INVESTMENTS, FIXED ASSETS, AND OUTPUT IN CZECHOSLOVAK INDUSTRY 1949-60

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• Sequence Number: 1
• Publication Date: August 1, 1961
• Content Type: REPORT

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CONFIDENTIAL
Economic Intelligence Report
N? 76
INVESTMENTS, FIXED ASSETS, AND OUTPUT
IN CZECHOSLOVAK INDUSTRY
194-9-60
CIA/RR ER 61-39
August 1961
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
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CONFIDENTIAL
Economic Intelligence Report
INVESTMENTS, FIXED ASSETS, AND OUTPUT
IN CZECHOSLOVAK INDUSTRY
199-9-60
CIA/RR ER 61-39
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. '793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
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CONTENTS
Page
Summary and Conclusions
1
I.
Introduction
5
A. Czechoslovak Investment Policy
5
B. Analytical Approach
6
II.
Growth and Distribution of Fixed Assets in 1948-60
. ?
?
7
1
1
A. Industrial Heritage of the Communists
B. Growth and Distribution of Industrial Investments .
C. Maturation of Investments and Retirements
D. Trends in the Growth of Fixed Assets
.
7
8
11
13
Productivity of Fixed Assets in Industry, 1949-60 .
15
A. Trends in the Productivity of Fixed Assets
15
B. Factors Affecting the Productivity of Fixed Assets
17
1. General
17
2. Changes in the Composition of Fixed Assets ? ?
?
18
3. Changes in Technology and Environment
19
4. Changes in the Utilization of Capacity
20
IV.
Evaluation and Prospects
24
A. Evaluation
24
B. Plans for Industrial Growth in 1961-65
25
Appendixes
Appendix A. Statistical Tables
33
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Tables
Page
1. Investment in Czechoslovak Industry, 1948-60 ' 36
2. Derivation of the Estimated Value of Fixed Assets and
Retirements in Czechoslovak Industry, 1948-60 and 1965 38
3. Value of Assets of C,zechoslovak Industry, by Branch,
1948-6o 4o
4. Value of Assets and Investments in Industrial Machinery
and Equipment in Czechoslovakia, 1948-60 41
5. Indexes of Czechoslovak Industrial Output, 1948-60 and
1965 Plan 42
6. Average Capital-Output Ratios of Czechoslovak Industry,
1948-60 43
7. Sectoral Distribution of Capital Investment in Czecho-
slovakia, 1949-65 44
8. Gross Capital Investment in Industry as a Percent of
Gross National Product in Czechoslovakia, Selected
Years, 1948-60 45
9. Shares of GNP Originating in Industry and Gross Capital
Investment in Industry as a Share of GNP in Czechoslo-
vakia and Selected European Countries, 1952, 1958, and
1952-58 Average 46
10. Indexes of Industrial Employment and Output per Worker
in Czechoslovakia and Selected European Countries,
1954 and 1958 47
11. Indexes of Fixed Assets, Employment, and Output in
Czechoslovak Industry, 1951, 1954, 1957, and 1960 . ? 48
12. Indexes of Fixed Assets, Employment, and Output of
Czechoslovak Industry, 1955, 1960, and 1965 Plan . ? ? 49
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INVESTMENTS, FIXED ASSh2S, AND OUTPUT IN CZECHOSLOVAK INDUSTRY*
1949-60
Summary and Conclusions
The rapid industrial development in Czechoslovakia in 1949-60 was
supported by a large investment program. An average of about 14 per-
cent of the gross national product (GNP) is estimated to have been used
for industrial investments, most of which were directed to heavy indus-
try, especially to the basic materials branches.
The Czechoslovak regime has constantly maintained emphasis on
heavy industry, although significant changes have occurred in invest-
ment policy. Industrial investments increased rapidly during 1949-52,
declined or stabilized during 1953-55, and increased rapidly once again
during 1956-60.. In the distribution of industrial investments, there
was a substantial shift during 1953-57 in favor of basic materials,
especially fuels and power, at the expense of machine building and light
industry. Since 1957 the share of machine building in investments has
risen slightly in response to the high investment and export require-
ments of the Third Five Year Plan (1961-65). These changes in invest-
ment policy occurred earlier than similar changes in most of the other
Satellite countries. By making relatively prompt adjustments in invest-
ments, the Czechoslovak regime was able to anticipate reasonably well
the prospective requirements for heavy industrial products. Thus the
short-term flexibility in investment policy has promoted the longer
term basic objectives of the regime.
As a result of the investment program, fixed assets in industry
grew at an average annual rate of 5.8 percent during 1949-60, and the
rate of growth of fixed assets increased during the same period. Be-
cause of the timelag between investments and the completion of new
facilities, there has been a substantial backlog of unfinished invest-
ments. On the other hand, retirements of old assets were very small
until 1957 or 1958.
Industrial production increased faster than fixed assets, at an
average annual rate of 8.1 percent in 1949-60. Consequently, average
capital-output ratios -- the ratios of fixed assets to net output --
declined, especially in machine building and light industry. This de-
cline occurred even though technological development was not particularly
* The estimates and conclusions in this report represent ?the best
judgment of this Office as of 1 August 1961.
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rapid and the industrial structure was becoming more capital-intensive.
Increased utilization of existing production capacity probably accounted
for nearly all of the decline in capital-output ratios..
Most of the decline in capital-output ratios occurred in 1949-51,
and further declines have taken place since then, mainly in machine
building and light industry. In these two sectors, substantial excess
capacity persisted throughout 1949-60, and the changes in capital-
output ratios depended mainly on supplies of materials and labor. In
most of the basic materials branches, however, the productive capacity
of old plants was already fully utilized by around 1951. Fluctuations
in the capital-output ratios since then have reflected changes in com-
missioning new facilities and inability for technical and organizational
reasons to use these facilities efficiently at the beginning. Changes
in the rate of growth of materials and labor inputs and in the rate at
which new facilities were being completed appear to explain the rise
in capital-output ratios in 1952-54, the sharp decline in 1955-57, and
the relatively slow decline in 1958-60.
Plans for 1961-65 call for about the same rates of growth in total
output and in the main industrial sectors -- machine building, basic
materials, and light industry -- as were achieved in 1956-60. Planners
also appear to assume that the trends since 1958 in the relationship
of fixed assets to output will continue: the over-all capital-output
ratio will decline slowly, and on the average the ratios will remain
about constant in the basic materials branches while continuing to
decline in machine building and light industry.
Investment costs per added unit of output will be substantially
higher than in 1956-60, however, because of planned increases in the
backlog of unfinished investments and in the rate of retirements. The
building of new plant in basic industries, especially in metallurgy,
mining, petrochemicals, and rubber, will be accelerated, and this
activity will tend to increase unfinished investments because of the
long construction periods. Increased retirements will result from
the greater emphasis on mechanization and on technological improve-
ments. On the other hand, technological improvement is expected to
save not only on labor, the supply of which will increase less than
in the past 5 years, but also on capital. Thus the plans for the
productivity of assets may depend heavily on the degree of success
in introducing new technology.
Reliance on new technology may constitute a major weakness in the
plan. Some of the published goals for technological change appear
optimistic, and the plan also relies heavily on imports of raw mate-
rials from the USSR. Some favorable trends, however, will assist in
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achieving output goals. The length of the construction period has
been reduced considerably during the past 5 years and may be reduced
further. Construction of many of the facilities that will be needed
during 1961-65 was begun during 1956-60. Industrial investments have
been rising ever since 1956, so that sharp fluctuations in the growth
of assets probably will be avoided. On balance, it does not appear
that the investment requirements of the production plan are grossly
understated.
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I. Introduction
A. Czechoslovak Investment Policy
In 1948, when the Communists came to power, Czechoslovakia had
regained its prewar level of industrial output and in terms of per
capita production of key commodities was more industrialized than Italy,
although less so than France. After 1948, economic policies common to
the entire Soviet Bloc promoted a rapid growth of industrial production
that in Czechoslovakia averaged 8.1 percent a year. This rate was
exceeded by only a few Western European countries, such as West Germany,
Austria, and Italy.
Maintaining rapid expansion of heavy industry has been a con-
stant goal of the Czechoslovak Communists. The principal support for
this policy has been an extremely large investment program in heavy in-
dustry. Industrial investments, including capital repairs and valued
at factor cost, increased from 8 percent of the GNP in 1948 to an aver-
age rate of 14 percent in 1952-58 and to about 21 percent in 1960 (see
Table.8*). About 85 percent of these investments were directed to
heavy industry. The rapid buildup of heavy industry permitted output
to increase by an average annual rate of 11.2 percent in machine build-
ing and 9.4 percent in the branches producing basic materials and power.
Light industry, however, experienced a relatively slow growth in output.
Within the limits of its over-all priorities the Czechoslovak
regime was quick to change its investment pattern in response to changes
in the economic situation. To halt the deterioration of living stand-
ards and to avoid a shortage of raw materials and power, investments in
industry were cut back and reallocated in favor of raw materials, power,
housing, and agriculture as early as the beginning of 1953 (see Tables 1
and 7**). These measures were aspects of the policy of "proportionate
growth" (called the "new course" elsewhere in the Bloc), which was
instituted in 1953 in Czechoslovakia rather than 1954 as in the other
Satellites. Then, with the improvement in the level of consumption and
reduced strain on industrial resources, Czechoslovakia began a new
investment drive in 1956, whereas some of the other Satellites did not
do so until 1958.
By making relatively prompt adjustments in investments, the
Czechoslovak regime was able to anticipate reasonably well the prospec-
tive requirements for heavy industrial products, and this policy of
short-term flexibility of investment has promoted the longer-term
objectives of the regime.
* Appendix A, p. 45, below.
** Appendix A, pp. 36 and 44, respectively, below.
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B. Analytical Approach
The principal purpose of this report is to explore the role
of investments in the industrial development of Czechoslovakia between
1948 and 1960. Investments affect production, however, only after
they have resulted in installations of plant and equipment -- that is,
additions to or modifications of fixed assets. The following analysis,
therefore, proceeds in two stages. Section II contains an analysis
of factors that have determined the effect of investments on the growth
of fixed assets in Czechoslovak industry. Such factors include the
amount and composition of assets at the beginning of the Communist
period, the growth and df'stribution of gross investment during the Com-
munist period, the rate at which investments were completed, and the
policy on retirements of assets. On the basis of this analysis an
estimate is made of the growth of fixed assets. Section III contains
an analysis of the productivity of fixed assets, based on the data
on fixed assets together with estimates of net industrial production,
and also an examination of the main factors that affect the productivity
of assets -- changes in the distribution of fixed assets by branch,
technological development, the degree of excess capacity, the supply
of labor and materials, and the efficiency of labor and management.
This analysis of historical trends is the basis for a general evalua-
tion in Section IV of Czechoslovak investment policy and for a discus-
sion of planned trends in investments, fixed assets, and industrial
production.
Czechoslovakia took its first comprehensive inventory of assets
in the economy on 1 January 1955. 1/* In the case of industry, an
inventory had been taken once before -- on 1 January 1948 -- but it
was hastily conducted and lacked a uniform methodology. 2/ Plans for
carrying out the inventory of 1955 were made more carefully, so as to
insure consistency in the data on the age, condition, technical level,
and value of assets.** This inventory served as a pilot operation
for the Soviet inventory 1?/ conducted 5 years later.*** In both inven-
tories, assets were revalued at replacement cost -- in Czechoslovakia
at what it would have cost to replace productive capacity existing in
January 1955. Although neither inventory made an explicit allowance
for past depreciation of assets, obsolescence was taken into account.
The replacement cost of old equipment was determined from data on the
current cost of production for equipment of the same general type and
productive capacity. Therefore, the cost of replacing assets reflected
the technology of 1955, rather than that of the year in which the assets
** The new inventory showed that the value of industrial assets exist-
ing in 1948 had been underestimated by 39 percent.
*** The Soviet census was taken as of 1 January 1960.
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were produced. Assets with an expected life of less than one year or
which cost less than 600 crowns* were not counted in the inventory. 2/
The Czechoslovak inventory established the value of assets
as of 1 January 1955. The value of industrial assets in other years
was obtained by adding or deducting the net additions to fixed assets
in each year, the net additions being equal to gross capital invest-
ments less any increase in unfinished investments and the value of
assets retired during the course of the year. Additions to assets
were calculated in 1955 prices.
The index of industrial production was obtained by using a
large sample of commodity series in physical units, weighted by net
output at factor cost.** The estimates of industrial output include
handicrafts, as do those for industrial assets.
II. Growth and Distribution of Fixed Assets in 1948-60
A. Industrial Heritage of the Communists
Czechoslovakia has had a long tradition in industry. Mining
and the manufacture of textiles, glass, and porcelain are among the
country's oldest industries, and in the 19th century there was also a
rapid development of metallurgy, machine building, chemicals, leather,
and food processing. Long before Czechoslovakia became a nation in
1918, Prague, Pilsen, Brno, Ostrava, and Most were important centers
of heavy industry.
Independence and the breaking up of the Austro-Hungarian Empire
in 1918 forced Czechoslovakia to seek new foreign markets and to
diversify industry further. Consumer industries now had to export a
large part of their output in order to make good use of capacity.
During the interwar period, more than half of industrial output, mainly
consumer goods, was exported. In general, domestic manufactures
were equal in quality to those produced in the advanced industrial
countries of Western Europe, and Czechoslovak goods had a favorable
reputation in world markets. Substantial imports of industrial equip-
ment (mostly from Western Europe), however, continued to be necessary,
although some expansion occurred in certain branches of heavy industry,
such as mining, engineering, steel, and chemicals. Stimulated by
military requirements, the expansion of heavy industrial plant was
* Unless otherwise indicated, all crown values are in constant 1957
prices. The official rate of exchange for noncommercial transactions --
14.3 crowns to US $1 -- is a rough approximation of the purchasing
power of the crown in relation to the dollar (for investment goods).
** See Table 5, Appendix A, p. 42, below.
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accelerated in the years of recovery from the depression of-the early
1930's and during the 6 years of German occupation (1939-45), while,
on balance, there was disinvestment in light industry.
Direct war losses were relatively small in Czechoslovakia,
but excessive use of equipment and inadequate maintenance during the
war led to a considerable amount of replacement and repair of equip-
ment afterwards. In heavy industry, war and war-related losses were
more than offset by new investments during the war. Light industry,
although probably suffering less war damage than heavy industry,
lost a significant part of its skilled labor with the expulsion of
some 2 million Sudeten Germans during 1945. Economic reconstruction
proceeded rapidly during 1946-47, and by the time of the Communist
takeover early in 1948, fixed assets in Czechoslovak industries proba-
bly were at least as large as in the late 1930's. The structure of
assets had shifted further in favor of heavy industry, so that almost
56 percent of assets were in heavy industry, including 18 percent in
machine building. The percentage distribution of industrial fixed
assets at the end of 1948 is shown in the tabulation on p. 14.
B. Growth and Distribution of Industrial Investments
Since 1948, when the Communists assumed control of the govern-
ment, investment policy has been focused unalterably on the rapid ex-
pansion of heavy industry. Even during 1953-55, when industrial in-
vestments were cut back to permit much greater investments in housing
and agriculture than in the past, the share of heavy industry in total
industrial investments increased. It is estimated that heavy industry
absorbed about 85 percent of total industrial investments in 1948-60.
The value of investments by branch of industry during 1948-60 is given
in Table 1.*
Within heavy industry, the largest amount of investment was
directed to branches producing electric power and basic materials.
During 1948-60, investments in power, fuels, metallurgy, chemicals,
rubber, and construction materials made up 64 percent of total indus-
trial investments compared with about 21 percent for machine building.
Moreover, investments in the power and basic materials branches of
industry have constantly increased, even during 1953-55, when invest-
ments in machine building and light industry were sharply reduced.
The basic industries had to be built up rapidly because, in the absence
of far greater foreign trade opportunities, they were the main support
for the development of the economy. Iron ore mining, for example,
helped to support the expansion of the steel industry, the development
of which in turn supported the expansion of machine building. Coal
* Appendix A, p. 36, below.
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mining was expanded because coal is the predominant source of energy
found in Czechoslovakia. The investment cost of rapidly increasing
the output of basic materials and power was high, however, because
the basic industries in general are highly capital-intensive,* and
many of them were producing at nearly full capacity after 1951.
By nearly any measure (for example, net output, gross output,
employment, value of fixed assets), machine building is the largest
single branch of Czechoslovak industry.** It has been given the highest
priorities in allocation of factors of production and has received
larger investments than any other single branch. Relative to the
value of net output, however, investments have been lower in machine
building than in basic materials because the machine building indus-
tries generally are less capital-intensive than nearly all of the
basic materials industries. In addition, excess productive capacity
was widespread in machine building during the entire period.
Investments in light industry were extremely low by any stand-
ard. Except in a few branches that produced goods for heavy industry
(for example, certain types of glass, ceramic, and wood products) or
that were important to the development of the state storage and dis-
tribution network (for example, refrigeration), the regime did very
little to increase productive capacity or even to replace worn out or
obsolete equipment.
There have been substantial changes both in the rate of growth
of industrial investments and in the distribution of investments
since 1948. Total industrial investments grew rapidly in 1949-52,
stagnated during the "new course" of 1953-55 at a level nearly 15 per-
cent below that of 1952, and then began to rise again in 1956. The
sharpest increases in industrial investments in recent years occurred
in 1958 (24 percent) and in 1959 (21 percent). (See Table 1.***)
The percentage distribution of investments changed substantially
in 1949-52, in 1953-57, and again in 1958-59, reflecting the distinctive
economic circumstances of those periods. Although data on the distri-
bution or investments in 1960 are not available, it is estimated that
* A capital-intensive industry (or product) uses more capital per
worker than does industry as a whole.
** For purposes of this report, the machine building branch is also
considered as one of three sectors of industry. The other two are
light industry (consisting of the wood, paper, glass, porcelain and
ceramics, food, textiles, clothing, and leather branches) and basic
materials and power (consisting of the electric power, fuel processing,
fuel and ore mining, metallurgy, chemicals, rubber, and construction
materials branches).
*** Appendix A, p. 36, below.
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the distribution was about the same as in 1958-59. Significant shifts
in the pattern of investment during 1948-59 can be seen clearly in
the following tabulation, which shows the percentages of industrial
investment going to machine building, light industry, and basic in-
dustry; and within the latter, to fuels and power and to metallurgy.
1948
1949-52
1953-57
1958-59
Machine building
20
25
18
20
Basic materials and power
57
54
70
66
Of which:
Fuels and power
32
20
35
34
Metallurgy
10
18
18
16
Light industry
23
21
12
14
Investments in machine building mounted rapidly in 1949-52,
because it was necessary to re-tool and convert production to meet the
rapid growth in demands for machinery, not only for the domestic invest-
ment program but also for the other countries of the Bloc, especially
the USSR. These large demands together with Western export controls
led to the creation of considerable new productive capacity in the
machine building industry and a rapid diversification of machinery
output.
During 1953-57, investments in fuels and power more than
doubled, an increase occasioned by threatened shortages of fuels and
power. Investments in all other branches, however, especially light
industry and machine building, were cut back severely, and investments
in these two branches in 1957 had not reached the level of 1952. The
shares allocated to machine building and light industry declined be-
cause the supply of materials to these industries at that time fell
far short of the capacity to process materials. Investments in
machine building declined to about the level of investments in metal-
lurgy, because the machine building plant had been overexpanded in
relation to the supply of metallurgical products. Output in light
industry could be expanded without much investment by importing more
materials and utilizing existing capacity. The drop of 23 percent in
investments in light industry in 1953-57 relative to those in the
preceding 5 years shows how the Czechoslovak regime was able to main-
tain its basic economic orientation at a time when other Soviet Bloc
countries were devoting additional resources to production of consumer
goods.
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In 1958-59 the distribution of investments shifted slightly in
favor of the processing industries. Both machine building and light
industry picked up two percentage points. In the case of machine
building, this shift was induced by the formulation of directives. in
1958 on the new Five Year Plan (1961-65) V and by the signing of the
Czechoslovak-Soviet agreement on economic cooperation for 1959-65. ?./
A.new cycle had started, which required, as in 1949-52, that suffi-
cient capacity first be constructed in machine building to support
future investment and export needs.
C. Maturation of Investments and Retirements
Because construction of new plant and equipment took a sub-
stantial period of time, particularly in the basic industries, comple-
tions lagged well behind new investments. As a result of this lag
and the rapid growth of new investment, unfinished investments rose
from no more than 2 billion crowns in 1948 to about 14 billion crowns
in 1959, about the value of average annual investments since 1955.
Unfinished investments accumulated most rapidly in the early
years of the Communist period, reaching more than 10 billion crowns
in 1952. When industrial investments declined in 1953-55 and a con-
certed effort was made to complete old projects, the stock of un-
finished investments stabilized. Unfinished investments increased
again with the renewed rise of investment spending in 1956 and have
fluctuated around this higher level since that time. The following
tabulation shows yearly investments and completions and the stock of
unfinished investments during 1948-59 (in millions of 1957 crowns):
Year
Investments
Completions
Unfinished
Investments*
1948
5,100
3,862
1,230**
1949
6,620
4,429
3,430
1950
7,880
5,453
5,850
1951
9,130
7,100
7,880
1952
11,000
8,596
10,290
1953
9,680
7,167
12,800
1954
9,610
10,883
11,530
1955
9,540
9,088
11,980
1956
11,200
9,543
13,600
1957
12,200
12,293
13,550
1958
15,200
13;970
14,820
1959
18,500
19,830
13,460
* Cumulative investments minus cumulative completions. (See the
statement on rounding, p. 35, below.)
** This number assumes that the stock of unfinished investments at
the end of 1947 was zero. It probably was no greater than 1 billion
crowns so that unfinished investments at the end of 1948 would be
about 2 billion crowns and at the end of 1959 would be 14.5 billion
crowns as a maximum.
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On the average during 1948-59, the lag between the initiation
and the completion of investments was 1 to 2 years. In the case of
new plants the lag was, of course, much larger than 2 years. One
project -- the steel plant in Kuncice -- has been under construction
for 11 years and is not finished yet, although parts of it have been
in operation since 1952 and additional facilities were subsequently
brought into operation. Such phasing of operations is typical of
many integrated investment projects. Many investments, however, in-
volved an expansion of productive capacity in old plants, and this
could sometimes be done in a few months.
The existence of a lag explains the considerable difference
between the trends in investments and completions. When investments
were falling during 1953-54, for example, completions continued to
increase. There is every indication, however, that the average lag
declined from around 2 years during 1948-50 to approximately 1 year
during 1957-59. Although industrial investment rose about as rapidly
in 1956-59 as in 1949-52, the volume of unfinished investments in-
creased much more slowly in the latter period and actually declined
in 1959, when investments grew by 21 percent.
The lag was shortened in spite of changes in the structure of
investments. After 1953 a larger share went to power and coal mining,
where investments mature slowly. In addition, construction work in-
creased from 45 percent of total industrial investments in 1949-52 to
49 percent in 1956-59. Both of these factors should have tended to
lengthen the construction period. The shortening of the lag, there-
fore, probably resulted from greater efficiency in construction, which
in turn arose from increased experience in industrial construction
and, since 1958, from organizational changes that improved the control
of large investment projects.
The regime's policy regarding the retirement of old equipment
also affected the growth of fixed assets. During 1949-57, assets were
retired at very low rates. Since 1958, however, the retirement rate
(the percent of fixed assets retired per year) has more than doubled
because the planners have changed their views on obsolescence and have
begun a program of modernizing certain industrial facilities (see
Table 2*). By postponing the replacement of obsolete equipment, the
Communist regime formerly had hoped to promote the growth of assets
in key industries, making up for the low efficiency of the obsolescent
facilities by increasing the supply of labor and materials. But the
policy of low retirement led to higher expenditures for capital re-
pairs than would have been required otherwise. Such expenditures,
* Appendix A, p. 38, below.
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which are not included in the figures on investments in this report,
were almost one-fifth as large as the indicated investments in 1949-59.
Low retirement of equipment had an especially unfavorable
impact on the assets in light industry. In 1960 only 33 percent of
these assets were less than 12 years old, compared with 61 percent
in machine building and 70 percent in power and basic materials. A
large part of the equipment in light industry was more than 40 years
old, because this sector had received little investment in the inter-
war period or in the war and reconstruction years. Even among tie
branches of heavy industry, there is considerable variation in the
age of assets. The following tabulation shows assets under 12 years
old as a percent* of total assets of selected industries in 1960:
Chemicals
86
Machine building
61
Metallurgy and ore mining
72
All industry
58
Construction materials
71
Rubber
55
Electric power
70
Fuel processing
48
Fuel mining
66
Light industry
33
D. _Trends in the Growth of Fixed Assets
The fixed assets of Czechoslovak industry, including handi-
crafts, grew by 96 percent in 1949-60, or from an estimated 114 bil-
lion,crowns** in 1948 to 223 billion crowns in 1960 (see Table 2***).
The most rapid growth occurred in the power and basic materials branches.
* These percentages were derived by dividing gross additions to
assets in 1949-60 by the value of assets in 1960.
** These values were derived from published statistics on the value
of annual gross additions to industrial assets, indexes of the growth
of industrial assets, retirement rates of productive assets in the
economy, and the percentage distribution of assets by industrial branch
at the end of 1957. The asset values shown in Tables 2 and 3 (Appendix A)
pp. 38 and 40, respectively, below) are undepreciated, expressing what
it would have cost to replace the productive capacity of existing assets
in the various years in 1957 prices. Gross additions to assets and the
distribution of assets in 1957 are from data in 1957 prices, but the in-
dex of growth of assets is based on data in 1955 prices. Series on in-
dustrial investments in both 1955 and 1957 prices, however, are nearly
identical, indicating that there was hardly any change in wholesale
prices between these years.
*** Appendix A, p. 38, below.
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The following tabulation shows the percentage increases in the assets
of selected basic industries during 1949-60:
Basic materials and power 174
Chemicals and rubber 398
Metallurgy and ore mining 193
Construction materials 188
Electric power 181
Fuel mining 144
Fuel processing 60
Assets in machine building, the largest branch of industry, grew by
110 percent, while light industrial assets grew by only 23 percent.
The values of fixed assets in the major branches of industry during
1948-60 are shown in Table 3.*
The principal changes in the percentage composition of industrial
assets are shown in the tabulation below. The basic.materials and power
industries accounted for an increasing percentage of total industrial
fixed assets, and assets in light industry declined sharply in relative
size.
1948
1954
1956
1960
Machine building
18.2
20.212.12
19.5
Basic materials and power
38.2
776
LI-1Z
53.2
Fuel mining
8.6
9.0
9.5
10.7
Metallurgy and ore mining
9.3
11.9
12.4
13.8
Electric power
8.3
9.9
10.8
11.9
Other basic materials**
12.0
14.0
15.1
16.8
Light industry
43.6
35.0
32.3
27.3
Foods
14.9
12.3
11.6
9.7
Textiles
13.0
10.5
9.6
7.9
Other light industry***
10.5
9.9
9.2
8.3
Miscellaneous and statistical
discrepancyt
5.2
2.3
1.9
1.4
* Appendix A, p. 40, below.
** Including chemicals, rubber, fuel processing, and construction
materials.
*** Including clothing, leather, wood, paper, glass, porcelain, and
ceramics.
t Including printing, fats, soaps, perfumes, refrigeration plants,
and possibly private handicrafts (see the methodology to Table 3).
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III. Productivity of Fixed Assets in Industry, 1949-60
A. Trends in the Productivity Of Fixed Assets
Increases in the stock of fixed assets have played a most
important role in the industrial growth of Czechoslovakia under the
Communists. The industrial branches which received large increases
in their fixed assets generally achieved large increases in output
in 1949-60. The relation between the percentage increases in output
and those in fixed assets, however, differs considerably among
branches. The following tabulation compares the percentage increases
in output and in fixed assets of selected branches of industry from
1948 to 1960:
Output
Fixed Assets
All industry
155
96
Light industry
70
23
Machine building
257
110
Basic materials and power
195
174
Chemicals and rubber
301
398
Electric power .
225
181
Fuel processing
219
60
Construction materials
202
188
Metallurgy and ore mining
201
193
Fuel mining
138
144
As indicated above, net industrial production increased faster
than fixed assets in industry as a whole, as well as in each of the
three main industrial sectors -- machine building, basic materials and
power, and light industry -- thus the productivity of assets (the ratio
of net output to the value of assets) increased. The productivity of
fixed assets conventionally is represented by its reciprocal, the
"average capital-output ratio" (ACOR). In industry as a whole the ACOR
declined from 3.84 in 1948 to 2.96 in 1960.
The ACOR for all industry conceals many differences in the ACOR's
among the industrial branches. ACOR's are much higher in capital-inten-
sive branches, such as power, fuel processing, chemicals, mining, metal-
lurgy, paper, and foods, than in labor-intensive branches such as machine
building, textiles, leather, and woodworking (see Table 6*). There also
* Appendix A, p. 43, below.
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has been considerable variation among branches in the movement of ACOR's
during the period, although in most of them the trend has been downward.
An examination of the ACOR's by branch of industry in Table 6*
reveals three basic tendencies. First, over the period as a whole,
ACOR's declined substantially only in branches engaged primarily in
the advanced stages of processing or in the refining of basic mate-
rials. The largest declines took place in machine building and in
fuel processing (coke ovens, gas works, petroleum refineries); declines
also occurred in light industry, in the rubber industry, and in elec-
tric power stations. Among the industries engaged mostly in mining
and the early stages of processing, however, there was only a small
decline in ACOR's. Second, for these basic industries except con-
struction materials, the entire decline in ACOR's took place in the
early years. In industry as a whole, the ACOR declined by the same
percentage over the 9 years from 1952 to 1960 as during the 3 years
from 1948 to 1951. Third, the movement of ACOR's follows a definitely
cyclical pattern, which was much more pronounced during the first half
than during the last half of the period. ACOR's declined in industry
as a whole and in all branches except chemicals and construction mate-
rials between 1948 and 1951; they increased slightly in all industry
and also rose or were stable in all branches except fuel processing
and construction materials between 1951 and 1954; then they declined
again in industry as a whole and in all branches except electric power
and fuel mining between 1954 and 1957. Between 1957 and 1960 the
decline continued, but at a reduced pace, in total industry and in
all branches except mining, rubber, construction materials, and metal-
lurgy. The following tabulation presents average capital-output ratios
for the major branches of industry in selected years of the 1948-60
period.
1948
1951
1954
1957
1960
Total industry
3.84
3.37
3.48
3.13
2.96
Machine building
2.91
2.37
2.43
1.98
1.71
Basic materials and power
4.55
4.33
4.33
4.16
4.22
Electric power
8.22
7.07
7.22
7.60
7.11
Fuel processing
9.96
7.26
5.86
5.26
4.98
Fuel mining
3.14
3.03
3.06
3.09
3.21
Metallurgy and ore mining
4.31
4.03
4.14
3.98
4.18
Chemicals
3.29
4.32
5.23
4.50
4.30
Rubber
3.26
2.54
2.60
2.29
2.44
Construction
3.28
3.57
3.15
2.76
3.13
Light industry
3.84
3.32
3.47
3.05
2.79
Foods
4.82
4.17
4.34
3.95
3.89
Textiles, clothing, and
leather
3.14
2.89
3.20
2.73
2.35
Glass, porcelain, and
ceramics
3.53
3.48
3.49
2.72
2.51
Wood and paper
2.63
2.44
2.44
2.42
2.30
* Appendix A, p. 43, below.
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This cycle coincides roughly with the cycle of investment com-
pletions and the consequent changes in the rate of growth of fixed
assets. When completions were relatively low, as in 1949-51 because
of low investments in the early years, and again as in 1955-57 because
of a decline in investments during 1953-55, the ACOR's declined sharply.
During the other two periods (1952-54 and 1958-60), when there was a
large increase in completions, ACOR's rose, stabilized, or fell rela-
tively slowly. An even more important factor in the cyclical movement
of ACOR's during the first three periods (through 1957), however, is
the sharp fluctuation in the rate of growth of output in machine
building and light industry. The rise in the over-all ACOR during
1952-54 and the fall during 1955-57 are wholly attributable, respec-
tively, to a sharp decline followed by an even greater increase in
the rate of growth of output in machine building and the foods, tex-
tiles, clothing, and leather industries (see Table 5*).
B. Factors Affecting the Productivity of Fixed Assets
1. General
The many factors that determine the productivity of fixed
assets can be classified under three headings: the degree of utiliza-
tion of capacity, the composition of assets, and technological and
environmental conditions. All the factors, however, are closely inter-
related, and most of them do }lot lend themselves to statistical
analysis.
Increased utilization of productive capacity tends to
lower capital-output ratios. Productive capacity may be idle at cer-
tain times because of inadequate demand, in which case production can
be raised without investments by increasing employment or supplies of
materials, or both. In other cases, greater utilization of capacity
requires selective investments to remove bottlenecks to production,
but these investments often are small in relation to the gain in output.
On the other hand, the capacity of new plants may not be used effec-
tively for a time, because complementary facilities are not finished as
a result of unexpected delays or bad planning. Moreover, both new
plants and new equipment in old plants may be operated inefficiently
until adequate experience has been gained. Workers may have to develop
new skills, and management also requires experience in finding the
best method of organizing operations. As new plants achieve a more
efficient utilization of capacity, capital-output ratios decline, but
whether they will be higher or lower than in old plants will depend
primarily on the type of technology that they incorporate.
* Appendix A, p. 42, below.
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Changes in the composition of assets between capital-
intensive and labor-intensive branches can also affect the aggregate
capital-output ratio. If assets in industries such as electric power,
fuel processing, mining, and metallurgy, which have relatively high
capital-output ratios, are growing more rapidly than those in labor-
intensive industries, the aggregate capital-output ratio tends to
rise.
Technological innovations and changes in production tech-
niques generally may bring about a substitution of capital for labor,
which tends to raise capital-output ratios. But these innovations
may also reduce the necessary value of capital per unit of output
through savings in the use of materials, improved quality of output,
or simply increased efficiency of equipment. A good example of a
capital-saving innovation now being undertaken in Czechoslovakia, the
US, and a number of other countries is the conversion to the oxygen
process in making steel.
Environmental conditions are especially important in mining,
where the accessibility and quality of the product may change. Environ-
mental conditions may also have a significant impact on capital-output
ratios in other industries, when the quality of the materials available
to them changes substantially.
In Czechoslovakia, capital-output ratios declined in spite
of the facts that the industrial structure was becoming more capital-
intensive, that conditions in mining were becoming more difficult,
and that technological development was not particularly rapid. This
decline was mainly a result of increased utilization of capacity in
the processing and refining branches -- particularly in machine build-
ing, light industry, fuel processing, and electric power.
2. Changes in the Composition of Fixed Assets
On the whole, the industrial investment program of Czecho-
slovakia favored the capital-intensive branches (especially metallurgy,
electric power, and chemicals), which consequently received the largest
percentage increases in fixed assets. Basic materials and power, paper,
and foods had about 55 percent of total assets in 1948, about 60 per-
cent of the total in 1954, and 65 percent of the total in 1960. This
change in the branch structure of assets, however, has only a small
effect on the ACOR for all industry -- it raises the ACOR by only 2 per-
cent between 1948 and 1960.
Too little is known about the distribution of assets within
major branches to draw firm conclusions as to the over-all effect of
structural changes on the productivity of capital. In construction
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materials, a large share of investments of the early years probably
was concentrated in cement plants, which are capital-intensive. In
the leather and shoe industry, on the other hand, most investments
probably went to shoe plants, which are relatively labor-intensive.
But it is impossible to determine whether or not such structural
changes within the branches tended to offset each other, or even
whether their effect could have offset the effect of the structural
change on the branch level. Nevertheless, structural changes clearly
offer no explanation for the decline in the ACOR over the period;
they may even have tended to raise it.
3. Changes in Technology and Environment
The rate of technological change in Czechoslovakia proba-
bly was not particularly rapid during the period under construction.
Czechoslovak writers often complain of the low technological level of
domestic plants in comparison with those of Western Europe and the
USSR. Until recently, the writers admit, plant managers have been
insufficiently interested in new technology. Being concerned primarily
with fulfilling the gross production plans, they were often unwilling
to take the risks involved in making technological improvements.
Enterprise plans usually could be fulfilled by adding more labor or
by purchasing more materials.
However, the introduction of new technology in Czechoslovak
industry during the postwar period contributed to industrial growth in
a number of ways: it led to savings of manpower, to some small savings
in the consumption of materials, and probably to a reduction in real
investment costs per unit of productive capacity. Moreover, it greatly
facilitated a more efficient utilization of existing capacity by per-
mitting a fuller use of floorspace in industrial plants and the break-
ing of bottlenecks in the production process. The considerable in-
crease in the value of machinery and equipment per unit of total fixed
assets,* for example, probably indicates both a better utilization of
capacity and improved technology. Apart from their effects on the
use of capacity, however, technological improvements do not appear to
explain the observed decline in capital-output ratios.
In the first place, reductions in real costs per unit of
capacity from prewar to postwar years have been taken into account at
least partly in official statistics on fixed assets, because they were
valued at replacement cost in the 1955 census. If the effect of cost
reductions had not been taken into account, prewar assets would have
been assigned a higher value, assets would have increased more slowly
* The value of assets in industrial machinery and equipment is given
in Table 4, Appendix A, p. 41, below.
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during the period, and the ACOR's would have fallen more rapidly. In
the second place, technological advances which involve the substitu-
tion of capital for labor would increase rather than reduce capital-
output ratios.
In some industries the favorable effect of new technology
did not compensate for the unfavorable effect on capital-output ratios
of worsening environmental conditions. The tendency for the ACOR to
rise in coal mining, for example, probably is partly a result of the
necessity to develop deeper seams. In ore mining, the capital-output
ratio increased rapidly throughout 1949-601* presumably because the
ore was becoming less accessible and required an increased degree of
preparation because of its declining quality. When Czechoslovakia
reduced imports of high grade iron ores from the West and substituted
the relatively inferior Soviet and domestic ores, beneficiating facili-
ties had to be built. Similarly, the substitution of Soviet cotton
for long-fiber Egyptian cotton must have affected the productivity of
assets in the textile industry.
4. Changes in the Utilization of Capacity
The principal factors affecting the utilization of produc-
tion capacity in Czechoslovak industry were the supply of materials
and labor and the efficiency of operation in new plants during the
period immediately following their completion. The relative impor-
tance of these factors differs considerably in the individual branches
of industry. In extractive industries, changes in the utilization of
capacity were mainly a result of the supply of labor. In the very
capital-intensive fuel processing and electric power branches, the
supply of materials was the principal determinant of the utilization
of capacity. In most of the other basic materials branches, metal-
lurgy, chemicals, rubber, and construction materials, the supply of
materials and labor played a role, especially during 1949-51, when
the old plants still were not fully utilized, but the efficiency of
new plants was more important during the rest of the 1949-60 period.
Finally, in machine building and light industry, changes in the use
of capacity can be traced mainly to changes in inputs of both materials
and labor (see Table 11**).
There are many indications that the lag between the com-
pletion of a plant and its efficient utilization was substantial in
Czechoslovakia, averaging perhaps 2 to 3 years in the basic materials
* The capital-output ratio of ore mining is estimated to have risen
by 85 percent between 1949 and 1957.
** Appendix A, p. 48, below.
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branches. As a result of this lag, in periods when completions in-
creased substantially there was a tendency for new excess capacity
to be created faster than the old capacity was being absorbed.
In blast furnaces and open hearth furnaces there was a
definite upward trend in the degree of utilization of productive
capacity as a result of technological improvements. But the use of
capacity increased rapidly when little or no new capacity was being
added (during 1955-57) and increased less rapidly, or even decreased,
when there were large additions to capacity (during 1952-54 and 1958-60).
The following tabulation shows percentage changes in the index of
capacity utilization* in the iron and steel industry:
Blast Open Hearth
Years Furnaces Furnaces
1952-54
-5
+7
1955-57
+23
+21
1958-60
+9
+6**
Fluctuations in the coefficients of utilization probably were caused
not only by the incidence of repairs and the rate of introduction of
new technology, but also by structural imbalances among facilities in
new plants which persisted for a period of time and resulted in a poor
coordination of supplies.
Direct measures of the utilization of capacity are not
available for other basic materials branches, but it seems likely that
the close correlation between changes in the rate of completions and
changes in capital-output ratios, noted in Section A ,*** is a result
of the lag in the utilization of capacity in new plants. This lag,
moreover, probably is more a reflection of structural imbalances in
productive capacity in new plants and of the difficulty of mastering
new processes and techniques, than of general shortages of materials
or labor.
* The coefficient of utilization of blast furnaces is the number of
cubic meters of effective blast furnace volume required to produce
1 metric ton of pig iron in 24 hours. The coefficient of utilization
of open hearth furnaces is the number of tons of steel produced per
square meter of furnace hearth in 24 hours.
50X1
** 1958-59 only.
*** P. 17, above.
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Fuel processing is the only basic materials branch in
which ACOR's registered an almost steady decline, mainly because there
was no appreciable expansion in assets until about 1956. Most of the
output came from refineries built before World War II and was based
on rising imports of crude oil. Some of the big investments of the
recent years have gone toward the construction of the Slovnaft re-
finery at Bratislava, the first section of which began operating in
July 1957. The recent expansion of capacity in this refinery has al-
ready given rise to large increases in output, but the ACOR in fuel
processing has tended to stabilize.
In electric power stations, output grew much faster than
capacity until 1954. Since 1954, however, percentage increases in
fixed assets and installed capacity have more nearly matched the in-
creases in output, as shown in the following tabulation:
Installed Fixed
Period* Production Capacity** Assets
1949-51
37
10
18
1952-54
32
20
35
1955-57
30
29
37
1958-59
23
20
17
Capital-output ratios in coal mining would have increased
considerably if output had not been increased at a forced rate in old
mines, through the use of labor brigades and overtime work.
Changes in the utilization of capacity through changes in -
the supply of materials and labor are clearly responsible for the
fluctuations in ACOR's in machine building and light industry. Machine
building had its greatest decline in ACOR's in 1949-51, when supplies
of steel and manpower increased most rapidly; ACOR's rose in 1952-54
and declined less rapidly in 1958-60 than in 1955-57 because the growth
of labor and steel inputs slowed down, as shown by the following per-
centage increases:
Apparent Consumption
Period* Employment of Steel
1949-51
24
42
1952-54
20
20
1955-57
12
38
1958-59
9
18
Base years for calculation of percentage increases are 1948, 1951,
1954, and 1957.
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That the slower growth of output in machine building in 1952-54 re-
flects a change in supply of materials rather than in demand is known
from official statements. Had investments continued at the same rate
during 1952-54 as during 1949-51, ACOR's would have risen much more.
The relatively small decline in ACOR's in 1958-59, however, may have
been a result not only of a reduced rate of growth in the supply of
steel, but also of inefficient operation in the many new facilities
added in this period. Changes in design of machines during this
period were bringing about some savings in steel inputs, so that an
increase in steel supplies smaller than that during 1955-57 was needed
to maintain a nearly constant rate of growth in output of machinery.
In light industry, increases in productive capacity were
very small during the entire 1949-60 period; thus changes in ACOR's
depended on the utilization of capacity in old plants. ACOR's declined
during 1949-51 in all branches of light industry as a result of in-
creased inputs of labor and materials. Thereafter) increasing re-
sources had to be diverted from light industry to serve the growing
requirements of heavy industry. Because of a tight labor supply in
Czechoslovakia, workers were transferred from light industry to heavy
industry, and in some branches the drop in employment was especially
severe. The textile, clothing, and leather industries had a smaller
employment in 1959 than in 1948. Moreover, imports of raw materials
for light industry were slashed so that the requirements of heavy in-
dustry could be met. In the early years, an improvement in the terms
of foreign trade permitted the country to supply both lielt and heavy
industry. But the terms of trade began to worsen after 1950, just
when requirements for raw materials for heavy industry were sharply
rising. The resulting strain in the balance of payments was relieved
partly by reducing imports of light industrial materials. These cut-
backs'led to a reduction in the volume of light industrial output and
in rising ACOR's. On the other hand, the decline in ACOR's after 1954
is attributable to increases in employment and rising imports,* which
are shown in the following tabulations:
? Employment in
Textiles, Clothing,
and Leather
Imports of Materials**
1957
1959
(1951
. 100)
(1954 =
100)
(1957.=
100)
1954
90
Cotton
128
127
Wool
175
114
1957
100
Cowhides
183
182
Jute
125
130
1959
107
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* Although the terms of trade did not improve until 1958, they did
not worsen by very much between 1954 and 1957.
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Capacity was also better utilized in 1955-60 than in 1952-54 in the
food industry, thanks to imports that partly compensated for poor
domestic harvests.
IV. Evaluation and Prospects
A. Evaluation
The Czechoslovak investment program of 1949-60 is undoubtedly
considered by the regime to have been a great success. Industrial
output grew rapidly over the period, and while the growth in light
industry probably did not come up to the expectations of the regime,
at least the major official objective -- the substantial building up
of heavy industry -- was achieved. Plans for total industrial out-
put generally were underfulfilled through 1953, but they have been
achieved or overfulfilled since then.
In comparison with other countries of Western Europe, Czecho-
slovak industry has improved its relative position in recent years.
The rate of industrial growth has increased in Czechoslovakia, while
it has declined in most Western European countries.* In 1951-55 the
Czechoslovak rate was slightly below the average for countries in the
Organization for European Economic Cooperation (OEEC). During 1956-60,
industrial production increased faster in Czechoslovakia than in any
Western European country, as shown in the following tabulation of
average annual increases:
1951-60
1951-55
1956-60
Czechoslovakia
7.6
6.2
9.1
Austria
7.0
9.2
4.9
France
6.4
5.5
7.3
Italy
8.9
8.9
8.9
United Kingdom
3.3
3.9
2.7
West Germany
9.6
12.3
7.0
OEEC countries_
6.1
6.7
5.4
There are indications,
more costly in Czechoslovakia
both labor and capital inputs.
above achieved their gains in
creases in employment than in
however, that industrial growth was
than in Western Europe, in terms of
The Western European countries listed
output with significantly smaller in-
Czechoslovakia, although Czechoslovak
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labor productivity, which lagged behind that in most of Western Europe
during the early years, grew at one of the highest rates in Europe
thereafter (see Table 10*). Czechoslovak industrial investments at
factor cost absorbed about 14 percent of GNP in 1952-58. By contrast,
such countries as the UK, France, West Germany, Italy, and Austria,
most of which are more industrialized than Czechoslovakia, devoted
only about 7 to 9 percent of their respective GNP's to industrial in-
vestments in 1952-58 (see Tables 8 and 9**). Because differences in
relative costs among these countries probably are partly responsible
for the differences in the ratios of investment to GNP, no firm con-
clusions can be drawn concerning the relative productivity of capital
in Czechoslovakia and in Western Europe. But it seems clear that the
investment effort applied to increasing industrial output was greater
in Czechoslovakia.
An important factor in the differences in the investment effort
was the role of foreign trade. In the early years, outside assistance
stimulated industrial growth in many Western European countries,
while Czechoslovakia not only had to develop industry from its own
resources, but also extended some credits to less developed countries
of the Bloc. Moreover, the foreign trade opportunities of Czechoslo-
vakia were more limited than those of Western European countries,
which had full access to the world market. Because of orienting its
trade toward the Soviet Bloc and reducing dependence on the West for
critical materials, Czechoslovakia had to supplement imports with out-
put from domestic industries developed at high marginal costs.
The high cost of the Czechoslovak industrial investment pro-
gram was felt in other sectors. Agricultural output stagnated through-
out the 1950's, holding down 'the growth in the GNP. Compared with
industry's average annual rate of growth of 7.6 percent, the GNP grew
by only 4.2 percent. The rate of growth of GNP of Czechoslovakia was
about the same as the average for all OEEC countries and considerably
less than in most countries of continental Western Europe.
B. Plans for Industrial Growth in 1961-65
According to the plan for 1961-65, 1// production in all Czecho-
slovak industry and in the three main industrial sectors will grow at
almost the same rate as was achieved in 1956-60, as shown by the fol-
lowing indexes of industrial production:
* Appendix A, p. 47, below.
** Appendix A, pp. 45 and 46, respectively, below.
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1960* 1965*
(1955 = 100) (1960 = 100)
Total industry 155 158
Machine building 172 176
Basic materials and power 162 168
Light industry 131 126
In order to achieve these goals, existing industrial facili-
ties are to be modernized and many new plants incorporating a high
level of technology are to be built. Investments are scheduled to be
88 percent higher in 1961-65 than in 1956-60. 1.,t3/ About the same share
of total industrial investments is to be allocated to machine building,
but the share going to light industry will fall and that of basic mate-
rials and power will rise, as shown in the following tabulation:
Percent
of Total
Industrial Investments
1956-60 1961-65
Machine building 19 19
Light industry 14 8
Basic materials and
power 67 73
The increase in the share of investments in the basic materials branches
is attributable to investments in the metallurgical, chemicals, rubber,
and fuels processing branches, which together are scheduled during
1961-65 to grow by 130 percent over the level of 1956-60,** constituting
a little more than one-half of investments in basic materials. Planned
investments would permit fixed assets in industry to grow faster than
* Calculated indexes. The official index of gross industrial produc-
tion planned for 1965 is 156.
** Investments to be carried out by the Ministry of Chemicals and the
Ministry of Metallurgy and Ore Mines are to increase by 145 and 115
percent, respectively. The Ministry of Chemicals includes the chemi-
cals and rubber branches and part of fuel processing (that is, petroleum
refining). The Ministry of Metallurgy and Ore Mines includes the fer-
rous and nonferrous metals branches and most of the rest of fuel pro-
cessing.
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in any period since 1948 -- by nearly 8 percent per year -- in spite
of a substantially higher rate of retirements and a large probable
increase in unfinished investments.
Investment costs per unit of increase in output are planned
to be significantly larger than during the past 5 years. According
to the plan, investments per unit of additional output will be 3.3
crowns during 1961-65 compared with 2.9 crowns during 1956-60 and
3.9 crowns during 1951-55. But the plan also provides for a faster
increase of output than of fixed assets (58 and 46 percent, respec-
tively), which implies a further decline in the ACOR. In industry as
a whole, the increase in fixed assets per crown of additional output
would be about the same in 1961-65 as in 1956-60 (2.4 crowns compared
with 2.3 crowns). It is estimated that investment costs per additional
unit of output will be higher in 1961-65 than they were in 1956-60 in
most of the basic materials branches and in light industry but will
remain about constant in machine building.
In many respects the new plan continues trends observed in
1958-60: an increasing rate of retirements; a growing share of in-
vestments allocated to chemicals, fuel processing, and metallurgy;
and finally a tendency for the total ACOR's to decline more slowly
and for the ACOR in basic materials to stabilize. In industry as a
whole, the ACOR would fall only slightly less than it did in 1956-60
by 8 percent in 1961-65 compared with 10 percent in 1956-60, and at
about the sane rate as in 1958-60. And although the higher share of
investments in the basic materials branches tends to increase the over-
all ACOR, by making the structure of industrial assets more capital-
intensive, the degree of change in branch structure is no greater than
it has been in the past.
There are two main reasons for the planned increase in invest-
ment costs per unit of additional output. One is the need to modernize
equipment, which is reflected in high retirements; and the other is
the rapid increase in outlays for the construction of new plants in
capital-intensive branches, which tends to increase the volume of un-
finished investments. The difference between officially planned in-
vestments and officially planned increments in fixed assets is sufficient
to allow about a doubling in the stock of unfinished investments (an in-
crease of about 11 billion to 12 billion crowns) and a large increase in
retirements. These trends are reflected in the following tabulations:
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Million 1957 Crowns*
1956-60
1961-65**
Additions to assets
62,890
103,200
Retirements
13,200
30,900
Additions to unfinished
investments
1,620
11,950
Total investments
77,700
146 000
Growth of assets (annual
Percentages
1956760
1961-65**
average)
6.9
7.9
Rate of retirements (average)
1.4
2.4
Stock of unfinished investments
in 1960 and 1965 as percent of
investments during the respec-
tive 5-year periods
17.5
17.5
Thus, more than 21 percent of total industrial investments can be
used to replace old equipment and structures during 1961-65, compared
with about 17 percent during 1956-60. If assets continued to be re-
tired at the same rate as in the past 5 years, instead of at the
planned higher rates, fixed assets would increase during 1961-65 by
51 percent -- only slightly less than industrial production.
Expenditures on facilities that will not be completed during
the plan period are mainly responsible for the rise in investment
costs per added unit of output in the basic materials and power branches,
and retirements are expected to be largest in machine building and light
industry, although they will probably increase rapidly in all branches.
The substantial increase that appears to be planned for retire-
ments is one reflection of a different approach to investments in old
* See the statement on rounding, p. 35, below.
** This model is based on (1) the planned growth of assets and (2) the
allocation of the remaining investments between retirements and addi-
? tions to unfinished investments on the assumption that the stock of
incomplete investments in 1965 will be the same percentage of 1961-65
investments as the stock existing in 1960 was of 1956-60 investments
(17.5 percent).
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plants. Until about 1958) investments in old plants were often made on
a selective basis to relieve bottlenecks in production and thereby in-
crease the utilization of existing capacity. Now they apparently will
be made on a much broader basis because of the progressive deteriora-
tion of old equipment and the previous absorption of the most easily
exploited reserves of unused capacity. The need to replace prewar
equipment is becoming more pressing, not only because it is obsolete
but also because it is often worn out or in poor condition.
The planned increase in the share of machinery in industrial
investments from 51 percent in 1960 to 57 percent in 1965 is another
reflection of the modernization program. 12/ More productive machines
are to be installed in order to use factory floorspace moi-e efficiently,
and the machines themselves are to be used more intensively by further
extending the use of second and third shifts. Through automation and
by introducing continuous production processes and improved control
devices, it is planned to reduce labor requirements and at the same
time to increase the utilization of existing capacity.
In the case of machine building, the regime clearly expects to
raise the efficiency of fixed assets substantially by accelerating the
rate of technological change and improving the organization of work.
Investment costs per added unit of output are planned to be about the
same in 1961-65 as in 1956-60, indicating that increased efficiency
of assets would compensate for a higher rate of retirements. In light
industry, investment costs will be only a little higher in 1961-65
than in the preceding period. ACOR's will continue to decline in both
sectors. In percentage terms, however, the decline in ACOR's probably
will be smaller than in the past 5 years because of the increasing
necessity to substitute capital for labor. The rate of growth of total
industrial employment is expected to be significantly lower during
1961-65 than it was during 1956-60 (see Table 12*).
In the basic materials and power branches) new technology will
be introduced mainly in new plants and in the expansion of existing
industrial complexes. But investments will also be made to modernize
existing facilities. Some of the new technology will be of a capital-
saving nature, such as the planned introduction of oxygen converters
in open hearth furnaces and large turbines in electric power stations,
which reduces the cost of materials per unit of output and results in
higher output per unit of fixed assets. The increased emphasis on
new plants in certain branches, however, is expected to increase con-
siderably the amount of unfinished investments, and the introduction
of more capital-intensive production processes will tend to reduce
output per unit of fixed assets. On balance the regime appears to be
* Appendix A, p. 49, below.
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planning for higher investments per unit of additional output and for
little change in the average ACOR for the basic materials branches.
Fuels, metallurgy, and rubber appear to be the areas in which
extra output will be most costly to achieve. Construction of 16 new
coal mines is to get underway, in addition to which several coal
finishing and grading plants are to be built. Although coal will
continue to be the main source of energy in the future, a larger pro-
portion of energy requirements will be met from the use of other fuels,
such as crude oil and natural gas. This shift to petroleum requires
large investment outlays, for capacity in petroleum refineries must
be expanded and a pipeline constructed to _import oil from the USSR.
The building of an integrated steel plant in Slovakia, which probably
will not be fully completed until after 1965, and a program of moderniz-
ing major steel facilities accounts for the added costs in metallurgy.
Finally, the building of two new plants for production of synthetic
rubber probably will result in higher investment costs to the rubber
industry in this plan period.
The plan appears to call for a rise in ACOR's in fuel mining
and possibly construction materials, a stabilization in power and
metallurgy, but a fall in chemicals, rubber, and fuel processing. These
trends in ACOR's would differ very little from those of 1958-60. In
the case of fuel processing, chemicals, and rubber, however, official
projections of the relation of fixed assets to output appear to assume
that newly created capacity will be utilized very rapidly and that a
great deal of capital-saving technology will be introduced. Since the
completion of the first stage of the Slovnaft refinery in Bratislava
in 1957, ACOR's have in fact been declining in fuel processing. But
whether the much larger refining capacity to be completed during the
next few years can be used efficiently by 1965 remains to be seen.
Similar problems of utilizing new capacity may develop in the projected
synthetic rubber plants. In chemicals, an imbalance between capacity
and output could arise if key plants are not completed on time or if
difficulties are encountered in mastering new technological processes.
It appears clear that the fulfillment of the output goals for
1965 will depend to a greater extent than ever before on investments.
They will also depend more than in the past on new technology. For
while some increase in investment cost per unit of additional output
is provided for in the plan, the actual increase could be even greater
if there are difficulties in introducing new technology. It is un-
likely, of course, that all of the possible improvements in technology
have been incorporated into the plan. Thus there may be a potential
technological reserve which could be used to reduce investment costs.
But the problem is less one of finding new techniques than of putting
them into effect in a relatively short period of time. The increased
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attention given to technology during the past few years, as well as
the reform of the system of incentives, has not yet had much impact.
Technology is not an area in which Czechoslovakia has excelled since
World War II, and it remains to be seen how rapidly the rate of tech-
nological change can be increased.
There will also be difficulties in the construction of new
plants, particularly in areas, such as organic chemicals, where
Czechoslovakia has limited experience and is even seeking technical
support from Western countries. But the evidence of the past few
years and the measures that the regime is currently taking appear to
point to a continued over-all improvement in the efficiency of new
plant construction. Although small investments have for the most part
been decentralized, new plant construction is being more closely super-
vised than ever by the central authorities. Through better planning
and tighter supervision, the regime hopes to follow the planned con-
struction schedules more closely and to reduce by nearly a third the
average construction period for centralized investment projects. 22/
There may also be some improvement in the rate at which new plants
are brought to full-scale production.
Another favorable aspect of the present Five Year Plan is the
stability of economic policy in recent years. Since 1956, industrial
investments have increased rapidly, and most of the facilities that
will be important to achieving the future goals in output were begun
during 1956-60. Thus additions to productive capacity are likely to
be spread more evenly than before and the problems brought about for-
merly by sharp cyclical changes in the additions to capacity probably
will be partly avoided.
Future industrial growth in Czechoslovakia will be affected
by many factors other than investments. A vital factor, for example,
will continue to be the supply of imported raw materials. How well
the USSR lives up to its commitments to deliver iron ore and crude
petroleum will determine the degree of utilization of Czechoslovakia's
rapidly expanding capacity in steel and petroleum refineries. The
growth of industrial employment will also be important, and it is partly
contingent on the possibilities for releasing labor from agriculture.
Finally, changes in economic policy could throw the investment and out-
put plans out of balance.
It is obviously impossible to estimate how effective the Czecho-
slovak industrial investment program for 1961-65 may be without a com-
plete analysis of prospects for the Czechoslovak economy. Given the
other basic assumptions of the Five Year Plan, however, the plan for
investments appears to be fairly realistic. The investment costs of
achieving the planned increases in industrial output may have been under-
stated, but it is unlikely that this understatement is very large.
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APPENDIX A
STATISTICAL TABLES
Czechoslovakia is the only Satellite country to have completed a
census of fixed assets in the economy or in the industrial sector.
It has published fairly detailed statistics on the growth and branch
distribution of industrial assets and on the growth of investments by
industrial branch. The absolute value of assets and the branch dis-
tribution of investments, however, had to be estimated in this report.
The main building blocks for the estimate of fixed assets and in-
vestments presented in Tables 1 through 4 are as follows:
1. The value of total industrial investments in each year
2. The value of investments completed during each year and
added to fixed assets
3. The percent of fixed assets retired in certain years
4. Indexes of fixed assets, total and by industrial branch
5. The percentage distribution of fixed assets by industrial
branch in some years
6. Indexes of investment by industrial branch
From these data were derived values of fixed assets and investments
for each industrial branch and for each year of the 1948-60 period, as
well as estimates of unfinished investments and retirements.
The distribution of investments was largely derived from the dis-
tribution of fixed assets. It is generally similar to that obtained by
using different sources and methods, although there are also significant
differences. The advantage of the method used in this report for de-
riving investments is that it is consistent with the method of calculat-
ing fixed assets. Moreover, the results of the alternative methods are
not fully consistent either internally or with other published statistics.*
The data and statements on investments and fixed assets in the Third
Five Year Plan (1961-65) are for the most part rough estimates based on
meager information. Published plans include hard figures only on the
growth of total industrial investments 21/ and assets, 22/ on assets in
machine building, 23/ and on investments to be carried out by the Minis-
try of Chemicals and the Ministry of Metallurgy and Ore Mines, 24/ and in
all the basic materials branches combined. .22/ Information on plans for
production, new plants, modernization and productive capacity, however,
was used to gain further insights into plans for investments and fixed
assets.
* As for example, Turcan, Socialisticka
(Socialist industrialization of Slovakia Bratislava, 1960
industrializacia Slovenska
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The index of net industrial production (Table 5) is roughly com-
parable methodologically to official indexes of industrial production
in Western countries. It differs very little in most years from the
official Czechoslovak index of net production, whose method of calcu-
lation is not known, but it gives a significantly lower measure of
industrial growth in past years than the official Czechoslovak index of
gross production. Thus it appears that the official Czechoslovak index
of gross production overstates the increase in industrial production.
Such a discrepancy does not exist, however, for planned production.
The calculated index for 1965, based on official commodity data, is
very nearly the same as the official gross production index planned
for 1965.
The index of net industrial output for 1948-58 was obtained from
the Columbia University project on national income in Eastern Europe. 2g
It was based originally on the Doctoral Dissertation of George Staller
at Cornell University. 2// The index was revised slightly for the
purposes of this report; it was also updated to cover 1958-60 and pro-
jected to 1965, using the same methodology and, as nearly as possible,
the same types of data.
The index was calculated from a large sample of commodity series,
nearly all of which are expressed in physical units. Using primarily
1947 and 1948 Czechoslovak wholesale prices as weights for the commodity
series) indexes were obtained for 70 industrial groups. Group indexes
were then aggregated into indexes for 17 industries using 1948 labor
costs as weights. To calculate the index for all industry, the indexes
for individual industries were weighted with estimated net output in
1956. Thus, although the base year for the index is 1956, the weight-
ing system is mixed. Mixed weights had to be used because of the in-
sufficient detail of labor cost data and the absence of price data for
1956.
Net output weights for 1956 are a composite of estimated returns to
labor and to other factors of production. Returns to labor (primarily
wages) represent about two thirds of net output. Returns to other
factors of production in industry as a whole were obtained from esti-
mates of the distribution of the national income at factor cost. These
returns were distributed among industries in proportion to the value
of fixed assets in 1956.
The index of industrial production includes rough estimates of
production in private handicrafts (which is not covered in official
commodity statistics) based on employment trends in private handi-
crafts.
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The commodity sample used for 1958-60 is virtually the same as
that for 1948-57. For 1965 (plan), however, it is smaller in some in-
dustries, and official indexes of gross value' of production had to be
used for the machine building and food industries for lack of an ade-
quate sample.
The value of total net industrial production at factor cost in
1956 was obtained from the Columbia University project mentioned
above. This value represents payments to labor in industry plus that
part of nonlabor returns (profits plus taxes minus subsidies) that
was imputed to industry -- an imputation made on the basis of the dis-
tribution of fixed and working capital by economic sector. The value
of net industrial production was distributed among individual indus-
tries according to the weights of these industries in 1956. In other
years, values were obtained by multiplying the estimates for 1956 by
the indexes.
Rounding in all tables is based on statistical significance. All
computations, however, were carried out before the data were rounded.
-35-
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C-0-N-F-I-D-E-N-T-I-A-L
Table 1
Investment in Czechoslovak Industry 2./*
1948-60
Million 1957 Crowns
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960 1,21
Total industry
5,100
6,620
7,880
9,130
11,000
9,680
9,610
9,540
11,200
12,200
15,200
18,500
20,600
Machine building
970
1,470
2,020
2,310
22...92
2.21.-60
1,730
1.'480
1,850
2,260
3,070
3,730
4,070
Basic materials and power
2,800
3,290
3,880
4,950
6,680
6,550
6,750
6,790
7,560
8,590
10,300
12,300
13,500
Electric power
805
795
820
845
1,275
1,340
1,480
1,770
2,350
2,155
2,210
2,210
2,645
Fuel mining
140,
135
120
135
120
170
355
305
240
800
865
1,375
1,340
Coal mining
620
600
525
605
935
1,105
1,265
1,255
1,640
1,950
2,440
2,370
2,875
Ferrous metallurgy 2/
450
700
1,135
1,690
2,055
1,670
1,485
1,485
1,160
1,150
1,845
2,860
2,815
Nonferrous metallurgy. 2/
50
55
75
235
295
47o
435
310
710
405
270
300
340
Chemicals
605
750
835
980
1,375
1,270
1,055
1,020
745
1,100
1,495
1,525
1,805
Rubber
20
25
25
40
50
35
35
30
' 50
80
80
85
95
Construction materials
105
230
345
425
575
485
635
610
660
955
1,070
1,530
1,555
Light industry
110 1
1,590
1 830
1,940
1,750
020 1
1 090
1 060
1,560
i,610
2,050
2,590
2,770
Wood
_2
170
230
325
460
435
_a
135
120
80
150
175
295
395
410
Paper
95
150
205
270
265
165
255
270
360
270
275
255
320
Glass
Porcelain and ceramics 4/
35
10
70
15
115
15
80
20
85
20
45
20
40
20
45
20
85
25
110
25
115
30
- 26()
. 4
2 5
Foods
325
525
595
575
550
400
390
390
550
545
665
780
865
Textiles
220
425
395
385
280
160
180
175
265
325
405
500
540
Clothing
35
35
40
40
30
15
25
10
20
20
45
85
80
Leather
195
115
110
75
40
40
25
30
60
85
155
235
230
Miscellaneous 4/
20
30
35
40
45
40
40
40
45
50
65
80
85
Statistical discrepancy 2/
+215
+270
+150
-230
-50
+40
+210
+185
-205
-160
-110
+290
* Footnotes for Table 1 follow on p. 37.
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C-0-N-F-I-D-E-N-T-I-A-L
Table 1
Investment in Czechoslovak Industry 21
1948-6o
(Continued) 50X1
Unless otherwise indicated, investments in the individual branches were calculated from indexes covering 1948-59 2/ and from estimates of the
cumulative value of these investments in 1949-58. 50X1
The cumulative value of investments by branch in 1949-58 was estimated by distributing among the branches the three uses of investments -- addi-
tions to fixed assets, unfinished investments, and retirements -- over this period. Additions to fixed assets are from Table 3. Unfinished invest-
ments were distributed by branch in the same proportion as additions to fixed assets (excluding the "Miscellaneous" category). Retirements (Table 2),
minus the reduction in assets in the "Miscellaneous" category, were distributed by branch in proportion to fixed assets in 1948.
The total investments of each branch during 1949-58 were divided by the cumulative indexes of investments for 1948-58 to calculate investments in
1948, and the resulting values were moved by the indexes to derive investments in 1949-59.
b. Investments by branch in 1960 are estimates based on the assumption that the distribution of investments was the same as in 1958-59 (average).
The statistical discrepancy in 1960, however, is the amount necessary to make the algebraic sum of the statistical discrepancies for the individual
years 1956-60 equal to zero.
c. Including ore mining. Official series on investments are broken down into ferrous and nonferrous metallurgy, while official series on assets
combine the two. Investments in metallurgy over the 1949-58 period were apportioned between ferrous and nonferrous metallurgy roughly on the basis
of employment.
d. Investments in the porcelain and ceramics branch and the "Miscellaneous" category were moved with the index for total industrial investments.
e. The statistical discrepancy includes the effect of errors and omissions.
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C -0 -N -F -I -ll-E -1N -T -1 -A-L
Table 2
Derivation of the Estimated Value of Fixed Assets and Retirements
in Czechoslovak Industry
1948-60 and 1965
Values in Million 1957 Crowns
Year
Index of
Fixed Assets 2/*
Fixed Assets 12/
Net
Additions to
Fixed Assets
Retirements
Gross
Additions to
Fixed Assets
Investments 2/
Value E/
Rate
(Percent)
1948
100.0
113,600
3,862
5,100
1949
103.1
117,100
3,500
900
0.8
4,429
6,620
1950
107.2
121,700
4,7o0
800
0.7
5,453
7,880
1951
112.6
127,900
6,100
1,000
0.8
7,100
9,130
1952
119.4_
135,600
7,700
900
0.7
8,596
11,000
1953
124.9
141,800
6,200
900
0.7
7,167
9,680
1954
133.6
151,700
9,900
1,000
0.7
10,883
9,610
1955
141.0
160,100
8,400
700
o.4
9,088
9,540
1956
148.5
168,600
8,500
1,000
0.6
9,543
11,200
1957
158.1
179,500
10,900
1,400
0.8
12,293
12,200
1958
168.0
190,800
11,200
2,700
1.5
13,970
15,200
1959
182.0
206,700
15,900
3,900
2.1
19,830
18,500
1960
196.4
223,000
16,300
4,100
2.0
20,460
20,600
1965
287.2
326,200
1961-65
103,200
30,900
2.4
134,000
146,000
* Footnotes for Table 2 follow on p. 39.
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Declassified in Part - Sanitized Copy Approved for Release 2013/07/10: CIA-RDP79R01141A002100110001-4
C-0-N-F-I-D-E-N-T-I-A-L
Table 2
Derivation of the Estimated Value of Fixed Assets and Retirements
in Czechoslovak Industry
1948-60 and 1965
(Continued) ?
a. For 1948-58, 12/; 1959,/; 1960, 5 ; and 1965, The index for 1965 was adjusted upward to account for the re-
vision of the investment plan in 1961- 5.
b. The value of assets for 1948 was derived by dividing gross additions to fixed assets in 1949 ()#,429 million crowns) by
the percentage increase in net fixed assets of 3.1 percent plus the retirement rate of 0.8 percent assumed for fixed assets
in 1949.
4,429,000,000 113,564,000
The value of assets for 1949-65 was derived from the index of assets in column 1.
c. Retirements during 1949-59 were obtained by subtracting the calculated net additions to assets from the given gross addi-
tions. The value of these retirements is roughly consistent with available data on retirement rates of all productive assets
for selected years. E/ Retirements in 1960 are based on the assumption that the retirement rate was 2 percent. Retirements
during 1961-65 were derived by subtracting net additions to fixed assets plus unfinished investments from investments. It
was assumed that unfinished investments in 1965 were the same percentage of investments in 1961-65 as unfinished investments
in 1960 were of 1956-60 investments.
d. Gross additions to fixed assets during 1949-57, 38/ are taken to be valued in 1957 prices. Data for 1958-59 were con-
verted to 1957 prices by a price index The value of gross additions to fixed assets in
1960 is the total of columns 4 and 5.
e. Investments in 1948-60 are from Table 1;
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50X1
50X1-
Declassified in Part - Sanitized Copy Approved for Release 2013/07/10: CIA-RDP79R01141A002100110001-4
C-0-N-F-I-D-E-N-T-I-A-L
Table 3
Value of Assets of Czechoslovak Industry, by Branch
19)+8-60
Million 1957 Crowns
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959 1960
Total industry 2/
113,600
117,100
121,700
127,900
135,600
141,800
151,7,00
160,100
168,600
179,500
190,800
223,000
Machine building hi
20,700
21,700
23,000
24,800
27,100
28,500
30,600
32,100
33,500
35,400
37,500
,.92.62./22
40,500
43,500
Basic materials and
power h/
43,400
45,300
47,800
51,300
56,300
60,900
68,000
74,300
80,500
88,700
96,500
107,400
118,600
Electric power
9,470
9,950
10,600
11,200
12,200
13,300
15,100
16,900
18,300
20,600
21,700
24,200
26,600
Fuel processing
6,450
6,520
6,580
6,580
6,650
6,650
6,84o
6,970
7,870
8,260
8,810
9,540
10,300
Fuel mining
9,770
10,100
10,300
10,500
11,200
12,000
13,600
14,800
16,000
17,800
19,700
21,700
23,800
Ore mining
Metallurgy
380
10,100
420
10,500
530
11,200
700
12,600
1,040
14,000
1,360
15,100
1,710
16,400
2,120
17,500
2,640
18,300
3,050
19,800
24900
,
27800
,
30,800
Chemicals
2,480
3,000
3,610
4,410
5,520
6,480
7,720
8,760
9,330
10,400
11,400
12,800
14,200
Rubber
600
610
630
66o
700
720
760
780
850
920
960
1,040
1,120
Construction materials
4,080
4,200
4,360
4,650
5,020
5,300
5,910
6,440
7,220
7,870
8,990
10,400
11,800
Light industry h/
49,500
50,100
51,000
51,800
52,200
52,400
53,100
53,800
54,600
55,500
56,700
58,800
60,900
Wood
2,150
2,320
2,580
2,990
3,380
3,480
3,610
3,680
3,810
3,920
4,110
4,45o
4,800
Paper
2,730
2,810
2,920
3,110
3,300
3,380
3,650
3,900
4,090
4,310
4,690
4,870
5,06o
Glass
2,120
2,160
2,240
2,310
2,370
2,390
2,440
2,480
2,460
2,540
2,660
2,880
3,100
Porcelain and ceramics
820
830
860
880
9o0
900
910
920
910
910
950
820
820
Food
16,900
17,300
17,600
18,000
18,300
18,500
18,600
19,100
19,500
20,000
20,300
21,000
21,700
Textiles
14,800
15,100
15,400
15,700
15,800
.15,800
16,000
16,100
16,100
16,300
16,400
17,000
17,600
Clothing
860
880
910
940
950
960
980
980
1,000
1,000
1,060
940
940
Leather
3,250
3,320
3,580
3,410
3,440
3,440
3,480
3,480
3,480
3,510
3,680
3,790
3,900
Miscellaneous h/
5,860
5,390
5,060
4,490
3,680
3,550
3,440
3,060
3,250
3,050
2,810
3,040
3,040
a. Total industrial assets are from Table 2.
b. The value of assets in the individual branches in 1948-59 was calculated from indexes of fixed assets in 1948-57ill/ and the percentage distribution of
assets by branch in 1957, 4?" 1958, and 1959. 1.421/ The indexes cover state, local, and cooperative industry. The percentage distribution by branch
covers only state industry. Rough estimates were made of the distribution of assets in local and cooperative industry in 1957-59 (1.7 percent of the total
in 1957). It was assumed that the percentage distribution of additions to assets in 1960 was the same in 1960 as in 1959.
c. The miscellaneous category includes printing, fats and soap, refrigeration and storage, the mining of chemicals, and possibly a statistical discrepancy
in 1948-56, when the category is a residual. In the early years the category may include private handicrafts, which were then of significant size. The
decline in assets may reflect the absorption of private handicrafts into socialized industry.
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C-0-N-F-I-D-E-N-T-I-A-L
Table 4
Value of Assets and Investments in Industrial Machinery and Equipment
in Czechoslovakia
1948-6o
Million 1957 Crowns
Years
Value of Assets 2/
Net Additions
Total
Industrial Retirements 12/
Investments
1948
29,500
2,570
1949
31,900
2,400
900
31600
1950
34,800
3,000
800
4,350
1951-53
11,200
2,800
16,200
1953
6,loo
1954-55
9,700
1,700
10,100
1955
55,800
1956
60,500
4,700
1,000
5,700
1957
65,800
5,300
1,400
6,230
1958
72,300
6,500
2,700
7,900
1959
80,900
8,600
3,900
9,280
1960
86,000
5,100
4,loo
a. The value for 1948 was obtained by applying,the ratio of assets in machinery and equipment to
total industrial assets (26 percent) 45/ to the value of total industrial assets in 1948 (Table 2).
b. Data from Table 2. It is assumed that all retirements in industry were used to retire wornout
machinery and equipment.
c. Total industrial investments multiplied by the ratio of machinery and equipment investments to
total industrial investments. 4
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Declassified in Part - Sanitized Copy Approved for Release 2013/07/10: CIA-RDP79R01141A002100110001-4
Table 5
Indexes of Czechoslovak Industrial Output
1948-60 and 1965 Plan
1956
= 100
Year
Total
Industry
Machine
Building
Basic Materials and Power
Light Industry 2/
Total
Fopds
Textiles,
Clothing,
and
Leather
Glass,
Porcelain,
and
Ceramics
Wood
and
f.t-222:
Total
Electric
Power
Fuel
Processing
Fuel
Mining
Metallurgy
and
Ore Mining
Chemicals
Rubber
Construction
Materials
1948
57.1
45.4
50.0
45.3
48.5
61.3
46.4
35.8
51.8
51.7
75.7
74.6
86.2
71.0
55.0
1949
62.9
52.0
53.2
49.9
57.9
63.1
50.4
39.3
65.5
49.3
83.8
81.6
97.3
76.0
59.0
1950
69.7
60.4
58.5
55.9
57.2
67.6
56.9
48.o
79.0
52.2
90.9
88.8
102.9
80.9
68.3
1951
73.3
67.0
62.1
62.1
67.9
68.6
62.6
48.5
73.0
54.2
91.5
91.4
99.6
78.o
74.2
1952
78.9
72.3
71.3
70.1
83.3
78.4
71.2
58.5
84.3
60.4
93.4
91.1
99.8
84.8
83.9
1953
81.8
78.6
76.8
74.5
80.3
81.0
81.8
61.5
74.9
70.8
90.4
88.7
95.6
78.8
83.4
1954
84.2
80.4
82.3
82.0
87.3
87.2
83.2
70.2
81.5
78.2
89.9
91.2
90.9
81.6
88.4
1955
94.1
94.2
90.7
90.5
96.7
90.8
91.8
86.6
86.o
89.6
97.8
93.9
101.8
94.8
96.3
1956
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
1957
110.9
114.1
111.8
106.8
117.5
113.4
108.8
110.0
112.4
118.8
106.9
107.5
109.3
108.1
100.6
1958
124.4
137.2
122.5
118.2
128.3
127.8
115.6
122.7
111.2
129.1
114.8
114.0
119.2
111.8
106.3
1959
132.5
145.6
133.0
131.9
143.6
132.9
/24.5
139.2
112.6
145.0
119.9
112.9
128.8
123.7
113.3
1960
145.6
162.1
147.3
147.3
154.8
146.0
139.9
157.1
128.6
156.3
128.4
118.4
136.9
133.0
127.1
1965
Plan
230.5
285.3
246.9
236.8
486.8
186.8
219.5
323.1
197.7
252.3
161.8
153.9
158.3
204.9
169.3
a. Including miscellaneous.
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Declassified in, Part - Sanitized Copy Approved for Release 2013/07/10: CIA-RDP79R01141A002100110001-4
C-0-N-F-I-D-E-N-T-I-A-L
Table 6
Average Capital-Output Ratios of Czechoslovak Industry 2/
1948-6o
Total
Total
Industry
Machine
Building
Basic Materials and Power
Total
Total
Electric
Power
Fuel
Processing
Fuel
Mining
Metallurgy
and
Ore Mining
Chemicals
Rubber
Construction
Materials
1948
3.84
2.91
4.55
8.22
9.96
3.14
4.31
3.29
3.26
3.28
3.84
1949
3.60
2.67
4.46
7.83
8.42
3.14
4.13
3.62
2.62
3.54
3.51
1950
3.37
2.43
4.29
7.46
8.61
2.99
3.94
3.58
2.24
3.48
3.29
1951
3.37
2.37
4.33
7.07
7.26
3.03
4.03
4.32
2.54
3.57
3.32
1952
3.32
2.39
4.14
6.85
5.97
2.82
4.01
4.49
2.32
3.46
3.28
1953
3.35
2.32
4.16
6.99
6.19
2.92
3.82
5.02
2.69
3.12
3.40
1954
3.48
2.43
4.33
7.22
5.86
3.064.14

5.23
2.60
3.15
3.47
1955
1956
3.29
3.26
2.18
2.14
4.29
4.22
7.32
7.18
5.41
5.89
3.22
3.15
4.07
3.98
4.81
4.44
2.56
2.39
3.00
3.00
if
1957
3.13
1.98
4.16
7.60
5.26
3.09
3.98
4.50
2.29
2.76
3.05
1958
2.96
1.74
4.13
7.23
5.14
3.03
4.10
4.43
2.42
2.90
2.90
1959
3.01
1.78
4.23
7.20
4.97
3.22
4.25
4.37
2.59
2.97
2.88
1960
2.96
1.71
4.22
7.11
4.98
3.21
4.18
4.30
2.44
3.13
2.79
Light Industry 12/
Foods
4.82
4.49
4.21
4.17
4.26
4.42
4.34
24:11
3.95
3.78
3.94
3.89
Textiles,
Clothing,
and
Leather
Glass,
Porcelain,
and
Ceramics
Wood
Paper
3.14
3.53
2.63
2.86
3.35
2.58
2.74
3.27
2.39
2.89
3.48
2.44
2.91
3.28
2.36
3.04
3.56
2.44
3.20
3.49
2.44
2.90
3.05
2.33
2.96
2.87
2.34
2.73
2.72
2.42
2.54
2.75
2.45
2.43
2.55
2.43
2.35
2.51
2.30
a. Fixed assets divided by net output.
b. Including miscellaneous.
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Table 7
Sectoral Distribution of Capital Investment in Czechoslovakia 2/
1949-65
Percent
Excluding Capital Repairs
1949-52
1953-57
1958-59
1956-60
1961-65
Industry
46.5
37.8
41.3
40.2
45.4
Agriculture (includes
forestry)
8.8
13.7
16.6
15.9
15.2
Transportation and
communications
13.6
11.3
10.2
9.8
10.8
Construction
2.2 .
2.2
2.9
2.6
2.3
Housing
15.3
19.8
15.2
31.5
14.0
Other
13.6
15.2
13.8
12.3
Including Capital Repairs
1949-52
1953-57
1958-59
Industry
46.4
39.0 .
42.1
Agriculture (includes
forestry)
8.4
12.1
14.6
Transportation and
communications
14.5
13.9
12.6
Housing
14.6
17.4
13.4
Other
16.1
17.6
17.3
a. 50/
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Table 8
Gross Capital Investment in Industry
as a Percent of Gross National Product in Czechoslovakia 2/
Selected Years, 1948-60
Percent
Year
At Factor Cost In Market Prices
1948
1949
1950
8.0
9.5
10.5
6.0
7.1
7.9
1952
13.5
10.2
1953
12.8
9.6
1955
12.3
9.3
1956
13.9
10.5
1957
14.5
11.0
1958
16.9
12.8
1959
19.0
14.3
1960 12/
21.2
16.0
In 1956 prices. Including capital repairs.
50X1
50X1
Annual investments at factor cost and at market prices were 50X1
then divided by GNP in the respective years. GNP series are estimates of this
Office.
b. Estimates. Capital repairs are unknoWn.
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Shares
as
Table 9
of GNP Originating in Industry and Gross Capital Investment in Industry
a Share of GNP in Czechoslovakia and Selected European Countries 21
1952, 1958, and 1952-58 Average
Share of GNP
Originating in Industry
Gross Capital Investment
in Industry
as a Share of GNP 1:2/
1952 1958
1952-58 Average
Czechoslovakia 2/
30.5
36.9
14.1
Italy 2/
West Germany id/
33.8
44.7
38.0
48.3
7.2
8.0
Austria d
46.7
47.8
9.2
France c
N.A.
N.A.
8.3
UK 2/
39.9
41.6
6.6
a.
The data for Czechoslovakia are estimated;
b. Including construction, except in Czechoslovakia and the UK. For Czechoslovakia
the average excludes 1954 (the source is Table 8). The average for Italy covers
1953-58 and that for France, 1954-58.
c. At factor cost; in 1956 prices for Czechoslovakia, current prices for France and
the UK, and 1954 prices for Italy.
d. In 1954 market prices. In terms of factor cost, the share would be only slightly
higher.
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Table 10
Indexes of Industrial Employment and Output per Worker
in Czechoslovakia and Selected European Countries pi
1954 and 1958
1954
(1950 = 100)
12/
1958
(1954 = 100)
12/
Employment 2/
Output
per Worker 1/
Employment 2/
Output
per Worker
Czechoslovakia
114
106
110
135
Italy
102
137
102
128
West Germany
127
123
120
113
Austria
105
127
109
121
France
101
121
108
123
UK
106
108
101
105
a. 1958 was a good year for Czechoslovakia but one of the poorer years for Western Europe. The
above relationships would not be Significantly different, however, in 1959.
c. Excluding mining for France and the UK.
d. Index of output per worker equals index of output divided by index of employment.
_247.
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Table 11
Indexes of Fixed Assets, Employment, and Output in Czechoslovak Industry
1951, 1954, 1957, and 1960
Total industry
Machine building
Basic materials and power
Electric power
Fuel processing
Fuel mining
Metallurgy and ore mining
Chemicals
Rubber
Construction materials
Light industry 2/
Foods
Textiles, clothing, and
leather
Glass, porcelain, and
ceramics
Wood and paper
1951
(1948 = 100
1954
(1951 = 100)
1957
(1954 = 100)
1960
(1957 = 100)
Assets
Employment 2/
Output
Assets
Employment 2/
Output
Assets
Employment 2/
Output
Assets
Employment 2/
Output
112.6
120
118
118
102
108
126
178
110
114
104
106
106
108
125
108.2
124
108
118
88
100
123
114
100
100
101
114
93
102
110
128.4
148
124
137
140
112
135
135
141
105
121
122
116
110
135
118.7
123
133
135
104
129
137
175
115
127
103
104
102
105
119
105.2
120
112
110
107
115
112
110
111
108
94
94
90
91
102
115.0
120
133
132
129
127
133
145
112
144
98
100
91
105
119
118.3
116
130
137
121
131
126
135
121
133
104
107
102
103
113
108.8
112
108
104
107
109
103
114
120
111
107
102
111
112
104
131.7
142
136
130
135
130
131
157
138
152
119
118
120
132
114
124.2
123
134
129
125
134
135
136
122
149
110
108
108
114
120
111.2
10912/
107 22/
104 lo/
106 112/
10412/
110b./
110 12/
10812/
108 12/
10512/
10012/
107 I.)/
li3 2_:./
105 IP/
131.3
142
132
138
132
129
129
143
114
132
120
110
125
123
126
a. Indexes pertaining to employment apply to production workers (delnici) only. 56/ For total industry, a more comprehensive series of employment has
also been published, the indexes of which are 108.4, 107.5, 109.3, and 108.7, respectively, for the periods indicated above. 2//
b. Index for 1959.
c. Including miscellaneous.
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Table 12
Indexes of Fixed Assets, Employment, and Output of Czechoslovak Industry
1955, 1960, and 1965 Plan
Total industry
Machine building
Basic materials and power
Electric power
Fuel processing
Fuel mining
Metallurgy and ore mining
Chemicals
Rubber
Construction materials
Light industry 2/
Foods
Textiles, clothing, and
leather
Glass, porcelain, and ceramics
Wood and paper
1955
(1950 = 100)
1960
(1955 = 100)
1965 Plan
(1960 = 100)
Assets
Employment f/
Output
Assets
Employment f/
Output
Assets
Employment 21
Output
131.5
140
155
159
106
145
167
242
125
148
106
109
105
109
138
112.2
140
117
121
100
114
124
121
111
115
96
94
92
90
111
135.0
156
155
162
169
134
161
180
109
172
108
106
99
117
141
139.3
136
160
158
148
160
157
162
142
182
113
113
109
116
130
118.4
123 2/
119 2/
104 2/
113 2/
114 2/
114 2/
120 2/
130 2/
114 2/
114 2/
103 2/
113 2/
123 2/
106 2/
154.7
172
162
163
160
161
152
181
150
174
131
126
134
140
132
146.2
144
166
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
109
N.A.
N.A.
N.A.
N.A.
109.1 2/
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
158.4
176
168
161
314
128
157
206
154
161
126
130
116
154
133
a. Indexes pertaining to employment apply to workers (delnici) only. 2_/ For total industry, a more comprehensive series of employment has also been pub-
lished, the indexes of which are 119.2 and 116.2, respectively, for 1951-55 and 1956-60. 29/
b. L)/. (Index of output divided by index of productivity.)
c. In order to get the distribution of employment in the main sectors in 1960, the rate of increase in total employment was applied to the 1959 level of em-
ployment.
d. Including miscellaneous.
e. Index for 1959.
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