Assessment of the Level of Economic Development of Rural Areas

At the meeting of the National Projects and Demographic Policy Council the President of the Russian Federation emphasized that “Rural areas have a powerful Economic, demographic, natural, historical and cultural potential. Our goal is to use it effectively for the benefit of the whole country, in order to achieve a new quality of life for millions of our citizens.”

Currently, the decision of problems of the development of rural areas of the Russian Federation is carried out in the framework of the concept of long-term socio-Economic development, the food security doctrine and the federal program “Sustainable development of rural areas.”

The effectiveness of the development of territories is characterized by comparing the effect obtained with the value of the resources or costs used. Determination of the effectiveness of the development of territories is based on a comparison of its results with the cost of labour and with the value of productive resources. Development is associated with the concept of Economic potential.

The word “potential” means possibilities, sources, tools, supplies, which can be actuated and used for achievement of certain goals. Availability of property potential due to the Economic stability and environmental conditions is understood as an Economic potential.

The Economic interpretation of “potential” regards it as the ability of the Economic entity to ensure its long-term performance and achievement of strategic goals using the system of available resources.

In this regard, we propose methodology for evaluation of the Economic potential of rural areas, which allows taking into account the results of the sustainable management of certain areas. We believe that the Economic potential of rural areas can be seen as the qualitative characteristics and quantitative measurement parameter.

To do this it is necessary to define a set of indicators, the composition of which depends on the purposes of evaluation and needs of the assessment subject. Since it is difficult to give the priority to any specific criteria, we propose to carry out a comprehensive assessment of the Economic potential of rural areas, which allows calculating the integral index, which characterizes the municipality and the region as a whole.

The methodology includes an assessment of the Economic potential of areas as a rating and as a rating construction with regard to the influence of the areas development factors. A significant advantage is that the evaluation can be performed based on the official statistics.

Analysis of the literature showed that currently there are various methods of rating, however, in our opinion, these methodologies differ in the initial set of indicators, algorithm for calculating comparable indicators and rating construction. In this connection, it was decided to take into account the previous experience, improve and generalize existing strengths and develop this methodology.

Methodology of the evaluation of the Economic potential of rural areas consists of the following stages: justification of the parameters and indicators system characterizing the given parameter; calculation of comparable indicators; calculation of parameters with different methods (additive convolution method; the method of calculating the distance from the benchmark); rating construction; analysis of the results obtained, the search for reserves of increase of the Economic potential use efficiency.

The qualitative characteristic of the Economic potential of the area is the extent of its sustainable development. Comparative evaluation makes it possible to take into account all the important parameters of Economic development which are essential.

We identified the following elements in the structure of the Economic potential: production potential, employment potential, financial potential, investment potential and consumption potential. In our opinion, this structure will allow to evaluate the Economic potential of rural areas objectively.

Since rural areas are areas, which main activity is the production of agricultural products, the structure of the production potential of the territories includes indicators of the agricultural sector development. At the same time, the agricultural production has the necessity for manpower, financial, investment and other resources which currently are being used or can be used in the industry.

Calculations of an integral indicator of the Economic potential of rural areas were carried out on materials of 44 municipalities. During the assessment the additive convolution of criteria was used. Calculations by the proposed methodology are quite time-consuming, especially for large sizes of the target population, therefore it is necessary to use specialized software.

A detailed analysis of the production capacity allows giving the characteristic of each municipality by sectors, identifying specifics, strengths and weaknesses, etc., however, the goal of this study is to evaluate the Economic potential of rural areas, which consists of the production, labour, financial, investment and consumer potential.

Development of the productive potential without the development of all the others is impossible, so it is also necessary to take into account their level of development.

Labour potential can be analyzed as a resource category, reflecting the labour resources that can be used to solve any problems, to achieve a certain goal. In this respect, the labour potential can be seen in relation to the individual employee, to the company and to the society as a whole.

Having the opportunity to use the existing or to attract the additional labour to the agricultural sector, including those from other sectors, in the municipality is considered by us as a factor of Economic potential development of the agriculture sector.

The values obtained by the rating of the Economic potential of rural areas can be divided into three groups. The first group includes municipalities with high Economic potential, rating of which is 12 or more. In the second group there are middle level Economic potential areas, the rating value is in the range of 8 to 12. The third group value is less than 8.

Thus, the assessment of the Economic potential of rural areas allows:

• comparing the actual result with the possible one and assessing the potential of individual territories, grouping them in accordance with their level of Economic development;

• identifying opportunities to improve the efficiency of the use of the Economic potential of rural areas, studying the causes of underutilization and on this basis developing measures aimed at maximizing of the Economic potential of rural areas;

• having considered the rural areas development programs, using the results obtained to determine the organizations located in the territory with the best return on the use of the available material resources and on this basis carrying out their state and municipal support.

Assessment of the Level of Economic Development of Rural Areas

Prepare and write by:
Author: Mohammed A Bazzoun
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