Transaction Costs and Prospects for Public-private Partnership in the Russian Mineral Resourse Sector

Irina Glazyrina and Sergey Lavlinskii
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Irina Glazyrina: Department for Ecological Economics, Institute of Natural Resources, Ecology and Cryology of the Siberian Branch of the Russian Academy of Sciences, Transbaikal State University, Chita, 672014 Russia,
Sergey Lavlinskii: Institute of Mathematics of the Siberian Branch of the Russian Academy of Sciences, Transbaikal State University, Novosibirsk, 630090, Russia

International Journal of Economics and Financial Issues, 2017, vol. 7, issue 1, 403-413

Abstract: An analysis is presented for the current development level of the institution of public-private partnership (PPP) in the mineral resources complex of Russia. The main focus is on the two PPP models that are most widely used in Russia. The first model is production sharing agreement (PSA). An analysis is conducted of the PSA concept. The Sakhalin 2 project is used as an example to show how an inadequate preparation of PSA terms and high transaction costs (TC) can lead to a breach of contract. The second model is applied in production infrastructure development projects financed by the Investment Fund of Russia. This is a Russia-specific model; thus, authors use a special toolkit for its assessment in the paper. Analysis shows that important factor of the project efficiency is an institutional environment. Weakness of institutions and lack of low cost instruments of conflict resolution might be the cause of high TC and environmental damage. The technique applied in the efficiency analysis of concrete partnership arrangements is presented using the examples of the PPP models practiced in Krasnoyarsk Krai and Transbaikal region in Siberia. It can be applied in designing a raw-material base development program involving PPP arrangements. The problem solution generates a cost-sharing arrangement between the state and the private investor, making it possible to optimize the majority of Russian PPP models.

Keywords: Mineral Resources; Public-Private Partnership; Production Sharing Agreement; Transaction Costs (search for similar items in EconPapers)
JEL-codes: C63 O13 Q32 (search for similar items in EconPapers)
Date: 2017
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