Sources of funding regional smart specialization in Ukraine

Abstract

Increasing the competitiveness level of regions based on smart-specialization is one of the foundations of regional development policy in Ukraine until 2027. Ukrainian regions have identified areas of their smart-specialization and formed projects for their implementation to achieve this goal. However, the smart-specialization projects require considerable financial resources. Identify and assess the financial sources for smart-specialization projects in Ukrainian regions, describe the weaknesses of the financial support mechanism for regions’ smart-specialization and suggest possible ways to eliminate them is the goal of our research. We analyzed regional development strategies and medium-term action plans of strategies’ implementation for identifying smart-specialization projects and the expected sources and scope of their financing. Then, we evaluated the possibility of financing the smart-specialization of Ukrainian regions from the expense of state and regional budgets, international organizations and domestic enterprises. State budget funds are the main financial resource for the introduction of regions’ smart-specialization. On average, almost half of the total planned funding for the regions’ smart-specialization projects comes from the state budget. The own funds of enterprises, grant funds, resources of international financial organizations, etc. – cover the second planned half of the regions’ smart-specialization projects’ cost. Funds from regional budgets will provide only a small need for funds for regions’ smart-specialization projects implementation. However, we found the absence of a separate financial support mechanism specifically for regions’ smart-specialization projects at both the state and regional levels. Conclusion. In Ukraine, there are sources of funds to start financing smart-specialization of regions. The range of tools for financial support of smart-specialization projects is quite wide. Besides, we propose to allocate part of the funds within the state and regional programs exclusively to the implementation of regions’ smart-specialization projects. We recommend introducing the funding for relevant projects on a revolving basis alongside non-repayable financial instruments to support regions’ smart-specialization.