Fuzzy Approach for the Formation of an Optimal Portfolio of Strategic Projects to Achieve Regional Development Targets in the Digital Economy
Published at : 07 Dec 2020
Volume : IJtech
Vol 11, No 6 (2020)
DOI : https://doi.org/10.14716/ijtech.v11i6.4433
Mazelis, L., Lavrenyuk, K., Krasko, A., 2020. Fuzzy Approach for the Formation of an Optimal Portfolio of Strategic Projects to Achieve Regional Development Targets in the Digital Economy. International Journal of Technology. Volume 11(6), pp. 1136-1147
| Lev Mazelis | Laboratory Department of Mathematics and Modelling, Vladivostok State University of Economics and Service, st. Gogol 41, Vladivostok 690014, Russia |
| Kirill Lavrenyuk | Human Resources Directorate, RT-Techpriemka, Electric lane 1/12, Moscow 123557, Russia |
| Andrey Krasko | Laboratory Department of Mathematics and Modelling, Vladivostok State University of Economics and Service, st. Gogol 41, Vladivostok 690014, Russia |
This study was
performed as part of an essential task of accumulating and developing regional
human capital in the digital economy. In this age of uncertainties, risks, and
scarcity of resources, regional leadership faces the task of the optimal allocation
of available financial resources among strategic projects that directly or
indirectly affect the development of regional human capital. The aim of this
study was to develop and test the economic and mathematical method of forming
the optimal portfolio of strategic projects to maximize progress towards
achieving the target values of key indicators of regional development through
the development of human capital using a fuzzy approach. A fuzzy model is
proposed, and its objective function is an integrated index that takes into
account the degrees of achievement of strategic indicators of the social and
economic development of a region. The information base of the study is composed
of statistical data from official information resources. The model is a fuzzy
mathematical programming problem in which the uncertainty and lack of
information are modeled using a fuzzy approach. The variables used for the
optimization are the Boolean variables of the inclusion of a project in a
particular investment area at a certain point in time in a project portfolio.
The transition from a fuzzy optimization problem to a crisp one is performed by
setting confidence levels for the objective function and constraints. The
choice of a certain confidence level allows, to some extent, one to take into
account the uncertainty, which in turn affects the structure of the investment
allocation. For the Primorsky Region, an example of the formation of an optimal
portfolio of projects is considered by each year of a given planning period,
which allows for maximum progress towards achieving the targets of development
for the region.
Economic and mathematical model; Fuzzy logic; Project portfolio optimization; Regional human capital; Social and economic development
Currently, regions operate in the context of the on-going digital transformation of the economy and social environment. The penetration of cutting-edge technologies into the environment of human functioning produces new innovative businesses and products and results in the automation and digitalization of business processes (Berawi, 2019). However, the integration of technological innovations into everyday life also demands new requirements for the quality and pace of the development of human capital (Santoso et al., 2019). The modification of human capital is associated with the rapid emergence of new digital competencies and their continual development. In turn, public authorities can contribute to the development of human capital through the implementation of projects that are aimed at creating favorable conditions for organizing educational processes that, for example, meet the requirements of employers, deliver quality medical care (Berawi, 2020), etc. This leads to the need to address the issue of the optimal allocation of resources that are available in a region among such projects to obtain a maximum effect.
Currently, there is
ongoing research on the problems of the development of human capital at various
levels. The research data can be logically structured into three groups.
Group
I includes studies that focus on the quantitative assessment of human capital.
One of the most popular tools for assessing human capital is the human development
index (UNDP, 2019). Gurban
(2015) presents the value of human capital by subjects of the Russian
Federation as the average of the following components: demography, education,
employment, science, and social culture. Lim et al.
(2018) made a systematic analysis of human capital for 195 countries and
regions for the period 1990–2016. There are many studies devoted to the subject
of the quantitative assessment of human capital in different geographical
areas, for example, in the U.S. (Christian, 2014)
and China (Li et al., 2016).
Group
II includes studies that focus on assessing the impact of the investment
process on human capital. For example, Pelinescu
(2014) considers the impact of investments aimed at ensuring the birth
rate, creating a training system for highly qualified specialists and the
social welfare of the population, and developing a region’s human capital. Percoco (2016) analyses the impact of changes in
the secondary and higher education systems in a country on the change in the
human capital development index. In addition, Soubjaki
(2017) analyses the relationship between negative contributors to the
health status of the population and human capital. Fraumeni
et al. (2019) proposes a new complex measure of human capital
investment.
Group
III includes studies that focus on the assessment of the impact of human
capital on the development of a specific social and economic system. For
example, McDonald (2019) describes the
positive impact of investment in human capital of the U.S. defense sector on
the economic growth of the states and the country as a whole. Olopade et al. (2019) analyses the impact of human
capital development on poverty reduction in terms of long-term economic growth.
Teixeira and Queirós (2016) note that in
1960–2011, the investment in human capital and the dynamics of production
specialization were critical economic growth factors for developed countries. Zallé (2019) indicates clear feedback between the
rate of exploitation of natural resources and the level of development of human
capital.
The
analysis of referenced works allows us to discuss the lack of tools that would
allow the reasonable formation of an optimal set of regional strategic projects
that directly or indirectly affect the development of regional human capital to
maximize progress towards achieving the targets of the development of a region.
When forming an optimal project portfolio, the current parameters and specifics
of the region, the planning period, and available resource constraints should
be taken into account. Special focus should be directed toward the
consideration of environmental uncertainties and incomplete information. Aras et al. (2008) consider the use of fuzzy logic
for modeling social and economic processes. The fuzzy set approach is viewed as
a promising direction, which allows the modeling of uncertainties of verbal
expert estimates of model parameters and potential risks by representing
parameters and functional dependencies in the form of fuzzy numbers (Carlsson et al., 2007). Fuzzy problems require
special solution methods. However, the lack of examples of implementations of
the proposed methods and approaches in real cases of the formation of
time-variant project portfolios presents considerable difficulties in their
further use in optimization models. Fuzzy optimization models with fuzzy
objective functions and constraints allow the results to vary when setting
various exogenously established confidence levels (Anshin,
2015).
Thus,
the aim of this study was to develop an economic and mathematical method of
forming the optimal portfolio of strategic projects to achieve the target
values of key indicators of regional development through the development of its
human capital in a fuzzy setting.
The
fuzzy economic and mathematical model has been developed, which allows the
formation of an optimal portfolio of regional strategic projects that directly
or indirectly affect the development of regional human capital. The objective
function of the model is an integrated index that characterizes the degrees of
achievement of the targets of social and economic development of the region for
a given planning period. The variables used for optimization are the Boolean
variables of the inclusion of a project in a particular investment area at a
certain point in time.
In comparison with previous studies, a distinctive
feature of this model is the consideration of two levels of uncertainty in the
formation of an optimal portfolio of regional strategic projects. The first
level is associated with the reliability of estimates of numerical coefficients
of dependencies (Equation 2) and (Equation 3). The second level is associated
with the need to set a number of parameters for dependencies (Equation 5) and (Equation
6) and restrictions (Equation 10) through (Equation 12), which are determined
by the experts. To model these uncertainties, a fuzzy-multiple approach is
used, and the developed model is a fuzzy mathematical programming problem.
This study proposes a method to identify a solution
for the fuzzy problem of forming an optimal portfolio of regional strategic
projects. The idea of the approach is to reduce the fuzzy optimization model to
a crisp one by converting fuzzy inequalities for the objective function and
restrictions into crisp ones at given confidence levels.
The formation of the optimal portfolio of strategic
projects for the Primorsky Region considers the computation aspects of the
proposed model. The resulting structure of the regional budget investments by
investment areas is formed on the basis of a pool of strategic projects. A
comparative analysis of the investment structure resulting from the use of the
model and reflected in the draft regional budget was performed. The analysis
showed a higher efficiency of financial resources expressed in a greater degree
of achieving the integrated index and the targets of social and economic
development for the regional project portfolio formed on the basis of the
proposed model.
The study was sponsored by the Russian Foundation for Basic Research
(RFBR) as part of research project No. 18-010-01010.
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