithuania. Questions on meeting places or household communities where people
what kind of society they would like to create, what social with similar professional or business interests could meet
VWUDWL¿FDWLRQ WKH\ ZRXOG ZHOFRPH DQG ZKDW WKH\ WKLQN were also perceived as activities suitable for rural areas.
about respect to private property were included into our
questionnaires. They revealed that people having most
Conclusions and recommendations
H[SHULHQFH ZLWK ³FROOHFWLYH SURSHUW\´ KDG VRPH WURXEOH
1. Possibilities of implementation of new model of rural
to understand how to evaluate the concept of private
development are limited by long-term historical
property. They also had some trouble to perceive their
circumstances, professional experience, and
own responsibility for the state and society and to take
competences of population and current business
part, for example, in elections, self-governance, and
HQYLURQPHQW $V VLJQL¿FDQW REVWDFOHV IRU VKLIW WR
even local communities’ activities. For those who are
the new forms of economic activity can be the lack
convinced that the state has to care for everybody, it
of individual business experience and risk’s fear.
is hard to imagine a vision of personal prosperity and
&OHDUVWDWHVWUDWHJ\SRLQWHGRXWRQHGXFDWLRQRIVR
understand that each individual is expected to create his
called owner’s society can encourage rural business
or her own long-term strategy of personal performance
development.
(Rural Development and…, 2012)
2. In the 20th century, Lithuanian farmers had only
The latest research studies show that people actually
less than two decades to obtain experience, which
cannot clearly articulate their wishes because they are
is necessary for performing their farms activity in
not able to understand the new role of suburban and
the free market. However, fast and purposeful
other countryside areas in the information society.
development of private farms was suddenly
Many of them cannot imagine prospects of industry and
cancelled. Social stratum of farmers was disrupted
other non-agrarian business development in the rural
FRPSOHWHO\ LQ WKH IHZ ¿UVW \HDUV RI WKH VRYLHW
space. However, new tendencies of people’s behaviour
regime – in 1945–1949. The whole infrastructure
based mostly on analysis of other countries’ economic
of private farms and former style of living was also
and social experience are necessitating some essential
changes in their notions and attitudes. For example, a destroyed.
lot of urban people, especially younger generation, are 3. The negative and long-lasting impact of the Soviet
focusing on creation of their own homesteads in the era on rural development was made on the behaviour
countryside areas. As Lithuania has a well-developed pattern of rural inhabitants. During the occupation
road system, new settlements are just created in the period, the approach of independent owners was
former small and quiet towns and even villages located ruined, and the system of their moral values was
near main highways. destroyed. Period of soviet annexation has served for
Big social problems lie in the huge gap between the the formation of special type of personalities – Homo
modern society and nature. The respondents, even living Sovieticus. Such type of individuals is completely
in the countryside, obviously are not able to identify dependent on central and local government
objects of nature and to describe their availability and guidelines. There was strictly prohibited to be
importance. Their knowledge on nature is not based HQJDJHG LQ WKH SHUVRQDO VHOIVXI¿FLHQW HFRQRPLF
on personal experience. They cannot recognise many activity. All manufacturing facilities were owned by
objects of wildlife (herbs, trees, birds, etc.) in a natural the state. Planning of economy was performed only
environment and cannot understand the interaction by the central government.
among ecosystems. They do not perceive the importance 4. 7KH ¿UVW VLJQV RI SRVLWLYH VKLIWV LQ UXUDO HFRQRP\
of agriculture and ecology. Most of them cannot appeared in Lithuania in the middle of 1989, after
understand why it is very important not to pollute. They passing the Peasant Farm Bill. After breakdown
do not know how to behave in the forest, meadow, by of the Soviet-era and restoration of Lithuania’s
the lake, or on the river bank. In addition, a lot of them independence in 1990, the restitution of private
are not able to identify their personal birthplace as very land property was started. However, implementation
VLJQL¿FDQW IRU WKH ZKROH OLIH 7KH\ GR QRW KDYH D VHQVH of democratic reforms became a very complicated
of homeland love because post-Soviet time families often SURFHVV XQGHU WKH LQÀXHQFH RI LQWHUQDWLRQDO DQG
had no permanent place of residence when they were domestic circumstances. There were no possibilities
children and teenagers. to get the agricultural machinery, adopted for the
The analysis of migration processes also shows two PRGHUQ IDUPLQJ LQ VPDOO DQG PLGGOH VL]H IDUPV
contradictory changes in the structure of rural and urban Descendants of former owners had no experience
population: 1) rural people who are looking for jobs move in building strategy of agricultural business in
to cities; 2) more prosperous urban social groups are trying accordance with the Western style free market
to obtain private households in suburban areas. These economy. Many of them decided not to participate
tendencies are much related with changes in business in restoration of family farms or lost their farmland
development: more and more jobs can be created by during few years.

ISSN 1691-3078
5. The main discussion about the future of Lithuanian 7. Grigas, R. (2009). Kaimas laiko isbandymuose:
rural areas is focused on the decision of appropriate tarp pragmatikos ir sakralumo (The Village in
agricultural model. Nowadays, priority is based the Challenges of Time: Between Pragmatics and
on the creating of large-scale farms, and it is a Sanctity). // Ekonomika ir vadyba: aktualijos ir
contrariety to the former family farms model. perspektyvos, 3(16). Siauliai: siauliu universitetas,
There is no enough attention to the development of pp. 10-13.
alternative, non-agrarian businesses. That is why 8. Isoraite, M. (2008). Lietuvos kaimo pletros politikos
rural population is sharply decreasing, and our young tendencijos (Tendencies of Lithuanian Rural
generation of villagers mostly prefer to choose urban Development Policy). // Ekonomika ir vadyba:
space for living and work. But the society of hired aktualijos ir perspektyvos, 2(11). Siauliai: Siauliu
ODERXUHUVFDQEHHYDOXDWHGRQO\OLNH³ZRUNIRUFH´DQG universitetas, pp. 99-109.
there is no clear difference between the behaviour 9. -DVDLWLV-'LYHUVL¿FDWLRQRI(FRQRPLF$FWLYLW\
of farmhand and Homo Sovieticus. The main goal DQG &KDQJHV LQ WKH 6WUXFWXUH RI 5XUDO ,QKDELWDQWV
RI ODUJHVFDOH IDUPV LV D ³SUR¿W DW DQ\ FRVW´ 7KH as Main Indicators for Regional Development
LQFUHDVLQJ RI SURGXFWLYLW\ DQG SUR¿WDELOLW\ LQ PDQ\ Planning. // The Regional Economic Policy. Grodno:
cases is warring with the sustainable development Grodno Janka Kupala State University, pp. 90-96.
and careful, ecological use of resources as well as 10. Jasaitis, J. (2006) Kaimo raidos pokyciu integralumo
with education of the knowledge society. problema (The Problem of Integrity of Rural
6. Rural areas still bear a negative image among urban Development Researches). // Lietuvos ukio
people, and this prevails even among decision- transformacija 1990-2005 metais. Vilnius: Vilniaus
PDNHUV 7KH SURORQJHG EXW XQ¿QLVKHG ODQG UHIRUP pedagoginis institutas, pp. 218-235.
and many other contradictory policies discourage 11. -DVDLWLV-.RQIHUHQFLMXÄ6LXRODLNLQLRNDLPR
educated people from working in rural settlements YL]LMD NRQFHSFLMD LU PLVLMD“(Conception and Mission
or remote small towns. This leads to ineffective use of Conferences „Vision of the Modern Village). //
of local resources and formation of social inequality Ekonomika ir vadyba: aktualijos ir perspektyvos,
and dividing. 3(16). Siauliai: Siauliu universitetas, pp. 14-20)
12. Jasaitis, J., Ratkeviciene, V. (2012). Kaimo
situacijos pokyciai -vienas is svarbiausiu issukiu
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ISSN 1691-3078
,.XOLWDQH$9LOFLŪD Possibilities for The Use of Innovation in Vidzeme Planning Region
POSSIBILITIES FOR THE USE OF INNOVATION

IN VIDZEME PLANNING REGION
Irina Kulitane, Mg.oec., Mg.paed.; $QDVWDVLMD9LOFLŪD1, Dr.oec., professor
Abstract. ,QQRYDWLRQLQ9LG]HPH3ODQQLQJ5HJLRQLVUHDOLVHGLQWKHIUDPHRI1DWLRQDOLQQRYDWLRQV\VWHPWKHHOHPHQWV
of which correspond to innovation and innovation system theories, and the best practices of which are applied in the
PRVW LQQRYDWLYH FRXQWULHV RI WKH ZRUOG 1HYHUWKHOHVV LQQRYDWLRQ LQ 9LG]HPH 3ODQQLQJ 5HJLRQ LV IUDJPHQWHG DQG LV
being introduced slowly, and its impact on economic development is faintly visible. It witnesses a problem, which was
LGHQWL¿HGDQDO\VHGDQGLWVVROXWLRQVVHDUFKHGE\WKHDXWKRUV7KHDLPRIWKHSDSHULVWRUHVHDUFKWKHSRWHQWLDORI
FDSDFLW\EXLOGLQJRILQQRYDWLRQV\VWHPHOHPHQWVLQ9LG]HPH3ODQQLQJ5HJLRQ)RUWKHDFKLHYHPHQWRIWKHREMHFWLYHWKH
IROORZLQJWDVNVZHUHFDUULHGRXWWRDQDO\VHWKHPRVWVLJQL¿FDQWWKHRULHVRQLQQRYDWLRQLQQRYDWLRQV\VWHPVDQG
UHJLRQDOHFRQRPLFGHYHORSPHQWWRFKDUDFWHUL]HDQGDQDO\VHWKHLQQRYDWLRQV\VWHPLQ9LG]HPH3ODQQLQJ5HJLRQ
and capacity of innovation elements; 3) to work out the capacity building opportunities and directions of innovation
HOHPHQWVRI9LG]HPH3ODQQLQJ5HJLRQ,QVFRSHRIWKHUHVHDUFKWKHHVVHQFHRILQQRYDWLRQZDVLGHQWL¿HGWKHRUHWLFDO
DVSHFWV RI LQQRYDWLRQ V\VWHP DQG LWV HOHPHQWV ZHUH H[DPLQHG WKH HOHPHQWV RI LQQRYDWLRQ V\VWHP ZHUH GH¿QHG
WKHH[LVWLQJHOHPHQWVRILQQRYDWLRQV\VWHPLQ9LG]HPH3ODQQLQJ5HJLRQZHUHLGHQWL¿HGDQDO\VHGDQGDVVHVVHGDQG
proposed capacity building measures of the elements of innovation system were elaborated by the authors. The
DXWKRUVKDYHFRQFOXGHGWKDW9LG]HPH3ODQQLQJ5HJLRQKDVWKHQHFHVVDU\HOHPHQWVRILQQRYDWLRQV\VWHPLQSODFHWKH
FDSDFLW\RIWKHVHHOHPHQWVLVLQVXI¿FLHQWDQGWKHSUHFRQGLWLRQVDQGRSSRUWXQLWLHVH[LVWIRULQFUHDVLQJWKHFDSDFLW\
Key words: LQQRYDWLRQLQQRYDWLRQV\VWHPUHJLRQDOHFRQRPLFGHYHORSPHQW9LG]HPH3ODQQLQJ5HJLRQ
JEL code: O31, R11, R13, R58
Introduction 3) to work out the capacity building opportunities and

In the National Development Plan of Latvia for 2014- GLUHFWLRQV RI LQQRYDWLRQ HOHPHQWV RI 9LG]HPH 3ODQQLQJ
2020, the government of Latvia has set up for itself and Region. In the research, the following methods were
for inhabitants of the country the objective - economic used: monographic, desk research, logically constructive,
RXWEUHDN $ VLJQL¿FDQW UROH LQ WKH DFKLHYHPHQW RI WKH DQGJUDSKLFDOUHÀHFWLRQPHWKRGVDQDO\VLVDQGV\QWKHVLV
objective is assigned to growth of national economy econometric and statistical analysis methods.
and development of territories striving to grow. One of The information sources used for the research were
the tools, used for promotion of economic development SXEOLFDWLRQV LQ LQWHUQDWLRQDO UHIHUHQFH VFLHQWL¿F VRXUFHV
in many countries around the world, is innovation. and periodicals, strategies and policy documents,
Successful creation and exploration of innovation requires legislative acts, reports of governmental institutions,
understanding its nature, preconditions necessary for statistics, and information obtained in surveys conducted
development and implementation of innovation, and by the authors.
elements, having impact on the number, frequency, and
sustainability of innovation. All previously mentioned Research results and discussion
HOHPHQWVIRUPLQQRYDWLRQV\VWHP,QQRYDWLRQLQ9LG]HPH 1. Theoretical aspects of innovation nature,
Planning Region is realised in the frame of national
elements and systems
innovation system, the elements of which correspond to
The range of theoretical aspects of nature, elements
innovation theories and innovation system theories and
and systems of innovation is comprehensive and manifold.
the best practices applied in the most innovative countries
The research of innovation started at the beginning of
RI WKH ZRUOG 1HYHUWKHOHVV LQQRYDWLRQ LQ 9LG]HPH
20th century, when N. Kondratieff analysed long waves
Planning Region is fragmented and is being introduced
(cycles) and made a conclusion that innovation is one
slowly; its impact on economic development is faintly
YLVLEOH ,W ZLWQHVVHV D SUREOHP ZKLFK ZDV LGHQWL¿HG of their reasons. In accordance with N. Kondratieff’s
analysed and solutions searched by the authors. theory, long waves are developing because of origination
Hypothesis – the increase of capacity of elements of of innovation clusters that initiate technological
innovation system can have impact on the development revolutions, and these revolutions initiate new industries
RI 9LG]HPH 3ODQQLQJ 5HJLRQ The aim - to research (Smihula D., 2010). J. Schumpeter, who researched
the potential of capacity building of innovation system the nature of theory of innovation processes and the
HOHPHQWV LQ 9LG]HPH 3ODQQLQJ 5HJLRQ 7R DFKLHYH WKH PDLQ FRQFHSWV H[SORUHG WKHVH FRJQLWLRQV IRU GH¿QLWLRQ
aim, the following tasks were carried out: 1) to analyse RI LQQRYDWLRQ QDPLQJ WKHP ³VFLHQWL¿F DQG PDQDJHULDO
WKH PRVW VLJQL¿FDQW WKHRULHV RQ LQQRYDWLRQ LQQRYDWLRQ combination of new production factors, motivated by
systems, and regional economic development; 2) to entrepreneurial competences, and including development
FKDUDFWHUL]HDQGDQDO\VHWKHLQQRYDWLRQV\VWHPLQ9LG]HPH DQG LPSOHPHQWDWLRQ RI SURGXFWV DQG PHWKRGV ¿QGLQJ
Planning Region and capacity of innovation elements; acquiring and subduing of new markets; discovery and
___________________________
1
&RUUHVSRQGLQJDXWKRUTel. +371 63021041. E-mail address: anastasija.vilcina@llu.lv

ISSN 1691-3078
exploring of raw materials; creation of new industries ground on subjective experience and comprehension of
DQG HQWHUSULVHV ZLWKLQ WKHVH LQGXVWULHV´ HPSKDVLVLQJ researchers about economics and its processes.
the connection of internal logics of innovation with The discussions about the role and impact of individuals
acceleration of economic development. However, 28 years and social processes on innovation were started among
ODWHU KH LQWHUSUHWHG LQQRYDWLRQ DV ³FKDQJHV ZKLFK DUH researchers in the middle of 80s of the last century.
aiming to introduce and explore new types of consumer $EHUQDWK\DQG&ODUN added to the DOUHDG\GH¿QHG
goods, new production and transport means and forms innovation elements knowledge created and accumulated
RI RUJDQLVDWLRQ RI SURGXFWLRQ´ DFFHQWXDWLQJ WKH UROH RI and experience of individuals and relation between
entrepreneurs to bond invention and innovation and their participants of economic systems. Therefore, they more
DELOLW\WRUHDOL]HLQQRYDWLRQLQOLIH$EHOWLQD$ clearly marked the role of individuals, their relation, and
The research of innovation in Latvia was started interaction in innovation processes. Few years later
comparatively recently - in the middle of 90s of the -1LRVLLQFOXGHGKXPDQFDSLWDODVWKH¿UVWDPRQJ
last century. Latvian researchers were involved into all other elements of innovation system, regarding
elaboration of national innovation concept, which individuals as creators, depositors and distributors of
GH¿QHV LQQRYDWLRQ QDWLRQDO LQQRYDWLRQ V\VWHP DQG productive knowledge. B. Lundvall (2008) added to
QDWLRQDO LQQRYDWLRQ SROLF\ 9 'LP]D $ 9HGOD WKRVH RSLQLRQV WKH LGHD DERXW VLJQL¿FDQFH RI FUHDWLYLW\
$ $EHOWLŪD DQG RWKHUV KDYH SURYLGHG of individuals as well emphasised the importance of
the latest innovation research in the context of the number of individuals as critical mass in innovation
HFRQRP\ 7KHUH DUH VHYHUDO GH¿QLWLRQV RI LQQRYDWLRQ processes, saying that the most successful economies of
used in economic environment of Latvia. In the National the world are those, which involve the largest possible
,QQRYDWLRQ&RQFHSWDFFHSWHGE\WKH&DELQHWRI0LQLVWHUV number of people, including front-line staff in creative
RQ)HEUXDU\LQQRYDWLRQLVGH¿QHGDV³SURFHVV thinking, doing, and exploitation of results The authors
ZKHUH QHZ VFLHQWL¿F WHFKQLFDO VRFLDO FXOWXUH DQG DJUHHZLWKWKHRSLQLRQWKDWDVOHVV³FUHDWLYHSHRSOH´DUH
other area developments and technologies are separated from the rest of society, as more successful is
UHDOLVHG DV D SURGXFW RU WHFKQRORJ\´ 1DWLRQDO &RQFHSW economy.
of Innovation, 2002). The development factors or elements have also been
During almost 100 years since innovation has been viewed and analysed in the context of regional economic
researched, scientists still in the whole world continue development. Intarakumnerd et al. (2002) and Padilla-
GLVFXVVLRQV DERXW GH¿QLWLRQ QDWXUH DQG TXDOLWLHV RI 3HUH]HWDOKDYHVWUHVVHGWKHUROHRILQGLYLGXDOV
LQQRYDWLRQ $V PXFK DV DPELJXRXV LV WKH GH¿QLWLRQ RI and institutions in acquisition, creation and exploration of
innovation, is opinion of researchers about the nature of knowledge as well emphasised the necessity for socially
innovation. The question - what is innovation: instrument and economically conductive environment promoting
(tool) for achievement of preferable result, action GHYHORSPHQW 9 0 &RKHQ DQG ' $ /HYLQWKDO
(process) or outcome (product, service) - has not been DUH DFFHQWXDWLQJ WKH VLJQL¿FDQFH RI D FRJQLWLYH SRZHU
unequivocally answered. $ 5RGULJXH]3RVH LV VWUHVVLQJ VRFLDO SROLWLFDO
.)UHHPDQSURPXOJDWHVRSLQLRQWKDW³«LQQRYDWLRQ and institutional environment of local territories.
in economic sense is commercial exploration of a new Some researchers (Granovetter, 1985; Knack and
SURGXFWSURFHVVV\VWHPRUIDFLOLW\´)UHHPDQ. Keefer, 1997; Zack and Knack, 2001) pay attention to
He as well as L.Soete holds a view that speed of economic social environment, highlighting, that positive social
development is directly dependent on emergence, environment and non-formal networks are promoting
development, and obsolescence of technological systems learning, transfer, and dissemination of knowledge much
and emphases the role of developing enterprises in more effectively than it is realised in formal environment.
innovation process. P. Drucker named innovation Non-formal approach is enabling to reach targets, which
³D VSHFLDO WRRO IRU HQWUHSUHQHXUVKLS ZKLFK HQGRZV FDQQRW EH UHDOL]HG ZLWKRXW VRFLDO FRQWDFWV DQG PXWXDO
UHVRXUFHV ZLWK DELOLW\ WR FUHDWH ZHOIDUH´ 'UXFNHU 3 FRQ¿GHQFH7ULJLOLD
% 7ZLVV FDOOV LQQRYDWLRQ ³D SURFHVV ZKHUH Researchers of innovation and its systems as well
LQYHQWLRQ RU LGHD DFTXLUHV HFRQRPLF FRQWHQW´ researchers of regional economic development, whose
) 1LNVRQ GH¿QHV LW DV ³WRWDOLW\ RI WHFKQLFDO SURGXFWLRQ works have been studied by the authors of the article,
DQG FRPPHUFLDO PHDVXUHV ZKLFK LV LQÀXHQFHG E\ have regarded innovation and economic development as
QHZ RU LPSURYHG SURGXFWLRQ SURFHVVHV DQG IDFLOLWLHV´ regionally ongoing processes, where local (in the context
$EHOWLŪD$ of the article - regional) social and institutional elements
In nowadays, in the international environment the play an essential role. Only their opinions split on the
explanation of innovation elaborated by the group of TXHVWLRQZKLFKWKHPRVWVLJQL¿FDQWRIWKHVHHOHPHQWVDUH
H[SHUWV HVWDEOLVKHG E\ WKH 2(&' 2UJDQLVDWLRQ IRU The authors of the article summarised the elements and
&RRSHUDWLRQ DQG (FRQRPLF 'HYHORSPHQW DQG LQFOXGHG structured them into four groups, taking into account both:
in Frascati Manual is widely used. In accordance with innovation and regional economic development aspects,
\HDU¶V HGLWLRQ RI WKH PDQXDO LQQRYDWLRQ LV ³DOO RI QDPLQJWKHP³HOHPHQWVRILQQRYDWLRQV\VWHPQHFHVVDU\
WKH VFLHQWL¿F WHFKQRORJLFDO RUJDQL]DWLRQDO ¿QDQFLDO IRUSURPRWLRQRIUHJLRQDOHFRQRPLFGHYHORSPHQW´7KH\
and commercial steps, including investments in new DUH5(6285&(6ODQGQDWXUDOUHVRXUFHVDQGPDWHULDO
knowledge, which actually, or are intended to, lead to DQG WHFKQLFDO EDVLV 3$57,&,3$176 2) (&2120,&
the implementation of technologically new or improved 6<67(0 $1' 7+(,5 &2*1,7,9( 32:(5 LQGLYLGXDOV
SURGXFWVDQGSURFHVVHV´)UDVFDWL0DQXDO enterprises, and public and private institutions promoting
The proposed explanations of innovation and its innovation); INSTITUTIONAL FRAME (formal mechanisms
nature differ and continue to progress as interpretations created for coordination of economic processes: politics,

ISSN 1691-3078
OHJLVODWLRQDQGUHJXODWRU\V\VWHPRIRSHUDWLRQ62&,$/ organic and functional food. Natural resources of the

ENVIRONMENT (generally accepted public opinion, region are appropriate for production and processing of
cultural and behaviour traditions and habits, and place such food, yet most of the food producers and processors
and role of individuals and institutions in local, national, of the region are not ready to start a business in a new
and international networks). All the elements were niche and compete in global markets.
UHVHDUFKHG LQ 9LG]HPH 3ODQQLQJ 5HJLRQ ZKLFK ZDV The authors have also analysed other natural
viewed and analysed in the context of a planning region, UHVRXUFHV EXLOGLQJV WUDI¿F LQIUDVWUXFWXUH DQG
the territorial unit of which is determined and approved telecommunication networks. In addition, the role
LQ WKH 5HJXODWLRQ 1R ³5HJXODWLRQV RQ 7HUULWRULHV RI of location of the region as innovation element was
3ODQQLQJ5HJLRQV´DSSURYHGE\WKH&DELQHWRI0LQLVWHUV analysed in scope of the research. The authors agree
of the Republic of Latvia on 5 May 2009. ZLWKWKH¿QGLQJVRIRWKHUUHVHDUFKHUVWKDWORFDWLRQODQG
PDWHULDO DQG WHFKQLFDO UHVRXUFHV DUH VLJQL¿FDQW \HW
2. Vidzeme Planning Region in situation of these attributes cannot create innovation by themselves.
global competition They become valuable when ideas and knowledge are
Authors have researched four groups of innovation created about their exploitation. Whereas, ideas and
elements: 1) resources; 2) participants of economic knowledge are the basis for innovation.
system and their cognitive power; 3) institutional frame; Participants of economic system and their
4) social environment. The article includes more detailed cognitive power. Information about participants was
LQIRUPDWLRQDERXW¿QGLQJVZLWKUHJDUGWRSDUWLFLSDQWVRI gathered and analysed in this chapter, considering
economic system, their cognition, and institutional frame TXDQWLWDWLYH DQG TXDOLWDWLYH LQGLFDWRUV &RJQLWLYH SRZHU
IROORZHG E\ D VKRUW VXPPDU\RI ¿QGLQJV ZLWK UHJDUG WR means - ability of individuals and institutions to perceive,
resources and social environment, accentuating the most acquire, evaluate, and apply knowledge.
VLJQL¿FDQWFRJQLWLRQV ,Q DFFRUGDQFH WR WKH GDWD SURYLGHG E\ WKH &HQWUDO
Resources 9LG]HPH 3ODQQLQJ 5HJLRQ LV ORFDWHG LQ Statistical Bureau, the total number of inhabitants in
the northeast part of Latvia and the European Union and 9LG]HPH3ODQQLQJ5HJLRQZDVDWWKHEHJLQQLQJ
LV /DWYLD¶V PDMRU UHJLRQ E\ VL]H WKRXVDQGV km²), of 2012, and it is 10.3% of the total number in Latvia.
covering 23.6% from the total area of the country. The The comparison of the data of 2012 with the data of
region has 290 km long internal border with Estonia 2007 (total number - 240 347) reveals 5% decrease. The
and 46.4 km long external European Union border number of economically active inhabitants has slightly
with the Russian Federation. Spatially and functionally, increased (0.4%) between 2009-2011, whereas the
the region is linked with Latgale, Riga, and Zemgale number of people until economically active age slightly
planning regions. The region has a large number and decreased (0.5%). The present provision of labour force
various natural resources. Besides, 51.7% of the area is can be viewed as satisfactory. Though, some data is
covered by forests, and it is 26% of the whole countries’ raising authors’ concerns about the future: the region
wood resources. Whereas, 34% of the region’s area is LV WKH ODUJHVW LQ VL]H DPRQJ RWKHU UHJLRQV \HW WKH
agricultural land, which is an important recourse for number of inhabitants is proportionally the smallest;
agriculture, which for its part is producing food products there are only 29 877 persons until age of 14 living
and raw materials for food production. The region is rich LQ 9LG]HPH 3ODQQLQJ 5HJLRQ DQG LW PDNHV XS
in landscapes, protected landscape districts, protected from the region’s inhabitants (corresponding indicator in
nature areas, parks, reservations, rivers, and lakes. =HPJDOH.XU]HPH±/DWJDOH±
There are 95 mineral deposits in the region in accordance The education level of inhabitants of the region
to the data of Latvian Environment, Geology and was analysed taking into account the data about
Meteorology Centre. The main types of mineral persons from age 25, when theoretically an individual
GHSRVLWVDUHSHDWTXDUW]VDQGGRORPLWHDQGFOD\ has graduated a college or a university, acquired
Moreover, 35.2% of the whole countries dolomite is higher education, and started a full time work.
SODFHG LQ 9LG]HPH 3ODQQLQJ 5HJLRQ /DWYLMDV UHJLRQX Table 1 below is showing that more than one third of
ekonomikas…, 2011). inhabitants have professional or vocational education.
The governors and managers of the resources very Less than 20% of the total number has acquired higher
often are not aware of possibilities and ways how the education and 43.75% inhabitants have secondary,
recourses can be applied as well have no capacity to use basic, or lower education level. Taking into consideration
these recourses effectively. This statement refers the most the role of critical mass and capacity of human
of mineral deposits, which are mainly used for production resources in innovation, these data should be viewed
of traditional materials and not so much demanded in very critically.
the market anymore. The researches and experiences While looking at the employment situation,
studied have given evidence that the minerals can be the authors found that most of the inhabitants are
used in unaccustomed areas. For example, clay is a raw employed by manufacturing industry (13 750 persons)
material for production of cosmetics, porcelain, paint, and nearly the same number in areas of wholesale
and products for agriculture. The research institutions and retail (12 426). Only 1724 persons (2.19%)
in Latvia have created and accumulated knowledge about ZHUH ZRUNLQJ LQ DUHD RI SURIHVVLRQDO VFLHQWL¿F DQG
qualities of minerals and their possible application, yet WHFKQLFDO VHUYLFHV &HQWUDO 6WDWLVWLFDO %XUHDX
it has been prevented due to the lack of collaboration There is no data available whether companies are
between researchers and governors and managers of employing researchers and high-level experts for
resources. There is increasing demand for high added development and implementation of new products and
value food products in the world markets, for example, technologies.

ISSN 1691-3078
Table 1
Education level of inhabitants of Vidzeme Planning Region on 1 March 2011
Number of % from the total

Education level
persons number
Total number of inhabitants (age 25-74), inter alias: 131 420 100
Doctor’s degree 138 0.11
Higher education 25 261 19.22
Professional or vocational education 48 525 36.92
Secondary education 31 714 24.13
Basic/elementary education 23 401 17.81
Education lower than basic/elementary 2 129 1.62
Illiterate persons 252 0.19
Source: authors’ construction based on the data of population census, aggregated by the Central Statistical Bureau
(2011)
Table 2
Change of number of economically active statistical units in Vidzeme Planning Region in the time period
2008-2010
Economically active statistical units

2008 2009 2010
depending on legal status
Total: 13964 13883 14533
Self-employed persons 6074 6279 6634
Individual merchants 908 912 900
&RPPHUFLDOFRPSDQLHV 3882 3864 4010
3HDVDQWDQG¿VKHUPHQ¶VIDUPV 3100 2828 2989
Number of economically active individual merchants and
20.2 20.4 21.1
commercial companies on 1000 inhabitants
Source: authors’ construction based on the data of the State Regional Development Agency (2012)
There were 14 533 economically active statistical There is a large number of public and private
XQLWV LQ 9LG]HPH 3ODQQLQJ 5HJLRQ LQ &HQWUDO institutions directly or indirectly supporting and promoting
Statistical Bureau, 2012). The data in Table 2 provide LQQRYDWLRQLQWKHUHJLRQWKH$GPLQLVWUDWLRQRI9LG]HPH
information that the major type of business in the Planning Region, 26 local municipalities, three research
region is self-employment (45.65%), but the least - LQVWLWXWLRQV 9LG]HPH 8QLYHUVLW\ RI $SSOLHG 6FLHQFHV
LQGLYLGXDO PHUFKDQWV &RPPHUFLDO FRPSDQLHV seven professional and lifelong learning education
are composing nearly one third (27.59%) of the total institutions, two business and innovation incubators,
number. The comparison of the data between 2008 and 9LG]HPH )RRG &OXVWHU DQG PRUH WKDQ RWKHUV LQ WKH
2010 reveals the increase of the total number for almost region and 60 in the country.
5%, and it has to be valued positively. Institutional frame. The overall scope of the
While analysing the data of enterprises’ performance, research includes more detailed analysis of institutional
LW VKRXOG EH FRQVLGHUHG WKDW PHGLXP DQG ODUJH VL]H frame, also observing national and European policies,
companies exporting products and services provide the legislation, and regulations. The article includes summary
PRVW VLJQL¿FDQW FRQWULEXWLRQ WR UHJLRQDO GHYHORSPHQW of the part of the study with regard to institutional
These companies have already learned to sight global IUDPH RI 9LG]HPH 3ODQQLQJ 5HJLRQ ZKLFK SHUIRUPV
PDUNHW GHPDQGV DQG ¿QG SRVVLELOLWLHV KRZ WR UHVSRQG activities in accordance to its main policy document -
to these demands. This let the authors to conclude that 9LG]HPH 3ODQQLQJ 5HJLRQ 'HYHORSPHQW 3URJUDPPH IRU
participation in international environment is raising 2007-2013. The programme as well as programmes of
awareness on manifold nature of resources and processes local municipalities include measures aimed to support
and is creating the basis for development of cognitive innovation and entrepreneurship. The authors analysed
power, which is a precondition for innovation. Micro and several programmes and found that the programmes of
VPDOO VL]H HQWHUSULVHV DUH RSHUDWLQJ DW ORFDO QDWLRQDO local municipalities frequently do not respond to existing
markets, or external markets located very nearby: Russia, situation and the measures planned are not based on
/LWKXDQLDDQG(VWRQLD:KLOHZRUNLQJLQDPRUH³QDUURZ´ resources available and their exploitation possibilities.
market, which demands mainly traditional products and 6RPHWLPHV SURJUDPPHV DUH UHÀHFWLQJ WKH REMHFWLYHV
services, companies are not aware of global challenges and priorities stated in national policies as the relevance
and are not motivated for innovation. of local plans to national is one of evaluation criteria

ISSN 1691-3078
Table 3
Attitude towards civic values depending on the age of inhabitants
IURPWKHDJHJURXSDQVZHUV©VLJQL¿FDQWªDQG©YHU\VLJQL¿FDQWªDUHVXPPHGn = 1004, of them - 103
UHVSRQGHQWVZHUHLQKDELWDQWVRI9LG]HPH3ODQQLQJ5HJLRQ
Consideration of laws Responsibility to pay Wish to be informed about

Age group
and rules taxes ongoing in the society
All 87.1 77.0 75.8
18-24 82.6 73.1 70.2
25-34 86.2 67.4 73.4
35-44 89.4 77.6 72.8
45-54 87.6 76.9 78.7
55-74 88.2 85.1 80.1
Source: Latvia. Human Development Report 2010/2011. National identity, mobility and capacity, 2011
when municipalities are applying for the EU funds. The to realise measures promoting society’s awareness of
VHFRQG VLJQL¿FDQW DVSHFW ZHOO VHHQ LQ WKH SURJUDPPHV VLJQL¿FDQFHRISD\LQJWD[HVDVZHOOPHDVXUHVSURPRWLQJ
is the wish of municipalities to improve their public improvement of laws and regulations that affect
infrastructure at any price in buildings, the suitableness entrepreneurship and innovation.
RI ZKLFK LV GLI¿FXOW WR XQGHUVWDQG LQVWHDG RI LQYHVWLQJ Awareness of ongoing in the society is another
in measures promoting economic activities. Although important aspect for innovation. Information can reach
local municipalities have included innovation and inhabitants occasionally and through purposeful search.
entrepreneurship support measures in the programmes, 7KHDXWKRUVZRXOGQRWOLNHWRGHQ\WKHVLJQL¿FDQFHDQG
practically support frequently ends with dissemination value of occasionally obtained information as some
of information about the EU Structural funds available ³TXDOLWDWLYH´ LQIRUPDWLRQ QHFHVVDU\ IRU GHYHORSPHQW RI
for enterprises. The results of the survey of local productive knowledge, can be found by chance in media,
PXQLFLSDOLWLHVSURYLGHGE\WKH$GPLQLVWUDWLRQRI9LG]HPH PRVW RIWHQ LQ LQWHUQHW QHZVSDSHUV DQG PDJD]LQHV DV
Planning Region in 2012, show that municipalities do not well through personal contacts. However, purposeful
cooperate with enterprises located in their territories searching is more essential for the development of
(Inovaciju ekonomikas attistibas…, 2012). productive knowledge. In order to understand how
There are two other documents including aspects of LQTXLVLWLYH LQKDELWDQWV DUH WKHLU ³ZLVK WR EH LQIRUPHG
innovation and elaborated by two distinguished groups DERXW RQJRLQJ LQ WKH VRFLHW\´ ZDV VWXGLHG E\ WKH
RI H[SHUWV LQ 7KH GRFXPHQW Ä/DWYLMDV UHJLRQX authors. Looking at the data in Table 3 (above), it is
HNRQRPLNDV DWWLVWLEDV SHUVSHNWLYDV XQ YLU]LHQL evident that inhabitants over age 45 are more willing
´ Ä9LG]HPHV LOJWHUPLQD DWWLVWLEDV VFHQDULMX to be informed than people in the age group 18-44. In
DQDOLWLVNDLV]LQRMXPV´%RWKGRFXPHQWVKDYHSHUPLVVLYH addition, education level affects the wish to be informed.
character. However, the second one should be highlighted If 81.2% respondents having higher education are willing
with the regard to innovation as it accentuates the to be informed, then the rate between inhabitants having
connection and interrelation of regional and global primary and lower education is only 67.8% (Latvija.
HFRQRP\WKHUROHRIVSHFLDOL]DWLRQIRUPDODQGQRQIRUPDO Parskats par..., 2011). There are no data available about
cooperation, and networking necessary for innovation WKHYROXPHRI³TXDOLWDWLYH´LQIRUPDWLRQLQWKHWRWDOUDQJH
(Vidzemes ilgtermina attistibas…, 2011). The document of information accessible and how inhabitants have used
is a good tool for encouragement and development of it so far. Possibly, lower wish to be informed among
communication among various stakeholders interested in younger people and people with lower education level
innovation. can be interpreted with lower cognitive power to appraise
Social environment. Although these elements were the value of information, differentiate the qualitative one
studied more broadly, the article includes an overview from inferior, and apply it.
of the study about attitude of inhabitants towards civic
values: consideration of laws and rules, responsibility to 3. Evaluation of possibilities to increase
pay taxes, and wish to be informed about ongoing in the capacity of innovation system elements and
VRFLHW\DVWKHVHDVSHFWVKDYHWREHYLHZHGDVVLJQL¿FDQW their impact on regional development
with regard to innovative entrepreneurship and economic Information and data acquired lead to the conclusion
development. Looking at the data in Table 3 (below) it WKDW9LG]HPH3ODQQLQJ5HJLRQKDVDOOWKHPRVWHVVHQWLDO
can be presumed that all age groups are dutiful (87.1% innovation elements, yet the capacity of these elements is
at the average), however the opinion about responsibility LQVXI¿FLHQWDQGWKHUHLVQHFHVVLW\WRLQFUHDVHLW,WFDQEH
to pay taxes is much more lower (77% at the average). realised by exploiting external and internal resources and
Moreover, inhabitants of the age group 25-34 years, available support tools and mechanisms. The hypothesis
potentially the most active entrepreneurs and innovators, of the research - increase of capacity of elements of
are more negative towards responsibility to pay taxes - innovation system can have impact on the development
only 67.4%. Such trend is highlighting the necessity RI9LG]HPH3ODQQLQJ5HJLRQ±LVYLQGLFDWLQJFRQVLGHULQJ

ISSN 1691-3078
that the region has all the most essential elements, there 4) assuming all the calculations and assumptions,
are possibilities for their exploitation, and there is a 0.12% increase of income tax (per inhabitant) can
possible impact on the region’s development. The authors be prognosticated;
provided an evaluation of anticipated economic impact in 5) the increase of local municipalities’ income will
a case if two indicators used for measuring innovation HQVXUH ¿QDQFLDO UHVRXUFHV QHFHVVDU\ IRU PHDVXUHV
and development level (applied by the EU Statistical promoting development.
Bureau and included in the EU Scoreboard report) would The obtained results enable the authors to
change. The indicators are: prognosticate positive improvements in the indicators
1. Amount of funding used for research and of innovation and regional economic development and
technological development (RTD) (% from FRQ¿UPWKHK\SRWKHVLV
GDP). &KDQJH RI WKH LQGLFDWRU DIIHFWV SURFHVVHV
ongoing outside VPR (decision of the national
government to increase budget for RTD).
2. Number of economically active individual recommendations
merchants and commercial companies per 1. The range of theoretical aspects of nature, elements
1000 inhabitants. &KDQJH RI WKH LQGLFDWRU DIIHFWV and systems of innovation is comprehensive and
processes ongoing inside and outside VPR (in the manifold.
region: economic and entrepreneurship activities 2. 7KH PRVW VLJQL¿FDQW HOHPHQWV RI LQQRYDWLRQ
of inhabitants, availability and quality of support system are resources, participants of economic
institutions, and other; outside the region: laws system and their cognition, institutional frame,
supporting entrepreneurship and innovation, and informal social environment. The existence
supporting tools and mechanisms for starting and and presence of all the mentioned elements is a
developing of innovative business). precondition for innovation. Feasibility, creation
Amount of funding used for research and technological and implementation of innovation directly
development (% from GDP) have a direct impact on depend on capacity of the elements of innovation
the number of applied patents, and applied patents system.
have impact on the number of commercial enterprises 3. 7KH FDSDFLW\ RI WKH HOHPHQWV RI 9LG]HPH UHJLRQ
potentially to be established and developed. The data LQQRYDWLRQ V\VWHP LV QRW VXI¿FLHQW IRU KDYLQJ D
from EUROSTAT was used for further research. In the next substantial positive impact on innovation and growth
part of the research, the authors used the calculations of the region. Internal and external intervention
and assumptions: is required for strengthening of the capacity of
1) assuming that the government of Latvia decides innovation elements.
to increase funding for RTD for 1%, the number of 4. Participants of regional economic system have
patents applied per 1 million inhabitants in Latvia will substantially distinct comprehension about
increase for 98 patents; innovation, elements necessary for innovation,
2) assuming that there are equivalent preconditions their own role, and the role of other participants in
created for development and innovation in all LQQRYDWLRQSURFHVVHV&RQQHFWLRQDQGLQWHUDFWLRQRI
the regions of Latvia, patents are applied evenly, the governors of resources, the owners of productive
appropriate to the number of inhabitants, thus, knowledge and the institutions promoting and
20.8 patents applied can be prognosticated in supporting innovation is weak.
9LG]HPH3ODQQLQJ5HJLRQ 5. ,QVXI¿FLHQW QXPEHU RI SURGXFHUV DQG XVHUV RI
The number of economically active individual productive knowledge has negatively affected
merchants and commercial companies per the development of innovation. The cognition of
1000 inhabitants is used for prognosis of income of participants of regional economic system is poor, and
ORFDO PXQLFLSDOLWLHV 7KLV LQGLFDWRU LV VLJQL¿FDQW DV SRVVLELOLWLHV IRU LWV GHYHORSPHQW DUH LQVXI¿FLHQW ,Q
municipalities’ income adjustment impacts the the region, human potential has not been assessed
development of local territories as well as the in the light of innovation.
ZKROH UHJLRQ 7KH GDWD IURP WKH UHSRUW Ä5HJLRQX 6. Processes promoting innovation are not coordinated
DWWLVWŝED /DWYLMD ´ ZDV XVHG LQ WKH IXUWKHU LQ 9LG]HPH 3ODQQLQJ 5HJLRQ WKXV GHFUHDVLQJ
research. Accordingly, the authors used the following innovation possibilities in the region.
calculations and assumptions:
1) if the number of economically active commercial Recommendations to the Administration of
companies per 1000 inhabitants increases for 1%, Vidzeme Plannin Region:
the income tax revenues in the budget of regional 1) to elaborate recommendations regarding the
municipalities will increase for 1.37% on the average; directions and priority measures to be included in
DVVXPLQJWKDWSDWHQWVZLOOEHDSSOLHGLQ9LG]HPH the next planning period (2014-2020) programmes
Planning Region, the establishment of 20 new for promotion and support of innovation in the
economically active commercial companies owning regions of Latvia and submit them to the Ministry of
productive knowledge can be prognosticated; Environmental Protection and Regional Development,
3) the establishment of 20 new economically active the Ministry of Education and Science, the Ministry of
commercial companies owning productive knowledge Economy, and to the authorities administrating the
will make 0.14% increase in relation to the overall European Union funds; .
number of region’s inhabitants and 0.09% increase 2) to develop and implement the innovation processes’
in relation to 1000 inhabitants; FRRUGLQDWLRQV\VWHPLQ9LG]HPH3ODQQLQJ5HJLRQ

ISSN 1691-3078
3) to establish a regional fund for provision of support Vol. 35, No1, Special Issue: Technology,
to research, technological development and 2UJDQL]DWLRQV DQG ,QQRYDWLRQ SS
LPSOHPHQWDWLRQRILQQRYDWLRQLQPLFURDQGVPDOOVL]H Retrieved: http://faculty.fuqua.duke.
companies. HGXaFKDUOHVZV%RFFRQL'XNH3DSHUV&
&RKHQ/HYLQWKDO$64SGI. Access: 06.10.2012
Recommendations to the Administration of 8. 'UXFNHU3)7+(35$&7,&(2),1129$7,21
Vidzeme Planning Regin, local municipalities, ,1129$7,21 $1' (175(35(1(856+,3 35$&7,&(
institutions supporting the development of $1' 35,1&,3/(6 +DUSHU 5RZ 1HZ <RUN
entrepreneurship, and innovation: pp. 288-290.
1) to study and gather data about competencies and 9. (GTXLVW & +RPPHQ / 6PDOO &RXQWU\
productive knowledge of participants of regional ,QQRYDWLRQ 6\VWHPV *OREDOL]DWLRQ &KDQJH DQG
economic system, and to identify opportunities Policy in Asia and Europe. Edward Elgar Publishing,
and advantages in exploration of the knowledge Ltd. pp. 531-533.
LGHQWL¿HG 10. EU Statistics database EUROSTAT. Retrieved: http://
2) to realise measures strengthening connection and epp.eurostat.ec.europa.eu/portal/page/portal/
interaction between governors of resources, owners eurostat/home/. Access: 10.10.2012
of productive knowledge, and institutions promoting 11. Frascati Manual (2002). ISBN92-64-19903-
and supporting innovation; ±2(&' S 5HWULHYHG KWWSZZZRHFG
3) to encourage the networking of participants of org/science/innovationinsciencetechnologyand
9LG]HPH UHJLRQDO HFRQRPLF V\VWHP ZLWK QHWZRUNV industryfrascatimanualproposedstandard
DQG LQVWLWXWLRQV HVWDEOLVKHG RXWVLGH 9LG]HPH practiceforsurveysonresearchandexperimental
Planning Region; development6thedition.htm.
4) to implement measures raising awareness of society 12. $FFHVV )UHHPDQ & 7+(
about innovation, processes of global economy, and (&2120,&62),1'8675,$/,1129$7,217+(0,7
SRVVLELOLWLHVRI9LG]HPH3ODQQLQJ5HJLRQLQWKHJOREDO 35(66+DJXH&+DJXH(%UHLWEDFK&
environment. Regional and local economic development. Palgrave
Macmillan, Hampshire: United Kingdom. pp. 49–50.
Retrieved: http://eur-lex.europa.eu/LexUriServ/
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2. Abeltina, A. (2008). Inovacija – XXI gadsimta
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the 21st FHQWXU\ %L]QHVD DXJVWVNROD Ä7XULED´
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5(*,21$/ (&2120,& '(9(/230(17 $ 5(9,(: Retrieved: http://www.csb.gov.lv/publikaciju_
/21'21 6&+22/ 2) (&2120,&6 $1' 32/,7,&$/ veikals?nocache=1. Access: 20.10.2012
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1.3.pdf.Access:05.10.2012 Human Development Report 2010/2011. National
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Weekly . THE FOUR KEY ELEMENTS OF INNOVATION: Brigita Zepa un Evija Klave. Riga: Advanced Social and
&2//$%25$7,21 ,'($7,21 ,03/(0(17$7,21 Political Research Institute. Pp. 154-.... Retrieved:
$1' 9$/8( &5($7,21 5HWULHYHG http://www. http://www.biss.soc.lv/downloads/resources/TAP/
stlouisfed.org/publications/br/articles/?id=1029. Latvija_TAP_2011.pdf. Access: 14.10.2012
Access: 03.10.2012 17. Latvijas regionu ekonomikas attistibas perspektivas
6. Bathelt, H. (2011). INNOVATION, LEARNING AND XQ YLU]LHQL (FRQRPLF HYHORSPHQW
.12:/('*( &5($7,21 ,1 &2/2&$/,=(' $1' perspectives and directions of Latvia regions)
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AND REGIONAL DEVELOPMENT (Eds.: Pike, A., Institute of Economics, Latvian Academy of
5RGULJXH]3RVH$7RPDQH\-5RXWOHGJH/RQGRQ Sciences. pp. 168-208. Retrieved: http://www.
pp. 149 -161. YLG]HPHOYOYHNRQRPLVNDLVBSUR¿OV. Access:
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&$3$&,7<$1(:3(563(&7,9(21/($51,1*$1' 18. Lindegaard S. (2010). THE OPEN INNOVATION
INNOVATION. Administrative Science Quarterly, 5(92/87,21 (66(17,$/6 52$'%/2&.6 $1'

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LEADERSHIP SKILLS. John Wiley&Sons, Inc. 24. 3DUVNDWV ³5HJLRQX DWWLVWLED /DWYLMD ´ 6XUYH\
Hoboken, New Jersey, USA. p 22-24. ³'HYHORSPHQW RI 5HJLRQV LQ /DWYLD ´
19. 7KH &DELQHW 5HJXODWLRQV RI WKH 5HSXEOLF RI /DWYLD State Regional Development Agency. Retrieved:
1R RI ³5HJXODWLRQV RQ 7HUULWRULHV http://www.vraa.gov.lv/lv/parskats/parskats2011/.
RI 3ODQQLQJ 5HJLRQV´ 5HWULHYHG www.likumi.lv. Access: 13.10.2012
Access: 22.09.2012 25. 3DVYDOGLEX DSWDXMD Ä,QRYDFLMD /DWYLMDV SDVYDOGLEDV´
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7+(&5,6,6$623325781,7<)25&+$1*( Aalborg municipalities) (2011). State Regional Development
University. Pp. 4-7. Retrieved: http://create2009. Agency. Retrieved: http://www.vraa.gov.lv/uploads/
HXURSDHXILOHDGPLQ&RQWHQW'RZQORDGV3') SHWQLHFLEDSHWLMXPL,QRYDFLMDVBDSWDXMDVBUH]XOWDW
Ambassadors/Lundvall_myopinion.pdf . Access: pdf. Access: 05.10.2012
05.10.2012 26. Smihula D. (2010). Waves of technological innovations
21. Lundvall B., Johnson B., Andersen E.S., Dalum B. and the end of the information revolution. JOURNAL
1$7,21$/ 6<67(06 2) 352'8&7,21 2)(&2120,&6$1',17(51$7,21$/),1$1&(9RO
,1129$7,21 $1' &203(7(1&( %8,/',1* 2(4), pp. 58-67. ISSN 2006-9812©, 2010, Academic
Elsevier Science B.V., Research Policy 31 (2002). Journals. Retrieved: http://www.academicjournals.
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evolution/esapapers/esa01/RPike.pdf. Access: 05.10.2012
pp 213–231. 27. Valtenbergs V., Klepers A., Ebele I., Rocans K.,
22. 1HOVRQ 5 :+$7 0$.(6 $1 (&2120< 6XOFH * 9LG]HPHV LOJWHUPLQD DWWLVWLEDV
352'8&7,9( $1' 352*5(66,9(" :+$7 $5( VFHQDULMX DQDOLWLVNDLV ]LQRMXPV (Analytical Report
THE NEEDED INSTITUTIONS? Staff Papers 13728, RI 9LG]HPH /RQJ7HUP 'HYHORSPHQW 6FHQDULR
University of Minnesota, Department of Applied 9LG]HPH SODQQLQJ UHJLRQ 5HWULHYHGhttp://
Economics. Retrieved: NEP-ALL-2006-10-07. Access: ZZZYLG]HPHOYXSORDG9LG]HPHVBVFHQDULMXB
11.11.2012 DQDOLWLVNDLVB]LQRMXPVSGI. . Access: 16.10.2012
23. Niosi J. (2002). National systems of innovations are 28. 9LG]HPHV UHJLRQD DWWLVWLEDV SURJUDPPD
³[HI¿FLHQW´ DQG [HIIHFWLYH :K\ VRPH DUH VORZ 'HYHORSPHQW 3URJUDPPH RI 9LG]HPH 5HJLRQ
learners, Research Policy 31 (2002). pp. 291–302. 9LG]HPH 'HYHORSPHQW $JHQF\ 5HWULHYHG
Retrieved: http://www.er.uqam.ca/nobel/r21010/ KWWSZZZYLG]HPHOYOYDWWLVWLEDVBSURJUDPPD.
document/1326.pdf. Access: 04.10.2012 Access: 16.10.2012

ISSN 1691-3078
K. Naglis-Liepa, M. Pelse Adaptation of Bioenergy Village Concept in Small Towns of Latvia
ADAPTATION OF BIOENERGY VILLAGE CONCEPT IN

SMALL TOWNS OF LATVIA
Kaspars Naglis-Liepa1, Mg.oec., lecturer; Modrite Pelse, Dr.oec., assoc.profesor

Abstract. (QHUJ\ SROLF\ LV D VLJQL¿FDQW FRPSRQHQW RI WKH (XURSHDQ 8QLRQ (8 VXVWDLQDELOLW\ SROLF\ $ORQJ ZLWK
transnational agreements, which determine the development of energy sector in accordance with the environmental,
competition, availability, and supply aspects, local initiatives also exist, including bioenergy villages.
Bioenergy villages are an example of a sustainable policy implementation at the lowest level of administrative territories.
The positive aspect of bioenergy villages appears in the support of local public as well as in the positive effect of a
ELRHQHUJ\YLOODJHRQDJULFXOWXUHDQGWKHHQYLURQPHQW%\HVWDEOLVKLQJORFDOUHVLGHQWLDOSODFHVWKDWDUHVHOIVXI¿FLHQW
with bioenergy, sustainable development is stimulated not only at the local, but also national level. The aim of the
present paper is to calculate, by means of a simulation model, the amount of resources needed for the establishment
and operation of a bioenergy village and its effects on greenhouse gas (GHG) emissions and resource imports.
By developing and exploiting a simulation model for a bioenergy village, which was based on the authors’ calculations
on economic and environmental effects of biogas production as well as assumptions and calculations regarding the
use of biomass and information on the output and consumption of energy in Auce town, it was found that establishing
DELRHQHUJ\YLOODJHZRXOGKDYHWKHIROORZLQJSRVLWLYHDIIHFWV*+*HPLVVLRQVZRXOGGHFUHDVHE\W&22eq a
year, local agriculture would have to supply the necessary biogas substrate – 4 233.3 t of silage and 15 366.7 t of
cattle liquid manure, imports of resources (energy and fertilisers) would decline by a value of LVL 199 060.69 a year,
and the cost of thermal energy for residents would not change.
Key words:ELRHQHUJ\YLOODJHELRJDVELRPDVVHQHUJ\VHOIVXI¿FLHQF\
JEL code: available on: Q42; R11
Introduction resources of high value (gas, oil, and wood), but also
Presently, the dominant equipment for large- industrial and household wastes. Such a perspective
scale energy production may be characterised by high LV QRW QHZ DV LW DFWXDOO\ UHÀHFWV :ROPDQ¶V LGHD RQ WKH
SURGXFWLRQHI¿FLHQF\DQGORZSHUXQLWFRVW$WWKHVDPH PHWDEROLVPRIFLWLHVWKDWVXJJHVWVYLHZLQJFLWLHVDVÀRZV
time, large production capacity is an equivalent for of energy and resources. The sustainable development
relatively long distances for the delivery of resources and of a 21st century city is not imaginable without GHG
products (electricity and thermal energy) as well as huge emissions and analyses of energy resources (Kennedy et
quantities of resources harming the environment (Ayres al., 2011). An idea about the establishment of bioenergy
et al., 2007). Manfred and his colleagues (Manfred et al., villages is proactive, which actually is the result of
2011) point to a change in the paradigm for establishing developing the city metabolism idea. Bioenergy villages
energy supply systems. In the future, an essential DUHSRSXODWHGWHUULWRULHVZKHUHHQHUJ\QHHGVDUHVDWLV¿HG
role will be played by micro-networks, information and with local alternative energy biomass resources, thus
communication technologies (virtual energy networks increasing the economic, environmental, and agricultural
and intelligent power grids) as well as an integrated sustainability of a local community.
energy supply system. The research aim is to calculate, by means of a
Decentralised energy production is local energy simulation model, the amount of resources needed for
production; it is located close to a consumer and it uses the establishment and operation of a bioenergy village
local resources. In the case of Latvia, the determinant and its effects on GHG emissions and resource imports.
factors have to be searched for in historical background, The research tasks are as follows: 1) to develop a model
especially it relates to the location of a gas pipeline for energy production in a bioenergy village in order
that determined the possibilities of a decentralised to obtain economic and environmental data for energy
production; 2) to assess the gained results by comparing
energy generation facility for using natural gas for
them with the alternative of fossil energy use. The
cogeneration (Pelse et al., 2011). However, sustainable
research object is energy supply in Auce town, and the
energy supply is associated not only with the location of
research subject is a possibility to establish a bioenergy
energy production, but also with a more complete use of
village, based on the resources of Auce town.
resources, which would also include waste recycling as
well as active support of the public for changes in energy
consumption. Actually, local regions, cities, towns, and Research results and discussion
YLOODJHVWU\WRHQKDQFHWKHÀRZRIHQHUJ\E\FRQVXPLQJ R.Mangoyana and T.Smith (2011), when analysing
an energy mix characteristic of their potentialities and several bioenergy village models worldwide, found that
wishes, which would contain not only primary energy only one best bioenergy village model does not exist. It is
___________________________
&RUUHVSRQGLQJDXWKRUE-mail: kasparsnl@inbox.lv
1

ISSN 1691-3078
Fig.1. Block scheme for calculations for the model of energy production in a bioenergy village
due to different ways of energy production, different uses village contains the following energy production
of products, different kinds of energy sources, different components:
amounts of output, different target groups of consumers — biogas cogeneration (electricity and thermal energy
as well as different forms of cooperation. Success is based is produced);
on synergy among support for the consumption of energy — wood is used to generate thermal energy.
UHVRXUFHV¿QDQFLDOUHVRXUFHVWHFKQRORJLFDONQRZOHGJH These two components were combined in a single
national support policies and the readiness of institutions bioenergy village model. To compare the obtain results
for cooperation, as well as direct gains, mainly economic, with the presently dominant energy supply in towns, the
and a great role is played by the support and participation authors included also a component of fossil resources:
of local public. German researchers Andre Wuste and Peter — fossil energy option.
Schmuck (2012) carried out interviews and ascertained A bioenergy village, in accordance with the basic
WKHRSLQLRQVRILQLWLDWRUVLQELRHQHUJ\YLOODJHVWR¿QG prerequisites for establishing a bioenergy village, has to
out the motives that drove them to establish a bioenergy provide itself with half of the electricity and the whole
village. In short, a successful bioenergy model depends amount of thermal energy consumed by its residents. In
on several factors: development prospects for a village Auce town, 3867 people resided (2011 data), consuming
or small town, available resources and infrastructure, annually 6805 MWh of thermal energy and 3765 MWh of
public support and common regional and environmental electricity.
government policies. A block scheme for calculations for the model of
In the present paper, the authors elaborated a energy production in a bioenergy village is presented in
bioenergy village model based on the example of Auce Figure 1.
town. Such a choice was made owing to the fact that a A biogas production facility providing a bio-village
biogas cogeneration power plant (capacity of 0.26 MW) with electricity and partially with thermal energy is
is presently operated in Auce. Previously, this town had considered a priority. The remaining amount of thermal
no natural gas infrastructure; therefore, the town already energy is supplied by a boiler house running on wood.
now partially provides itself with energy from renewable The necessary amount of energy determines the
sources. A model for energy production in a bioenergy necessary amount of primary resources that compose

ISSN 1691-3078
Table 1
Characteristics of the wood exploitation component in the bioenergy model for a small town
Kind and amount of Total cost

primary resources Value Import energy
(including
¿UHZRRGP3, of fuel substitution
support for
Indicator (woodchips) bulk m3 resources, effect, LVL, a
investment),
LVL year
¿UHZRRG woodchips LVL, a year
Total for a bioenergy town 3 367 4 761 78 573.00 138 543.39 117 946.92
Per MWh of thermal energy 0.9896 1.3996 11.55 20.36 17.33
Table 2
Characteristics of biogas cogeneration in the bioenergy model for a small town
Kind and amount of Total cost Necessary UAA, Import energy GHG
primary resources, t (including ha, for substitution emissions
Indicator support for
effect, LVL, a produced,
/LTXLG investment),
year t COHT
Silage LVL, a year Silage Forage
manure
Total for a bioenergy
4 233.3 15 366.7 244 476.00 84.7 683.4 106 822.00 93.5
town
Per MWh of
2.85 26.08 117.54 0.0407 0.3286 51.36 0.0449
electricity
Note: an amount of energy produced from substrates is equal to 1 484 655 kWh for silage and 599 300 kWh for liquid
manure
the component of energy costs. Besides, these primary considered a tariff for consumers. The import substitution
resources determine the necessary utilised agricultural value is equal to 17.33 LVL/MWh, i.e. the production of
area (UAA) as well as the amount of fertilisers saved a MWh of thermal energy from wood improves foreign
owing to using digestate as a fertiliser in agriculture. trade balance by LVL 17.33, compared with the situation
The saved amount of fertilisers increases the import if this energy is produced from natural gas. The GHG
substitution value that is affected by the amount of emissions are assumed to be neutral, thus causing no
energy generated in a bioenergy village and the value pollution.
of a unit of imported energy. Total cost is affected by Biogas cogeneration. The calculations for biogas
LQYHVWPHQW DQG PDLQWHQDQFH FRVWV DV ZHOO DV ¿QDQFLDO exploitation are not orientated towards fully meeting
support for renewable energy. Based on the exergy the demand for thermal energy in the small town, but
method, total cost is divided into the cost of electricity towards the production of electricity. The selected
and the cost of thermal energy, which, depending on the ELRJDV FRJHQHUDWLRQ SRZHU SODQW H[SORLWV PDL]H VLODJH
amount of energy generated, determines the cost of a and manure as inputs. As any cogeneration power
unit of energy. GHG emissions are determined by the plant, the biogas cogeneration power plant produces
amount of biogas energy and the GHG emission factor several kinds of energy, in this particular case – electric
for biogas. GHG emissions caused by burning wood are and thermal energy. Different periods of demand
not included in the calculations, as it is assumed that for heat and electricity have to be taken into account.
the use of wood in energy production does not affect the The demand for electricity lasts all year long and
potential of global warming. FKDQJHV LQVLJQL¿FDQWO\ ZKHUHDV WKH GHPDQG IRU KHDW
Use of wood for generating thermal energy. is explicitly seasonal. It is assumed in the calculations
Thermal energy production, based on using wood, is that the main product is electricity, and the operating
FKDUDFWHULVHGE\IXOOVHOIVXI¿FLHQF\ZLWKWKHUPDO hours of a cogeneration power plant total 8 000 a year.
energy in Auce town. Half of the necessary amount of &KDUDFWHULVWLFV RI ELRJDV FRJHQHUDWLRQ DUH SUHVHQWHG
WKHUPDO HQHUJ\ LV SURGXFHG IURP ¿UHZRRG DQG KDOI in Table 2.
from woodchips. Actually, it is a heat supply option that If comparing the characteristics of the biogas
is widespread in small towns and villages of Latvia. production component (Table 2) with those of wood
&KDUDFWHULVWLFV RI WKH ZRRG H[SORLWDWLRQ component are exploitation for heat production (Table 1), the complexity
presented in Table 1. and capital-intensiveness of biogas production become
According to the data, the proportion of primary explicitly apparent.
resources is quite high. The heat production cost is The total cost of biogas production is much higher
relatively low – 20.36 LVL/MWh, yet, it has to be taken if calculated per MWh. Yet, it is important to note
into consideration that, in this case, additional taxes are that these indicators may not be compared in a direct
not included in the calculations and this cost may not be way because:

ISSN 1691-3078
Table 3
Comparison of the alternatives for producing bioenergy and fossil energy in the
bioenergy model for a small town
Unit of Fossil energy

Indicators Bioenergy town
measure option
Thermal energy needs MWh 6804.60 6804.60
Electricity needs MWh 3765.10 3765.10
t 4233.3 t of silage
239 695 m3 15366.7 t of liquid manure
Needs for resources
m 3
RIOLTXH¿HGJDV 2636.4 m3RI¿UHZRRGEXON
ber.m3 m3 of woodchips
Value of fuel resources LVL/kWh 0.064 0.021
Thermal energy output MWh 6 804.60 6 804.60
Electricity output MWh 0 2 080.0
7KHUPDOHQHUJ\VHOIVXI¿FLHQF\ % 100 100
(OHFWULFLW\VHOIVXI¿FLHQF\ % 100* 55.2
Investment in equipment LVL, a year 14 666.67 82 410.00
Maintenance cost LVL, a year 44 709.69 125 810.39
Substrate cost LVL, a year 433 847.95 190 458.36
Total cost LVL, a year 493 224.31 398 678.75
Support for investments LVL, a year - 32 964.00
Support for production (electricity) LVL/kWh - 0.10 - 0.149
Total cost, including support LVL, a year 493 224.31 365 714.75
Thermal energy cost Ls/kWh 0.072 0.030
Electricity cost Ls/kWh 0.035* 0.076
Amount of emissions produced W&22eq 1886.24 93.5
Import substitution value LVL, a year -1825.31 199 060.69
LWLVDVVXPHGWKDWWKHSXEOLFSURGXFHUSURYLGHVLWDWDWDULIIVHWE\WKH38&
1) regardless of energy unit, the amount of energy Fossil energy option. The authors calculated
actually is different, as electricity is a higher level the option of energy supply from fossil resources,
energy; which may be considered a partial alternative, as in
2) in the summary on biogas production, investment is this case it is envisaged that the heat supply system
expressed per MWh of electricity, yet, the thermal ZLOO VKLIW WR OLTXH¿HG JDV $ ODUJH SURSRUWLRQ RI
energy produced has to be also considered. towns in Latvia have no natural gas pipeline in their
The use of heat is not included in the calculations, as region, therefore, the only real alternative for fossil
WKHVHFRHI¿FLHQWVDUHHPSOR\HGLQGHWHUPLQLQJWKHHIIHFW UHVRXUFHV LV OLTXH¿HG SHWUROHXP JDV 7KH DVVXPSWLRQ
of establishing a small bioenergy town. is interesting in relation to the planned construction
Bioenergy village (a combination of biogas RI D OLTXH¿HG JDV WHUPLQDO LQ WKH %DOWLF UHJLRQ ,Q
and wood). Based on the prerequisites for a bioenergy FHUWDLQSHULRGVOLTXH¿HGJDVZRXOGEHDEOHWRFRPSHWH
YLOODJH UHJDUGLQJ HQHUJ\ VHOIVXI¿FLHQF\ ZKLFK UHTXLUH quite well with natural gas for heat production. The
to supply at least half of the electricity and 100% of calculations are important as an intermediate stage for
the thermal energy by exploiting energy generated transition to the use of biogas in heat production on the
locally, a combination of biogas and wood that actually condition that the electricity market price is not able to
meets these prerequisites is found. Biogas production cover the cost of energy and the public abandons the
generates additional large gains to ensure agricultural support policy for biogas production. The duty of the
sustainability; therefore, it is used as a basis and is public producer is to supply electricity to households,
integrated in the bioenergy model for a small town. which are not market participants, at a tariff set by the
Owing to a synergy between energy produced from 3XEOLF 8WLOLWLHV &RPPLVVLRQ 38& LQ WKH FDOFXODWLRQV ±
biogas and energy produced from wood, in the tariff plan T1 Basic).
calculations, the demand for heat from wood is reduced The results are presented in Table 3; at the same time,
by the amount of heat produced from biogas. The it is compared with the bioenergy village alternative. It
amount of heat to be produced from wood, in addition has to be taken into consideration that the alternatives
to the heat generated at the biogas power plant, is are not fully comparable, as there is no single energy
equal to 5325.4 MWh, accounting for 78.3% of the total amount standard with which the present options may be
amount of heat. compared.

ISSN 1691-3078
After analysing the results (Table 3), one can in the use of renewable sources, and the reduction of
conclude that the model of energy supply for a bioenergy GHG emissions. Such an approach could equalise the real
village is competitive in general. To establish a bioenergy prices of fossil and green energy. Presently, electricity is
village, two facilities, a boiler house running on wood, SXUFKDVHGLQDFFRUGDQFHZLWKWKH&3&SURFHGXUHZKLFK
and a biogas cogeneration power plant are necessary. covers the cost of electricity at a greater extent than it
Such an option can fully satisfy the demand for heat and is needed.
supply more than half of the electricity needed, and the
EDVLF SUHUHTXLVLWHV IRU HQHUJ\ VHOIVXI¿FLHQF\ DUH PHW
Conclusions
The production of energy in a bioenergy village is closely
After comparing the model for a bioenergy village with
integrated with agriculture, as a part of primary energy
the fossil energy option, one has to conclude that using
resources are agricultural products. To meet the need
OLTXH¿HG JDV LQ KHDWLQJ LV H[SHQVLYH DQG VLJQL¿FDQWO\
for resources, 4 233.3 t of silage, 15 366.7 t of cattle
increases the cost of heat as well as increases energy
liquid manure as well as 2 636.4 m3 RI ¿UHZRRG DQG
imports. If compared with the alternative option, GHG
3 728.6 bulk m3 of woodchips are necessary. To produce
emissions also increase. The fossil energy option does
the silage, an agricultural area of 84.7 ha is necessary,
not affect the economic activity of local residents, and
and one can say that, to a certain extent, such an area
local resources, including agricultural land, are not
needs to change its kind of use from food production
exploited.
to energy production. It has to be noted that there are
3179 ha of unfarmed agricultural land in Auce
municipality. At the same time, it has to be mentioned Bibliography
that such an area of land provides a more optimal 1. $\UHV 58 +DO 7 &DVWHQ 7 (QHUJ\
substrate obtained from biogas production and, as a (I¿FLHQF\ 6XVWDLQDELOLW\ DQG (FRQRPLF *URZWK
result, the necessary investment is saved. Every year, In: Energy. Volume 32, Issue 5 (May 2007).
a small bioenergy town will produce a GHG emission pp. 634. - 648.
RI W &22eq ,I FRPSDUHG ZLWK WKH XVH RI OLTXH¿HG 2. ,QIRUPDFLMD SDU VLOWXPHQHUJLMDV WDULID L]PDLQDP
gas in energy production, it is an annual saving of (2012) (Information on Changes in the Tariff for
W&22eq. At the national level, LVL 199 060.69 will Thermal Energy). Auces Novada Vestis, Nr. 7 (35).
be saved, which would otherwise be spent on imported 3. .HQQHG\&3LQFHWL6%XQMH37KH6WXG\
energy resources. of Urban Metabolism and its Applications to Urban
2Q'HFHPEHUWKH5HJLRQDO38&VHWDWDULII Planning and Design. In: Environmental Pollution,
of 41.95 LVL/MWh, VAT excluded, for thermal energy, Volume 159. Issues 8-9, pp.1965-1973
although in practice the heat supply enterprise used 4. 0DQIUHG0&DSXWR3&RVWD*3DUDGLJP
a lower tariff of 37.09 LVL/MWh. (Par SIA Auces….); Shift in Urban Systems through Distributed
(Informacija par siltumenergijas ..., 2012). The cost of Generation: Methods and Models. In: Applied
heat at a bioenergy village is 30 LVL/MWh, excluding heat Energy, Volume 88, Issue 4, pp.1032-1048.
transportation cost. By assuming that administration 5. Mangoyana, R.B., Smith, T.F. (2011). Decentralised
and marketing costs contribute to a price increase of Bioenergy Systems: A Review of Opportunities and
approximately 30%, the tariff is 39 LVL/MWh, VAT Threats. In: Energy Policy. Volume 39, Issue 3,
excluded, for a bioenergy village, which is less than the pp. 1286.-1295.
existing tariff. 6. 3DU 6,$ Ä$XFHV NRPXQDOLH SDNDOSRMXPL´
An opposite situation is observed for electricity, as its siltumenergijas tarifa apstiprinasanu (2008):
cost in the case of a small bioenergy town is much higher Jelgavas regionalas SPR padomes lemums Nr.36
than the average cost for the public producer. The cost of 2Q 6HWWLQJ D 7DULII IRU 7KHUPDO (QHUJ\ IRU Ä$XFHV
electricity produced at a biogas power plant is equal to komunalie pakalpojumi” Ltd (2008): Jelgava Regional
/9/N:KZLWKRXWDQ\SUR¿WLQFOXGHG7KHSULFHRI PUC decision No.36). Retrieved: http://www.sprk.
electricity sold by the public producer is 0.035 LVL/kWh or gov.lv/doc_upl/Auces_ komunalie _pakalpojumi,_
more than two times cheaper. Yet, the price of electricity SIA.pdf. Access: 5 March 2011.
contains some more components, such as electricity 7. Pelse, M., Leikucs, J., Naglis-Liepa, K., (2011).
transportation and distribution costs, compulsory Abatement Factors for Renewable Energy Production
purchase component cost, electricity marketing cost, in the Baltic States. In: Energy solutions for
and VAT. In a situation, when a bioenergy village wishes a sustainable world: Proceedings of the Third
to consume locally produced electricity, another price ,QWHUQDWLRQDO &RQIHUHQFH RQ $SSOLHG (QHUJ\
formation mechanism is required, which excludes high Italy, Perugia, pp. 255.-272.
voltage services, as they are not consumed; besides, the 8. Wüste, A., Schmuck, P. (2012). Bioenergy Villages
FRVW RI FRPSXOVRU\ SXUFKDVH FRPSRQHQW &3& VKRXOG and Regions in Germany: An Interview Study with
QRW EH LQFOXGHG LQ WRWDO FRVW DV WKH &3& LV DFWXDOO\ D ,QLWLDWRUV RI &RPPXQDO %LRHQHUJ\ 3URMHFWV RQ WKH
compensation for services paid by a bioenergy village Success Factors for Restructuring the Energy Supply
directly to the producer. Namely, these services include the RI WKH &RPPXQLW\ ,QSustainability, Volume 4(2),
construction of new base load capacities, the expansion pp. 244.-256.
Acknowledgemen
7KLV SXEOLFDWLRQ KDV EHHQ SUHSDUHG ZLWKLQ WKH IUDPHZRUN RI WKH (6)3URMHFW Ä$WWUDFWLRQ RI KXPDQ UHVRXUFHV WR WKH
UHVHDUFKRIWKHUHQHZDEOHHQHUJ\VRXUFHV´FRQWUDFW1R'3$3,$9,$$

ISSN 1691-3078
A. Rubanovskis Integrating Education into National Economy in a Balanced Way
INTEGRATING EDUCATION INTO NATIONAL ECONOMY IN A

BALANCED WAY
Aleksandrs Rubanovskis1, Dr. oec., assoc. prof.
One of the key factors that affect labour productivity and hence national economy is education. On the one hand,
HGXFDWLRQUHTXLUHV¿QDQFLDOUHVRXUFHVRQWKHRWKHUKDQGLWQHHGVWRPHHWWKHUHTXLUHPHQWVRIQDWLRQDOHFRQRP\7KH
article presents the results of the researched topic, which will allow a better understanding of what issues in education
will make it more corresponding to the changing needs of economy.
Key words: education, educational system, national economy, self-education, balanced education.
-(/FODVVL¿FDWLRQI29
Introduction the tendency but rather exceptions. Usually, these people

The amount, structure, and quality of the workforce UHFRJQL]HG WKH LPSRUWDQFH RI HGXFDWLRQ DQG GHYHORSHG
are a precondition for economic growth of a society. themselves on their own.
One of the main indicators of these preconditions is ³(GXFDWLRQ´ DV D WHUP VWDUWHG WR EH DSSOLHG LQ
education - a guarantor of spiritual, social, and economic pedagogy around the middle of the 18th century (Lexikon
development of a person. der Pädagogik, 1972).
The role of education in the national economy at the The role of education in the labour market is well
beginning of the last century was highly appreciated. The represented in Table 1.
economic thought put it forward as an independent factor The study conducted in Germany in 1997 indicates
of production. However, this attitude did not sustain as that:
well as the proposal of A. Marshall in 1890 – to consider — 84% of university graduates are managers or self-
RUJDQL]ation as a productive factor (Marshall, 1993). employed businessmen;
7KHUHIRUH RUJDQL]DWLRQ DQG HGXFDWLRQ UHPDLQHG WR EH — the number of the unemployed persons among the
viewed as parts of labour as a production factor. university graduates is the lowest;
The development and welfare of the society depends — the biggest number of the unemployed persons is
on the growth of knowledge, on continuous education, among the people without professional education.
including long-life learning or self education throughout A tendency is observed that those who received
the person’s life, on everyday use of information and developed their professional education at the
technology and on the mastery of foreign languages. HQWHUSULVHPRVWO\FRQQHFWWKHLUIXUWKHUFDUHHUZLWK³WKHLU´
To a large extent, the ability of the society to absorb, enterprise.
accumulate, and apply knowledge determines the well- Education is directly linked to living standard.
being of national economy. High-quality and balanced The highest living standard is in the countries where
education determines the rating of a state in the world almost everybody can read and write (Australia,
and serves as a driving force of national economic $XVWULD %HOJLXP &DQDGD 'HQPDUN )LQODQG )UDQFH
development. Germany, Great Britain, Island, Italy, Japan, Norway,
The aim of the article is to identify opportunities Sweden, New Zealand, the Netherlands, the USA, etc.)
that will allow integrating the balanced education in the 6FK|QKHUU
educational systems of the national economy. On the contrary, the lowest level of living standard
The objectives of the article are: is in such African and Asian countries as Afghanistan,
1) to identify the connection between the level of Butane, Mali, Mauritania, Nigeria, and Sudan where
education and the economy; only up to 20% of population can read and write
2) to determine the necessity and principles of 6FK|QKHUU
reformation of the educational systems of post- The attitude to the level of education is not the
communist countries; same in different countries. Even in such economically
3) WRGH¿QHJHQHUDOSULQFLSOHVRIUHJXODWLRQDQGSODQQLQJ developed countries as Germany, Japan, and the USA
of the systems of education in the European Union; there are remarkably different approaches to the level
4) to investigate the opportunities of self education. of education:
— in the USA, there is the highest level of higher
education;
The connection between the level of — in Japan, the most attention is paid to solid secondary
education and economy education in secondary schools;
There have been examples when individuals did not — in Germany, the most attention is drawn to secondary
ZDQW WR VWXG\ DQG JRW UHFRJQL]DEOH VXFFHVV ZLWKRXW HGXFDWLRQ WUDLQLQJ FHUWL¿FDWHV SURIHVVLRQDO
substantial education, however these cases do not show education).
___________________________
1
%DOWLF3V\FKRORJ\DQG0DQDJHPHQW8QLYHUVLW\&ROOHJH/DWYLD

ISSN 1691-3078
Table 1
The labour force division according to education levels and employment groups (%)
Education level
Employment group professional school

without professional
education or education university education
education
received at the enterprise
Managers or businessmen 15.0 18.0 84.0
Middle level managers 22.0 56.0 15.0
Ordinary employees and 63.0 26.0 1.0
assistants
Total 100.0 100.0 100.0
Unemployed 15.0 4.5 4.1
Source: Stavro, 2013
One gets higher evaluation, i.e. higher marks for — in 1952, from 28.2% higher education was completed
better acquired knowledge and skills when studies more by 3.9%;
consciously in the learning process. This can serve as a — in 1962, from 34.9% higher education was completed
basis for a higher salary in the future. Thus, a student of by 6.5%;
a vocational school, college, or higher school has to make — In 1975, from 58.5% higher education was completed
a choice between his/her free time and also consumption by 14.0%.
today and his/her income and consumption in the future, The German tendency in the aspect of education is
i.e. after the successful studies. Of course, conscious represented in Table 2 and in the author’s calculations.
studies often can ensure the corresponding scholarship The increase in university graduates during this period
that can make studies or learning process easier through ZDV2WKHUVUHFHLYHGHGXFDWLRQDQGTXDOL¿FDWLRQV
WKHHIIHFWRQ¿QDQFLDOVLGH7KH-DSDQHVHRULJLQVWXGHQWV in vocational schools and in equivalent to such schools,
LQ&DQDGLDQXQLYHUVLWLHVDUHDJRRGH[DPSOHRIVWXGHQWV trade schools, which since 1975 have been called
who intensively use their free time for studies. These vocational grammar schools and equivalent to such
universities have one of the shortest study years - schools vocational technical schools and engineering
RQO\PRQWKV(GXFDWLRQLQ&DQDGDDQGWKH&DQDGLDQV schools (HdWW, 1988).
use 4 summer months to work. This is considered The studies of the system of education of the Federal
the practice time. But the Japanese student groups Republic of Germany and their results by no means allow
RUJDQL]H VWXG\ VHPHVWHUV DQG ZLWK WKH LQKHUHQW speaking about a separate German educational system
-DSDQHVHLQVLVWHQFHLQWZR\HDUV¿QLVKWKUHH\HDUFRXUVH (Education in Germany), which could displace other
with high grades. As a result, the Japanese students Western European educational systems. The German
faster enter the labour market. system of education is a part of the evaluation system of
7KH H[DPSOH RI &DQDGD VKRZV WKDW WKHUH DUH education of the EU.
opportunities of more effective exploitation of the As studies show, people in Germany do not
academic year potential by individual differentiated particularly strive to obtain higher education, but they
groups of university students alongside with the rather associate the desired level of education with
necessary amount of practice. labour market conditions and their individual abilities.
This obviously does not mean that people in Germany are
The move to a balanced education not educated and intelligent. There are different kinds
In the 20th century, higher education was expanding. of courses (education of interest (Fisher, 1965) widely
For example, in 1900, there was 1.2% of population popular in Germany. Short and longer educational courses
with complete higher education in Great Britain, have been known in Western Europe since 1875, when
and respectively, in 1954 – 5.8%, in 1962 – 8.5%, WKH¿UVW8QLYHUVLW\([WHQVLRQD%ULWLVKW\SHSHRSOH¶VKLJK
in 1981 – 13.5%, in 1993 – already more than 25% school was opened in London. Before World War II, the
6WLJOLFV 'UL¿OV LH WKH QXPEHU LQFUHDVHG second people’s high school of the Danish type functioned
more than 20 times. In the countries with developed in Latvia, too (Latviesu konversacijas vardnica, 2002).
economies, the number of population with higher People’s high schools (or people’s universities) have never
education could be similar to that of the UK. been granting a diploma of higher education, although
In the interests of national economy, higher education certain courses (academic subjects) can be studied even
should lead to a higher productivity. However, the tandem at a quality of the university level.
³QDWLRQDO HFRQRP\ ± WKH OHYHO RI HGXFDWLRQ´ VKRXOG EH The experience of Germany shows that the level of
balanced. In this connection, the people of the former education corresponding to the relevant labour market
Federal Republic of Germany acted in a traditionally conditions and individual abilities, i.e. the level of
reasonable way. education that is balanced with the needs of national
Based on the data represented in Table 2, the author economy, provides a high level of development of national
calculated the number of 18 year old students who economy. Of course, this was not the only factor that
studied in higher education institutions: contributed to the development of the German economy

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Table 2
7KHVKDUHRI*HUPDQVHFRQGDU\VFKRROSXSLOVDQGRIHTXLYDOHQWVWRVXFKVFKRROVDQG

high school students in the total number of young people
Age group of The share of pupils and students in the total

pupils and Educational institution number of youth age group (%)
students In 1952 In 1962 In 1975
Vocational educational institutions 20.2 21.9 34.3
Industrial schools 1.1 1.5 2.6
Vocational grammar schools - - 2,8
18 year old
Professional schools (including engineering
2.0 2.3 3.5
schools)
Grammar schools 4.9 9.2 15.3
Engineering high schools, vocational high
1.5 2.4 4.2
schools *
22 year old
Separate higher schools (including
2.4 4.1 9.8
universities)
* This group includes also German Hochschulen, which does not provide a complete higher education.
6RXUFHDXWKRU¶VFRQVWUXFWLRQDFFRUGLQJWR.|KOHU
Table 3
Correlation of salaries to the level of education (in %)
Salaries in percentage compared to salaries
Level of education
provided by lower level of education
Basic education 100.0
Secondary school education 114.2
8Q¿QLVKHGKLJKHUHGXFDWLRQ\HDUVKLJKHU 114.8
education 137.6
Source: Fisher, 1965
in the post-war period. Nevertheless, it is a factor that a strong motivation for striving for a better education.
should be taken into account. 7KHGH¿QLWLRQLVPDGHDFFRUGLQJWR0DQNLZDQG
Basically, by grounding only on the individual Becker (1964).)
assessment, one can not evaluate the impact of ,I*HUPDQ\ZDVWKH¿UVWWKDWWULHGWREDODQFHHGXFDWLRQ
education on the national economy as a whole. The fact with the needs of national economy pragmatically, now
that individuals with higher education provide higher Great Britain has started to pay a lot of attention to the
economic returns at the individual level does not mean problem. For instance, the Department of Education and
the same at the national level. Therefore, when analysing Employment of the UK argues that there is a limit as to
the impact of education on the national economy, it is how many additional graduates the economy can absorb
necessary to analyse the link between education and until the productivity gains, which they create, begin to
growth of national economy by way of producing a per GHFUHDVH6WXGHQW/RDQV&RPSDQ\
FDSLWD FDOFXODWLRQ ,W ZLOO VKRZ WKH RYHUDOO HI¿FLHQF\ Moreover, in Germany people do not always try to get
(productivity) of the country more objectively. WKHKLJKHVWVFLHQWL¿FGHJUHHV)RULQVWDQFHDQDXWKRULW\
The effect of education on the level of the development of European level – Dr.oec. Walter Eucken (1891-1950)
of the national economy and welfare of the country was (Eucken, 1990), next such an authority of European scale
also studied by the British scientist A. Sweetman, who is Wilhelm Henrichsmeyer, born in 1935, (Henrichsmeyer,
has admitted that: :LW]NH ZKR LV Dr.hab.oec., followed by such
1) it should be taken into account that even though prominent German and EU scientists as Dr.oec. Professor
this effect may be small in the short term, it may -RDFKLP+HQW]HERUQLQ+HQW]HDQGDIUHH
accumulate in the long run and thus can generate a research fellow Dr.oec. Peter Brose, born in 1954, (Brose,
VLJQL¿FDQWLQFUHDVH 1985) as well as many others are successfully working.
2) the major problem is how to evaluate education and A decent way to get a balanced education and improve
KXPDQ FDSLWDO LH WKHUH LV VWLOO D ODFN RI D XQL¿HG it is education throughout life or life long learning.
methodology (Sweetman). Payment and its relation to the level of education
The human capital is a combination of received and have been researched in the USA, and the results are
accumulated knowledge, expertise, skills and experience, VXPPDUL]HGLQ7DEOHIURPZKLFKZHFDQFRQFOXGHWKDW
ZKLFKDOORZVDSHUVRQZKRKDVWKHPEHLQJPRUHHI¿FLHQW — VHFRQGDU\ HGXFDWLRQ DQG XQ¿QLVKHG XQLYHUVLW\
and productive. Also the opportunity to earn more is education give a similar increase in salaries;

ISSN 1691-3078
Table 4
Proportions among the main study directions in the higher schools (%)
Study courses Finland - 1993 EU - 2010

Humanities 18.3 27.4
Law and social sciences 22.8 23.2
Mathematics, natural sciences 13.5 16.9
Engineering sciences 20.6 19.0
Medicine 7.2 6.3
Agricultural sciences 2.5 2.2
Arts 2.5 5.0
Teacher training 10.6 0.0
Other 2.0 0.0
Total 100.0 100.0
Source: Materials of the Ministry of Education and Science, 2011.
— completed higher education gives 2.5 times greater From the data represented in Table 4, it can be
salary increase than the increase provided by the seen that in the EU about 50% of students majored in
lower level of education. humanities, in Finland - about 40%, but in engineer
Although the data presented in Table 3 refer to the sciences in both countries only about 20%. In Latvia, it
¿UVWKDOIRIWKHVWKHWUHQGWKDWWKHOHYHORISD\PHQW would be essentially desirable to increase the number
depends on the level of education is still valid today of engineering students, and the number of majoring in
and will remain such in the future. There may be some other sciences could be less.
differences in the numerical evaluations.
The research conducted in the USA is also based on The potential of life-long learning
WKHLGHDWKDWWKHSURIHVVLRQDOTXDOL¿FDWLRQVZLWKXQLYHUVLW\ Life long learning integrates well into the system of
degrees are in constant demand by the labour market. EDODQFHGHGXFDWLRQHVSHFLDOO\RUJDQL]HGHGXFDWLRQ
In some professions, wage/salary differential may /LIHORQJOHDUQLQJRUHGXFDWLRQFDQEHUHDOL]HG
be even higher. For example, young IT professionals 1) LQDQRUJDQL]HGZD\LQWKHIRUPRIDERYHPHQWLRQHG
(Information technology) in Sweden start earning higher courses at people’s universities and at different
salaries immediately after graduation in comparison with courses under the auspices of different higher
representatives of other professions who have worked in education institutions, etc.;
their professions for several decades. 2) LQGLYLGXDOO\ LH QRW LQ DQ RUJDQL]HG ZD\ EXW
From purely professional criteria, higher education independently, for which it is necessary to have
levels help to develop analytical abilities, which are very personal determination, a lot of effort, self-discipline,
important for a specialist. Employers appreciate that etc.
and, when selecting from a range of applicants, assess 6SHFLDOL]DWLRQVRIWKLVNLQGRIHGXFDWLRQDUHFUHDWHGE\
whether the selected person will be able to implement the demand of the labour market that correspond to the
the company’s strategy. For example, one enterprise of interests of the economy. One form of such education is
³1HVWH´ JDV¿OOLQJ VWDWLRQV QHWZRUN QRW IDU IURP 5LJD HGXFDWLRQDFFRUGLQJWRLQWHUHVWVZKLFKXVXDOO\LVUHDOL]HG
announced a competition for the post of the director of a in the form of self-education.
JDV¿OOLQJVWDWLRQ0DQ\ZHUHVXUSULVHGWKDWWKHYDFDQF\ The education according to interests, when it is
ZDV¿OOHGLQQRWE\DWUDQVSRUWVSHFLDOLVWWHFKQLFLDQZKR VNLOIXOO\ SXUSRVHIXOO\ DQG V\VWHPDWLFDOO\ UHDOL]HG FDQ
would be the best from the applicants to manage fuel- SURGXFHYHU\VLJQL¿FDQWUHVXOWV7KHVHDUHWZRH[DPSOHV
related technical problems, but an applicant with higher of famous people of Latvian descent:
HGXFDWLRQ DQG VLJQL¿FDQWO\ SRRUHU WHFKQLFDO NQRZOHGJH — Karlis Irbitis (14.10.1904. – 13.10.1997) – one of
It turned out that the selected applicant was the best WKH ¿UVW SURIHVVLRQDO DLUFUDIW GHVLJQHUV RI (XURSH
WRDQDO\VHDQGGH¿QHWKHVWDWLRQGHYHORSPHQWVWUDWHJ\ +H JUDGXDWHG IURP WKH 6WDWH 7HFKQLFDO &ROOHJH
ZKLFKZDVPRUHLPSRUWDQWWR³1HVWH´ which was founded in 1919, with no specialisations
In order to create the prognosis of the labour demand related to aviation, then worked at Bakmanis Aircraft
in EU labour market, there was a research conducted in Factory in Riga from 1926 to 1930 and later at the
the early 1990s in EU, and the prognosis was worked State Electromechanic Factory (VEF). From 1925 to
out up to 2010 (Table 4). The table below shows the 1940, he designed 19 types of aircraft, of which eight
corresponding proportions (at the time of the research) working prototypes were taken over by the Soviet
in Finland. authorities to the designing bureau of Andrei Tupolev
The highest percentage of the employed is expected in 1940 (this bureau has used many of Irbitis’s
in the consulting, social care, teaching, publishing, models and ideas). In the period of 1950-1970,
RUJDQL]LQJDQGPDQDJHPHQW¿HOGVZKLOHWKHQXPEHURI he participated in the design of aircraft engines for
SHRSOHZRUNLQJLQWKHLQGXVWU\DQGRI¿FHVZLOOGHFUHDVH ³&DQDGDLU´LQ0RQWUHDO/RFPHOLV

ISSN 1691-3078
— Edward Liedskalninsh (Edvards Liedskalnins) Conclusions and suggestions

(10.08.1887. – 07.12.1951) had only basic school 1. Modern economy cannot exist without people that
education. E.Liedskalninsh subjected himself to DUH OLWHUDWH DQG WR PDNH WKH HFRQRP\ VXI¿FLHQWO\
a strict regime – he worked 6 days a week and developed, the labour force should be appropriately
dedicated some of that time to tourists, and one day HGXFDWHGDQGTXDOL¿HG
a week was devoted to reading books, i.e. to self- 2. The attitude to the level of education is not the same
education. As a result, he obtained a good knowledge in different countries. Even in such economically
of astronomy, physics, engineering sciences, and developed countries as Germany, Japan, and the
history, which he applied for construction of the USA there are remarkably different approaches to
&RUDO&DVWOH the level of education:
7KH VL]H RI WKH VWUXFWXUH RI WKH FDVWOH EXLOW E\ — in the USA, there is the highest level of higher
E. Liedskalninsh is compared to the construction of education;
ancient pyramids. Besides that, he invented a power — in Japan, the most attention is paid to solid
generator, constructed a radio apparatus, and in 1945 secondary education in secondary schools;
SXEOLVKHGDQLQWHUHVWLQJVFLHQWL¿FDUWLFOHRQWKHPDJQHWLF — in Germany, the most attention is drawn to
ÀRZV LQ D VFLHQWL¿F MRXUQDO LW LV EHOLHYHG WKDW KH XVHG VHFRQGDU\ HGXFDWLRQ WUDLQLQJ FHUWL¿FDWHV
WKHPDJQHWLFÀRZVIRUKRUL]RQWDODQGHVSHFLDOO\YHUWLFDO professional education).
movement of heavy stone blocks) (Stavro). In 1984, 3. In Latvia, the system of education complies with
WKH&RUDOFDVWOHZDVLQFOXGHGLQWKHQDWLRQDO5HJLVWHURI the EU requirements and practices, including the
historic monuments of the USA. mastery of foreign languages.
7KHVH WZR H[DPSOHV FKDUDFWHUL]H WKH WZR JRDOV RI 4. Based only on the individual assessment, one can
self-education. not evaluate the impact of education on the national
1. The purpose of self-education coincides with the economy as a whole. The fact that individuals with
applied interests of the economy (example of higher education produce higher economic returns
K. Irbitis). Such cases are quite common in the at the individual level does not mean the same at
world practice, e.g. Bill Gates, who dropped from the national level. Therefore, when analysing the
Harvard University after the second year of studies impact of education on the national economy, it is
and dedicated himself fully to the development of necessary to analyse the link between education and
his idea. the growth of national economy by way of producing
2. The purpose of self education may appear as a hobby a per capita calculation.
(example of E. Liedskalninsh) and may not have 5. Although, in general, it is believed that education
the short term returns for the national economy. is important for both the individual and for the
However, there may be long term returns important country, nevertheless attention is increasingly being
even for fundamental science. In this case, it is paid to what really is a contribution of education and
possible that the author may not fully disclose his whether the gains are outweighed by the costs.
¿QGLQJVDQGGLVFRYHULHV(YHQWKHIDPRXV/HRQDUGR 6. Life long education is a necessary means of balancing
da Vinci did not reveal all his discoveries to the the system of education with the national economy.
public. 7. Self-education may be considered as an essential
E. Liedskalnins, K. Irbitis, and B. Gates are part of lifelong learning. Therefore, it should receive
autodidacts or self-educators of a higher order. There are more attention from the state, in which a system of
also autodidacts of a lower order, nevertheless who were assessment and recognition of education obtained in
VWLOODEOHWRFRPSOHWHWKHLUSURIHVVLRQDOTXDOL¿FDWLRQVDQG the course of self study may be created.
reach a high level of education through a self study. The 8. ,IDQLQGLYLGXDOKDVVXI¿FLHQWTXDOLW\LQGLFDWRUVVXFK
DXWKRUJLYHVVRPHVSHFL¿FH[DPSOHV as determination, perseverance, self discipline, etc.,
The education of Rudolfs Jukevics, whose family then such a person has a high potential for targeted
was deported from Latvia to Siberia in 1941, was self-education, including the mastery of languages
decided by a KGB captain, the commandant of a local as an integral part of education throughout life.
6LEHULDQ YLOODJH 5 -XNHYLFV ¿QLVKHG \HDUV RI D ORFDO 9. Individuals with basic and secondary education
village primary school. In order to continue education in or higher education, which corresponds to the
the 5th year, it was necessary to go to another school requirements of the labour market but does not
60 km away, and for that the captain’s permit was satisfy their spiritual needs, should be provided
needed. But such permit had never been issued, with the opportunity to expand their knowledge
because the captain decided that it would be better for within the scope of their interests: distantly, or
Rudolf to work. Rudolf was given a permit to train for in any other form of self-education. Moreover, at
a tractor operator instead, which he did. R. Jukevics the national level, it would be necessary to create
continued his further technical education through the RSSRUWXQLWLHV WR KDYH WKHLU NQRZOHGJH UHFRJQL]HG
VHOIVWXG\ RI VSHFLDOL]HG OLWHUDWXUH ZKHQ KH UHWXUQHG and appreciated. In this way, individuals can adapt to
back to Latvia. The results were very good. He the changing requirements of the labour market, and
designed many technical innovations and inventions. their education may be balanced with the general
For example, a log loader on a wheeled tractor base requirements of the economy.
was invented by him in the sixties of the last century. It 10. 6LJQL¿FDQW ¿QGLQJV DQG SURSRVDOV JLYHQ WKH
ZDVWKH¿UVWLQYHQWLRQRIVXFKNLQGLQWKH6RYLHW8QLRQ increasing importance of education in the national
Surprisingly, he hadn’t had even a technical college HFRQRP\PDNHLWQHFHVVDU\WRDFFHSWWKHGH¿QLWLRQ
education! RI³HGXFDWLRQ´DVDVHSDUDWHIDFWRURISURGXFWLRQ

ISSN 1691-3078
Bibliography IDNVLPLOL]GHYXPV JUDPDWDV DSJDGV $*XOELV

1. %HFNHU *6 +XPDQ &DSLWDO 1HZ <RUN ± 1940.).
London. 12. Lexikon der Pädagogik. (1972) Freiburg Rombach,
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ZZZOYGHGHL]JOLWLEDL]JOLWLEDVVLVWHPD 14. 6FK|QKHUU * 9RONVZLUWVFKDIW XQG
vacija.html (in Latvian). Access: 15.01.2013. Betriebswirtschaft. Bertelsmann Lexikon Verlag
5. (XFNHQ:*UXQGVlW]HGHU:LUWVFKDIWVSROLWLN GmbH. Güterslohn München.
Tübingen. Mohr, S. 398. 15. 6WDYUR $ .RUDOOX SLOV &RUDO FDVWOH >RQOLQH@
6. Fisher, I. (1965). The Theory of Interest. New York. Retrieved: http://www.tautasforums.lv/?p=1246 (in
7. +DQGZ|UWHUEXFK GHU :LUWVFKDIWVZLVVHQVFKDIW Latvian). Access: 15.01.2013.
(HdWW). (1988) Bd.2. Bildungspolitik in der 16. 6WLJOLFV ']( 'UL¿OV '] 0LNURHNRQRPLND
Bundesrepublik Deutschland.S 12-17 Stuttgart, (Microeconomics). Riga. Latvijas Universitate, 351
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8. +HQULFKVPH\HU::LW]NH+3$JUDUSROLWLN 17. 6WXGHQW /RDQV &RPSDQ\ >RQOLQH@ 5HWULHYHG www.
Stuttgart. Ulmer, S. 463. slc.co.uk/ Access: 15.01.2013.
9. +HQW]H - 3HUVRQDOZLWVFKDIWVOHKUH %HUQ 18. Sweetman, A. Working Smarter: Education and
und Stuttgart. Haupt, S. 406. Productivity. [online] Retrieved: http://www.csls.ca/
10. .|KOHU + 'HU UHODWLYH 6FKXO XQG repsp/2/ arthursweetman.pdf Access: 15.01.2013.
Hochschulbesuch in der Bundesrepublik Deutschland 19. Materials of the Ministry of Education and Science.
XQYHU|IIHQWOLFKWHV $UEHLWVSDSLHU (2011). Riga.
Marx-Plank-Institut für Bildungsfor-schung. Berlin, 20. Marshal, Ǩ. (1993). Principles of economic science
'H]HPEHU (in Russian) Ǻ.1. Moskva. Progress, 416 s.
11. Latviesu konversacijas vardnica (Latvian coversation 21. Menkui, N.G. (1999). Principles of economics (in
dictionary). VŋMXPV ± 5LJD $QWHUD Russian). Sankt-Peterburg. Piter Kom, 780 s.

ISSN 1691-3078
I. Kantane et al. Management Development Challenges in Small Companies in The Regions of Latvia
MANAGEMENT DEVELOPMENT CHALLENGES IN

SMALL COMPANIES IN THE REGIONS OF LATVIA
Inara Kantane1+, Mg.oec.; Biruta Sloka2, Dr.oec., professor;

Anastasija Vilcina3, Dr.oec., professor
1,2
3
Abstract. Academic research worldwide has proved that it is of great importance to have sustainable companies in
the regions to ensure the development of all regions. Statistics has shown that many companies are established in
Latvia every year but not all of them are ready for long-term activities as often owners and managers are lacking the
necessary skills and knowledge to survive on the market conditions. The authors have researched the importance of
different aspects of management of small companies in Latvia and, especially, the attitude of small companies managers
towards knowledge, experience, and other aspects related with the company development. The research methods
used in the paper include academic publications analysis, statistical data analysis, and a survey of entrepreneurs. A
mechanical sampling was applied for the survey to guarantee random sampling and to be able to analyse the data
by statistical methods. Descriptive statistics – indicators of central tendency or location and indicators of variability
were used for data processing. The analysis of variance and cross tabulations was also used in the research. Empirical
UHVHDUFKUHVXOWVVKRZHGWKDWWKHHYDOXDWLRQVGRQHE\VPDOOFRPSDQ\PDQDJHUVVWDWLVWLFDOO\VLJQL¿FDQWO\GLIIHUE\WKH
regions of Latvia.
Key words: management knowledge, management skills, small companies, regions, experience.
JEL code: M1; M12; M50; D20
Introduction SUDFWLFH6HGHUDHWDO6SDQLVKVFLHQWLVWV&DUROLQD

Academic research worldwide has proved that it is of /RSH] ± 1LFRlas and Pedro Soto-Acosta by examining
great importance to have sustainable companies in the 6SDQLVK VPDOO DQG PHGLXP VL]HG FRPSDQLHV KDYH
regions to ensure the development of all regions. Statistics evaluated different aspects for knowledge creation and
has shown that many companies are established in Latvia three different orientations: informative, communicative,
every year but not all of them are ready for long-term DQGZRUNÀRZ/RSH]1LFRODVHWDO0XOWLQDWLRQDO
activities as often owners and managers are lacking the companies arrive at quite different approaches and touch
necessary skills and knowledge to survive and develop economic, technological, organisational, geographical,
the company on the market conditions. The authors and sociological aspects – important emphasis is devoted
have researched the importance of different aspects of to knowledge exchange (Ensign et al., 2009). Knowledge
management of small companies in Latvia and, especially, management systems go in tandem with fostering
the attitude of small companies managers towards HI¿FLHQF\ DQG LQQRYDWLRQ FRPSOHPHQWDULW\ WKHVH
knowledge, experience, and other aspects related with aspects are analysed by international teams in the United
the company development. The research methods used Kingdom, the United States of America, and Singapore
in the paper include academic publications analysis, (Newell et al., 2003). There is a lot of research devoted
statistical data analysis, and a survey of entrepreneurs. to different branches also by Lithuanian scientists
A mechanical sampling was applied for the survey to (Zavadskas et al., 2011). Innovative technologies are
guarantee random sampling and to be able to analyse reshaping the global economic landscape by improving
the data by statistical methods. Descriptive statistics – speed and ease of communications and interaction among
indicators of central tendency or location and indicators the various economic actors involved in the production
of variability were used for data processing. The analysis F\FOH &DUD\DQQLV HW DO ,QQRYDWLRQ FDSDFLW\
of variance and cross tabulations was also used in the and innovation development in small companies are of
research. great interest in Finland, since attention is paid to these
issues also from technology side (Horsman, 2011). Small
Theoretical background companies have never been among the most attractive
Academic research worldwide has devoted a lot HPSOR\HUV\HWVPDOOFRPSDQLHVFRXOGEHPRUHÀH[LEOH
RI DWWHQWLRQ WR LPSRUWDQW IDFWRUV LQÀXHQFLQJ HI¿FLHQW more creative, and could undertake more risk. Danish
work of the companies, especially, small and medium scientists – Ole Henning Sørensen, Peter Hasle and Elsa
VL]H FRPSDQLHV DQG FRPSDQLHV ORFDWHG LQ WKH UHJLRQV Bach have researched small enterprises while working
Knowledge management is among the most important in them and examining their special risk by studying
factors. Darshana Sedera and Guy Gable from Australia reliable databases with the data on work environment
KDYHH[DPLQHGNQRZOHGJHPDQDJHPHQWLQÀXHQFHRQWKH and enterprises (Sørensen et al., 2007). Alberto Grandop
company success, suggesting important implications for and Valeria Belvedere in Tialy have evaluated difference
___________________________
+
E-mail address: (Inara.Kantane@lu.lv).

ISSN 1691-3078
Table 1
Changes in the number of market sector economically active statistical units by size group in
statistical regions in Latvia, comparison of 2010 and 2011
Total Micro Small Medium Large

LATVIA 5587 5098 384 81 24
Riga region 2902 2695 184 21 2
Pieriga region 1448 1316 97 27 8
9LG]HPHUHJLRQ 213 197 3 14 -1
.XU]HPHUHJLRQ 167 129 25 7 6
Zemgale region 255 192 45 12 6
Latgale region 602 569 30 0 3
Source: Central Statistical Bureau of Latvia, 2013
Table 2
6WDWLVWLFDOLQGLFDWRUVRIVPDOOFRPSDQ\RZQHUVPDQDJHUV¶HVWLPDWLRQRINQRZOHGJHVLJQL¿FDQFH
Statistical indicators Value of statistical indicators

Number of respondents 1188
Mean 7.91
Standard Error of Mean 0.06
Median 8.5
Mode 9
Standard Deviation 2.05
Variance 8
Minimum 2
Maximum 10
6RXUFH DXWKRUV¶ FDOFXODWLRQV EDVHG RQ WKH VPDOO FRPSDQ\ RZQHUV PDQDJHUV VXUYH\ 'HFHPEHU $XJXVW
Q (VWLPDWLRQVFDOH±ZKHUH±QRWVLJQL¿FDQW±YHU\VLJQL¿FDQW
in the company performance regarding its location by positive impact on the performance measures (Haathi
districts: do companies perform better and what are et al., 2005). Factors of the SWOT analysis applied to
the results of comparisons among large, small – to micro, small to medium and large companies were
PHGLXP ± VL]HG DQG GLVWULFW HQWHUSULVHV *UDQGR HW studied in Austria (Bernroider, 2002). In France, paths
al., 2006). Margaret Fletcher and Simon Harris from to commercial knowledge on forms and consequences
the University of Glasgow have found that smaller RI XQLYHUVLW\ ± HQWHUSULVH V\QHUJ\ RXWOLQHG D VLJQL¿FDQW
companies may not have relevant experience in useful lowering of the boundaries between science and industry
QHWZRUNVWRSHUIRUPHI¿FLHQWXVHRINQRZOHGJH)OHWFKHU and society (Shinn et al., 2006). The studies of experience
et al., *RQJPLQJ 4LDQ IURP WKH &KLQHVH in other countries have indicated three tiers architecture
University of Hong Kong has found that small and RINQRZOHGJHÀRZDQGPDQDJHPHQWDFWLYLWLHV.DPKDZL
PHGLXPVL]HGFRPSDQLHVVKRXOGFRQVLGHURSWLPDOOHYHOV 2010) and they have indicated on great challenges as
RIPXOWLQDWLRQDOLW\DQGSURGXFWGLYHUVL¿FDWLRQZKHQWKH\ well as possibilities in small companies management.
expand product offerings and geographic markets (Qiann,
2002). Swedish scientists Sara Jonsson and Jessica
Lindbergh have evaluated the impact of institutional Research results and discussion
impediments and information, and knowledge exchange An increase in newly established companies,
on the SMEs’ investments in international business especially, small companies may be noticed for many
relationships and they have tested three hypotheses years in the Republic of Latvia, for example, the total
with the linear structural relations (LISREL) model number of companies has increased by 5587 units
(Jonsson et al., 2010). Scientists from Finland and the in 2011 compared with 2010. The micro and small
United States of America have researched cooperative enterprises have presented the biggest increase (5098
strategy, knowledge intensity, and export performance and 384 units, respectively). The distribution of changes
RI VPDOO DQG PHGLXP VL]HG FRPSDQLHV EDVHG RQ two- LQWKHQXPEHURIFRPSDQLHVE\VL]HJURXSVDQGVWDWLVWLFDO
group simultaneous analysis of 87 Finnish companies regions are included in Table 1.
and 62 Norwegian companies. The research results The survey of small company owners - managers
KDYHLQGLFDWHGWKDWNQRZOHGJHLQWHQVLW\KDVDVLJQL¿FDQW was conducted from December 2010 to August 2011.

ISSN 1691-3078
Fig. 1. 6PDOOFRPSDQ\RZQHUVPDQDJHUVHYDOXDWLRQRINQRZOHGJHVLJQL¿FDQFH
Fig. 2. 6PDOOFRPSDQ\RZQHUVPDQDJHUVHYDOXDWLRQRINQRZOHGJHVLJQL¿FDQFHE\WKHUHJLRQVRI/DWYLD
The survey included 1188 responses received (response NQRZOHGJHVLJQL¿FDQFH7KHPDLQVWDWLVWLFDOLQGLFDWRUVRI

rate 21.7%) and the selection method was systematic evaluations are shown in Table 2.
sample to ensure random responses. The scale 1 – 10 The evaluations of small company managers
ZKHUH QRW VLJQL¿FDQW DQG ± YHU\ VLJQL¿FDQW ZDV indicate that the attitude is quite different
used to evaluate managers attitude towards knowledge as there are managers of small companies
VLJQL¿FDQFH 6HYHUDO LVVXHV ZHUH H[DPLQHG LQ WKH who do not think that it has an importance at all.
survey; however, this paper evaluates in more details The average evaluation of small company managers
the attitude of small company managers towards was 7.91, half of the managers evaluated it

ISSN 1691-3078
Table 3
Results of analysis of variance for small company owners, managers evaluation of knowledge
VLJQL¿FDQFHLQWKHUHJLRQVRI/DWYLD
6XPRI6TXDUHV df 0HDQ6TXDUH F Sig.

Between groups 141.038 5 28.208 6.739 0.000
Within groups 4721.591 1128 4.186
Total 4862.629 1133
6RXUFHDXWKRUV¶FDOFXODWLRQVEDVHGRQWKHVPDOOFRPSDQ\RZQHUVPDQDJHUVVXUYH\'HFHPEHU$XJXVW
Table 4
6WDWLVWLFDOLQGLFDWRUVRIVPDOOFRPSDQ\RZQHUVPDQDJHUV¶HVWLPDWLRQRIH[SHULHQFHVLJQL¿FDQFH
Statistical indicators Value of statistical indicators

Number of respondents 1188
Mean 8.95
Standard Error of Mean 0.038
Median 9.5
Mode 10
Standard Deviation 1.478
Variance 6
Minimum 4
Maximum 10
below 8.5 (median). The biggest share of small company majority of managers marked the evaluation 10 (mode).
managers gave evaluation 9 (mode, given by 27.3% Small company managers who evaluated higher the
of managers). There were 4.4% of small companies importance of knowledge are more active on foreign
managers who rated the importance of knowledge markets, adoption of new technologies, the increase
only by 2. Distribution of the evaluations done by of productivity, the development of new services, and
VPDOO FRPSDQ\ PDQDJHUV RQ NQRZOHGJH VLJQL¿FDQFH LV they are more active to support training. The results are
outlined in Figure 1. shown in Table 5.
Evaluations done by small company managers of the The research results indicate that there is still a space
knowledge importance are different by the regions of for better use of knowledge and experience in small
Latvia; the results are shown in Figure 2. company management.
7KH VLJQL¿FDQFH RI GLIIHUHQFHV LQ WKH HYDOXDWLRQV
done by small companies managers in the regions
of Latvia were checked by the variance analysis. The
Conclusions
In 2011, numerous micro companies were
results indicated that the differences in the average
evaluations of knowledge importance by small established in Latvia, especially, in Riga region and
FRPSDQLHV PDQDJHUV GLIIHUHG VLJQL¿FDQWO\ ZLWK KLJK Latgale region. To keep the newly established companies
probability. The results of variance analysis are shown active and successful, it is important to have experience,
in Table 3. will and knowledge to manage them. Knowledge is
Experience is another issue related with the DPRQJ WKH PRVW LPSRUWDQW IDFWRUV LQÀXHQFLQJ WKH
importance of company (especially small company) PDQDJHPHQW RI VPDOO FRPSDQLHV &RPSDQ\ PDQDJHUV
management. Small company managers in Latvia were LQ /DWYLD KDYH GLIIHUHQWO\ HYDOXDWHG WKH VLJQL¿FDQFH RI
asked to evaluate also this aspect. The main statistical knowledge for the company management: the average
indicators of small company managers evaluations evaluation was 7.91 with median 8.5, and mode 9 in the
related with the importance of experience are shown in scale from 1 to 10. There were 4.4% of managers who
Table 4. HYDOXDWHGWKHVLJQL¿FDQFHRINQRZOHGJHRQO\E\LQWKH
The data of Table 4 indicate that the average evaluation scale 1-10).
evaluations of the importance of experience are .QRZOHGJH VLJQL¿FDQFH LQ WKH HYDOXDWLRQV RI VPDOO
VLJQL¿FDQW LQ WKH YLHZV RI VPDOO FRPSDQ\ PDQDJHUV company managers differed by the regions of Latvia,
since the average evaluation was 8.95 and the lowest WKH GLIIHUHQFHV ZHUH VWDWLVWLFDOO\ VLJQL¿FDQW ZLWK KLJK
evaluation of small company managers was 4, the probability (shown by the variance analysis).

ISSN 1691-3078
Table 5
Distribution of small companies managers evaluations on different aspects of the
FRPSDQ\PDQDJHPHQWLQUHODWLRQZLWKWKHLUHYDOXDWLRQRINQRZOHGJHVLJQL¿FDQFH
Evaluation of attitudes on different aspects of the company management

Evaluation of 6SHFL¿F
knowledge New weight
Foreign New Produc-
VLJQL¿FDQce products, Training Total (%)
market technology tivity
service
2 0 0 0 6 0 6 0.45
4 0 0 2 15 0 17 1.28
5 0 12 0 16 1 29 2.19
6 10 22 54 10 6 102 7.70
7 17 38 37 28 5 125 9.43
8 51 54 97 44 71 317 23.92
9 27 81 189 38 42 377 28.45
10 81 74 108 35 54 352 26.57
186 281 487 192 179 1325 100.00
Small company managers highly evaluated /DUJH 6PDOO ± WR 0HGLXP ± 6L]HG DQG 'LVWULFW
WKH VLJQL¿FDQFH RI H[SHULHQFH LQ VPDOO FRPSDQ\ Enterprises, International Journal of Production
management. The evaluations were higher than for Economics, Volume 104, pp. 85-99.
NQRZOHGJHVLJQL¿FDQFH 7. Haathi, A., Madupu, V., Yavas, U., Babakus, E.
Managers of small companies in Latvia who provided &RRSHUDWLYH 6WUDWHJ\ .QRZOHGJH ,QWHQVLW\
KLJKHU HYDOXDWLRQV IRU NQRZOHGJH VLJQL¿FDQFH ZHUH and Export Performance of Small and Medium
more active on foreign markets, acceptance of new 6L]HG (QWHUSULVHV Journal of World Business,
technologies, productivity, development of new products Volume 40, pp. 124-138.
and service as well as training. 8. Jonsson, S., Lindbergh, J. (2010). The Impact of
Institutional Impediments and Information and
Knowledge Exchange on SME’s Investments in
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$FTXLVLWLRQ IRU WKH ,QWHUQDWLRQDOL]DWLRQ RI WKH 'LYHUVL¿FDWLRQ DQG 3UR¿WDELOLW\ RI (PHUJLQJ 86
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0DQXIDFWXULQJ 3HUIRUPDQFHV $ &RPSDULVRQ DPRQJ University – Enterprise Synergy in Scientist –

ISSN 1691-3078
Sponsored Firms, Research Policy, Volume 35, 16. Zavadskas, E.K., Turskis, Z., Tamosaitiene, J.
pp. 1465-1476. 6HOHFWLQJ RI &RQVWUXFWLRQ (QWHUSULVHV
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ISSN 1691-3078
ISSN 1691-3078
(&2120,&6&,(1&()25585$/'(9(/230(17 No. 31
Editor – in-chief Aija Eglite
Printed and bound in Drukatava Ltd.
Spilvas street 9, Marupe,
Latvia

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ECONOMIC SCIENCE FOR

Integrated and Sustainable

Economic Science for Rural Development No. 31, 2013 1

TIME SCHEDULE OF THE CONFERENCE

Preparation – September, 2012 – April 20, 2013

Latvia University of Agriculture, Latvia, 2013

Abstracted / Indexed: AGRIS, EBSCO

2 Economic Science for Rural Development No. 1-10

Professor Baiba Rivza President of the Academy of Agricultural and

Economic Science for Rural 1-10

Associate professor Aija Eglite Latvia

Editor – in-chief and responsible

Language Editor: Gunta GRINBERGA-ZALITE

Layout designer: Agnese RADZELE-SULCE

4 Economic Science for Rural Development No. 1-10

Adolfs Rucins Dr.sc.ing., leading researcher (Research Institute of Agricultural Machinery,

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1. Latvia University of Agriculture, Latvia

8 Economic Science for Rural Development No. 31, 2013

No. 30 Production and Cooperation in Agriculture

No. 31 Integrated and Sustainable Regional Development

No. 32 Rural Development and Entrepreneurship

Economic Science for Rural Development No. 31, 2013 9

On behalf of the conference organisers

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Integrated and Sustainable Regional Development

Antoni Mickiewicz, Characteristics of Measures Undertaken Within the 58

Economic Science for Rural Development No. 31, 2013 11

Agnieszka Baer- Processes of Convergence/Divergence of Labour 129

12 3-13 Economic Science for Rural Development No. 31, 2013

Economic Science for Rural Development No. 31, 2013 13

INTEGRATED AND SUSTAINABLE

Economic Science for Rural Development No. 31, 2013 15

FOOD CRISIS VERSUS THREATS TO THE WORLD’S SOCIAL AND

Grazyna Krzyminiewska1, associate professor

Introduction 1. Reasons for the food crisis

16 Economic Science for Rural Development No. 31, 2013

Economic Science for Rural Development No. 31, 2013 17

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Economic Science for Rural Development No. 31, 2013 19

PROPERTY RIGHTS AND MACROECONOMIC PERFORMANCE IN

Aldona Zawojska1+, Dr.oec.; Tomasz Siudek2, Dr.habil.oec.

Introduction institutions and institutional framework playing the key

20 Economic Science for Rural Development No. 31, 2013

Economic Science for Rural Development No. 31, 2013 21

22 Economic Science for Rural Development No. 31, 2013

POL CZE HUN EST LVA LTU SLK SLV EU-8

Economic Science for Rural Development No. 31, 2013 23

Fig. 1. CIM vs. time in the selected EU countries, 1990-2011

Dependent variable: GDP growth rate (GDP_RATE)

24 Economic Science for Rural Development No. 31, 2013

Contract-intensive money (CIM)

VA_AGR 0.47* .. -0.64** .. 0.20 -0.36 0.48 0.66** -0.22*

*)&)B35 .. .. .. .. -0.35 -0.44 0.52 .. 0.41**

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Economic Science for Rural Development No. 31, 2013 25

Dependent Contract-intensive money at time t-2 (CIM ) – independent variable

variables POL CZE HUN EST

Conclusions, proposals, in economic activity and thus in the process of

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