MULTICRITERIAL REASONING of PRIORITIES1 THE PRINCIPLES OF MULTICRITERIAL REASONING OF THE DEVELOPMENT PRIORITIES Buracas & Zvirblis PROF. HAB. DR. ALGIS ŽVIRBLIS

MULTICRITERIAL REASONING of PRIORITIES2 MAIN STAGES OF THE ECONOMIC STRATEGIES’ FORMATION they are: determination of main tasks; SWOT analysis; differentiation & identification; taxonomy and subordination of development priorities; multivariate formation of the programmed indicator groups. On these stages, the parallel analysis, multiobjective and multicriterial evaluation as well as optimizing of alternatives according to essential integrated criteria, reasoning of strategic solutions, analysis of expected consequences of the implementation of strategic procedures and, at last, their necessary feedback correction comparing with policy measures determined on the earlier stage - is suggested to be applied.

MULTICRITERIAL REASONING of PRIORITIES3 EFFICIENCY OF STRATEGIC PROGRAMMING IS EXPECTED TO BE SYSTEMIC EVALUATED The theoretic backgrounds of national economic (finance system) development strategies are generated in the process of: multicriterial evaluation, ranking and optimizing of priorities, alternatives and formation groups of background economic (financial) indicators for this development in the connection with national economic resources and competitive abilities, multifunctional regional and sectored development directions.

MULTICRITERIAL REASONING of PRIORITIES4 EVALUATION METHODS FOR THE PROGRAMMED PRIORITIES OF THE ECONOMIC DEVELOPMENT The Analytical Hierarchy Process (AHP), Simple Additive Weighting (SAW), Complex Proportional Assessment (COPRAS), Multi-Objective Optimisation on basis of Ratio Analysis (MOORA), Generalized (Multiattribute) Utility Function and Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) - such methods are mostly used for the determining of the alternative programmed financial indicators and / or criterial significance, the evaluation of their priorities.

MULTICRITERIAL REASONING of PRIORITIES5 COPRAS & SAW COPRAS method permits to determine the value of the complex criterion for the finance system environment. Such a criterion is integrating some partial criteria (international payment balances, legal surrounding of the decision taking a/o); their values are determined, p. ex., by SAW method. The essence of the priority synthesis consists in the determination of the highest priority from local priorities and the last ones compared with it. The inconsistent realization of the procedures may become serious obstacle to correct application of the method itself under review.

MULTICRITERIAL REASONING of PRIORITIES6 TOPSIS & MOORA The optimization principles for strategic programmed solutions applying Multi-Objective Optimization on basis of Ratio Analysis (MOORA) method can be realized using minimax or TOPSIS methods and comparative calculations of efficiency parameters. Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) is determined for the evaluation of alternative (or variant) economic and / or finance priorities. The priority is given to the alternative which is nearest to ideal variant under review.

MULTICRITERIAL REASONING of PRIORITIES7 THREE-STAGE SYSTEM OF QUANTITATIVE ASSESSMENT An essence is provided in the following consequence: the identification and assessment of essential socioeconomic indicators (based on expertises) determining the objective groups of indicators; the assessment of groups of indicators according to their determination using a compound index for each of them; the assessment of generalized macroeconomic criteria (as a composition of indicator groups) applying the level index as a complex measure.

MULTICRITERIAL REASONING of PRIORITIES8 General matrix expressions When applying SAW method for the evaluation of finance system environment indicators: where b 11,…b nn are the significance parameters of the essential indicators’ E 1,...,En influence on the compound variable E.

MULTICRITERIAL REASONING of PRIORITIES9 where k e1, … k ln, are the significance parameters of direct and interaction impact of respective indicator groups E, S, A, L on the general level of finance macrosystem M. THE MODEL FOR ASSESSMENT OF FINANCE MACROSYSTEM

MULTICRITERIAL REASONING of PRIORITIES10 Selected basic groups of the essential macrosystemic efficiency and innovation indicators (comparative with WEF expert evaluations) :  GDP growth and its structure;  Inflation level (DIT);  Amount of direct foreign investments;  Level of economics regulation;  Market size and efficiency;  Favourability of taxation (redistributive function);  Number of bancrupting enterprises (changes);  Financial market sophistication;  Amounts of public procurement;  Indicators of innovations, markets efficiency a/o (with account of business situation).

MULTICRITERIAL REASONING of PRIORITIES11 APPLYING COMPLEX PROPORTIONAL ASSESSMENT (COPRAS) METHOD: The value of macroeconomic level index M(I) is determined by COPRAS with account of the significances of partial criteria : where k e, k s, k a −coefficients of impact of partial criteria economic growth E(I), finance sector efficiency S(I), innovation and market efficiency level A(I) on the value of macroeconomic level index M(I) determined by expert way.

MULTICRITERIAL REASONING of PRIORITIES12 THE QUALITATIVE AND QUANTITATIVE ASSESSMENT OF IDENTIFIED ECONOMIC INDICATORS AND DETERMINATION OF WEIGHTS IN INFLUENCE SCENARIOS I AND II Economic indicator groups and determining essential indicators Qualitati ve evalu ation Assessment in points Weights III Group of economic indicators (E) 0,4 Direct foreign investments E1E1 (+)5,56,0 0.2 Change of GDP E2E2 (- )4,55,5 0,15 Busines sophistication E3E3 (- )4,55,0 0.2 Economic regulation level E4E4 (- )4,0 5,5 0.2 Taxation favourability E5E5 (--)3,04,0 0,25 Level index E (I) 4,3 5,0

MULTICRITERIAL REASONING of PRIORITIES13 SUMMARY The multicriterial evaluation and optimization principles based on it permit to formulate the more effective strategic development programs, to determine their priorities and essential indicators when modeling programmed alternatives. There is possibilities to implement the multicriterial reasoning under review into management and administration systems when forming the algorithms of this process. The principles under review may form the basis for the computer- based strategic planning and development programs.