JPRS ID: 10054 USSR REPORT INTERNATIONAL ECONOMIC RELATIONS

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JPRS L/ 10054
15 October 1981
~ USSR Re ort
p -
INTERNATIONAL ECONOMi~ RELATIONS
(FQUO 4/81)
FB~~ FORElGN BROAD~AST INFORMATION SERVICE
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JPRS L/10054
15 October 1981
USSR REPORT
INTERNATIONAL ECONOMIC RELATIONS
(FOUO 4 j 81)
CONTENTS
USSR-CEMA Z'RADE
Managing Foreign Economic Ties in European CEMA Countries
- (0. Bakovetskiy; VOPROSY EKONO~MIKI, May 81) 1
CEMA Member-Nation 1980 Economic Results, 1981 Plans
(L. Taxasov; VOPROSY EKONOMIKI, May 81) 12
USSR-EAST EUROPE BILATERAI, TRADE
Bilateral Programs for Specialization, Cooperation in Production
~I. Kareyev; VOPROSY EKONOMIKI, May 81) 26
- a - [III - USSR - 38a FOUO]
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~
U~SR-CEMA TRADE
MA.IVAGING FOREIGN ECONOMIC TIES IN EUROPEAN CEMA COUNTRIES
Moscow VOPROSY EKONOMIKI in Russian No 5, May 81 pp 106-114
[Article by 0. Bakovetskiy: "Managing Foreign Economic Ties in the European CEMA
- Nations"]
[Text] T~e study and use of mutual positive experience in organizing producti~n,
management and solving national economic problems is of important significance in re-
solving the myriad tasks facing CEMA nations. L. I. Brezhnev noted in the CPSU Cen-
tral Committee Accountability Report to the 26th Party Congress that we should "study
more attentively and make better use of the experi~nce of fraternal countries." This
applies directly to managing foreign economic ties. The experience of a number of
CIIKA naCions in which the methods of managing foreign er_onomic activity have been
substantially changed in the course of economic reforms over the last 10-15 ,years is
of great interest.
The primary goal of improving the management of foreign economic ties is to improve
the efficiency of the national economy, which in the European CEMA nations is deter-
~ mined largely by their increased participation in the international division of la-
bor, by the effectiveness of foreign trade turnover. CEMA nations involved in de-
liveries of energy carriers, _aw material and machinery pay particular attention to
developing exports as a means of payment and, in this connection,~as�a condition ne-
cessary for expanding imports and making them more effective. A signif icant and,
most i.mportantly, constantly growing portion of the national income of the socialist
states is realized through foreign trade. Thus, exports reached 29 percent of the
national income in Czechoslovakia in 1978, 30 percent in the GDR, 40 percent in Bul-
garia and 54 percent in Hungary. For example~, as was noted at the October (1977)
HSWP [Hungarian Socialist Workers Party] Central Committee Plenum, "to develop its
- production, Hungary must increase ita imports, and it ~an cover them only by inten-
sified.expansion of its exports.... It is necessary," the plenum pointed out, "to
increase HPR [Hungarian Peoples Republic] participation in the international divi-
sion of labor. The HPR is attaining its goals in developing its economy in close
cooperation with CEMA member-nations. At the same time, it is trying to broaden its
own economic relations with nonsocialist countries as well.i1 This leads to a situ-
ation in which foreign economic factors exart an ever-greater influence on consumption
1iSoobshcheniye o plenume TsK VSRP. 20 oktyabrya 1977 g. Informatsionnyy byulleten'
TsK VSRP" [Report on the 20 October 1977 Central Committee Plenum of the HSWP. In-
formation. Bulletin of the HSWP Central Commj.tteeJ, Budapest, 1977, pp 10-12.
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of the national income produced, in the physical-substantive structure of recompen-
sation, accumulation and consumption regroduction funds formed as a result of econo-
mic exchange between countries. At tY~e same time, foreign economic ties also in-
- fluence national income cost volume used for accumulation and coasumption.
In the not too distant past, many socialist countries did not have sufficiently flex-
ible and stable contacts between thc production and �areign economic spheres. Direct
links to the markets were effected only through fore~gn trade organizations. Calcu-
lations between them and industrial enterprises for output supplied for e~:port or im-
ported from abroad were based on domestic prices. All income from export-import op-
erations was concentrated in foreign trade organizations and was then transferred to
the state budget. Conditior?s for selling output on the world market did not in-
fluence the activity of industrial. enterprises.
But under present conditions in the socialist countries, this system of relations be-
tween fo�ceign trade and industry has not facilitated increasing the effectiveness of
fareign economic ties. The Frimary goals in changing Che system of foreign economic
a~~tivity management in a ma,~urity of the European CEMA countries have therefore been
foremost to overcome the separation of national production and foreign market de-
mands, the establishment of a planned, cost-accounting interaction between production
and foreign trade organizations and the creation of a two-fold cost-accounting inter-
est within industry and foreign trade organizations in expanding exparts advantage-
ous to the country and in importing. Thus, the primary task set management in the
foreign economic sphere in Bu].garia has been to improve relations between organiza-
tions participating in foreign economic activity through the creation of a direct de-
pendence of revenues from output produced on the results of selling that output in
international markets.l Similar goals have been set in other CEMA nations.2
The central problem in improving the m.anagement of foreign economic ties during the
~ economic reforms which have occurred in a majority of socialist countries has been
to achieve an effective combination of centralized, planned leadership with the de-
velopment of foreign-trade and production enterprise initiative. To this end, the
number of decreed indicators was decreased and they shifted from planning in physical
indicators to planning in cost terms for a number of foreign trade plan positions.
Price-formation reforms to bring domestic prices ctoser to world prices were carried
out. In many countries, calculated foreign exchange coefficients are now a basis for
including the results of joint industry and foretgn trade activity in each other's
cost-accounting relations. Cost-accounting agreemenCs are now used widely as the
bases of production and foreign trade. Obligations were redistributed among foreign
economic departments and subordinate organizations so that the former could concen-
trate on long-range problems in developing foreign economic ties and the latter
could assume responsibility for current activity; in some instances, the right to
manage foreign Crade activity was transferred to industrial organizations.
1iOsnovni polozheniya na novata sistema na r"kovodstvo na narodnogo stopanstvo,"
Sofia, 1966, p 7.
2See, for example: "Novoye v planirovanii i upravlenii narodnym khozyaystvom v VNIt"
[Innovations in HPR Economic Planning and Management], Izd-vo "Progress", 1969; "No-
voye planirovanii i upravlenii SRR" [Innovations in Planning and Management in the
Romanian Socialist Republic], Izd-vo "Progreas", 1973.
2
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The organizationa~ rapprochement of the foreign economic sphere and industry and an
increased role for the direct implementers participating in foreign economic scti-
vity, and foremost the branch industrial ministries and departments, associations,
combines and enterprises, have been characteristic features of the steps taken. At
the same time, the countries have differed in degre~ of implementer responsibility
in foreign economic activity, by differences in areas of responsibility of economic
units entitled to establish foreign economic ties.
With improvement in the management of foreign economic ties, the dominant trend has
been organizational linking of specialized foreign trade enterprises and correspond-
ing production associations and enterprises. Thus, foreign trade enterprises in the
PRB [People's Republic of Bulgaria] and the GDR have been transferred from the min-
ist..ies of foreign trade and are directly subordinate to the corresponding produc-
tion units or agencies supervising their activity. At the same time, the ministries
of foreign trade contin~.ue to exercise control over conducting state trade policies
and observance of foreign trade norms. A second trend is t'~at ~pecialized links
(departments, bureaus) concerned with exports have been created within production
units (as in Hungary and the GDR, for example). These links generally market ou~-
put of their ocan associations or comb~nes and are directly subordinate to the pro-
duction association or its superior agency. However, their work is supervised by
the Ministry rf Foreign Trade. The next tze~id has been towards creating foreign
trade organiz:tions which would carry out export-import operations on a largs scale,
at the level of one or several branches of the economy; different organizational pro-
cedures were adopted in different countries. In particular, such tasks are being
. carried out by special state agencies acting as general contractors but which are
not legal entities, by general contractors and enterprises d~signate3 by state agen-
cies (or those interested in making a particular deal) which are granted the right
to carry on foreign trade activity, and so forth.
Thus, part~cipation by production organizations in foreign trade activity in Bul-
garia can take any of three forms: first, direct inclusion in foreign trade organ-
izatlons or through an appropriate management link; second, through a specialized
foreign trade organizat3on subordinate to a branch ministry; third, through a for-
eign trade organization in another economic organizatioa or other ministry. In
this regard, specialized links servir~g the corresponding economic organization pro-
ducing goods for export are created in the latter two instances in the foreigi~ trade
organization.l
In Hungary, foreign trade turnover is effected for the most part by specialized for-
eign trade organizations managing export-import activity on a commission basis, in
which the commission agent (the foreign trade enterprise) purchases goods and sells
tk~em in foreign markets for a set fee. The enterprisea are granted the right to
choose independently a commission agent for foreign trade operations. At the same '
time, more than 100 industrial enterprises have been given the right to independent
foreign trade activity, and the number of such enterprises is increasing.2
1iByuletin normativni aktove za upravleniye na v"nahnot"rgovskata deynost," Sofia,
1980, pp 1-2.
2iA n~pgazdas'dg ir�nyitasi rendszer," Budap~st, 1970, 163 old; MAGYAR KOZLONY, No 56,
1979.
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r~utc urrl~l~.~~ u5~, uivLY
Until recently, a significaat portion of G~7R foreign trade turnover was carried on
' by or~anizations run by the Ministry of Foreign Trade. Moreover, a number of fox~-
eign trade organizations were subordin3te to branch ministries and combines.l In
~.ccordance with a resolutian adopted in 1980, foreign trade enterprises are being
transferred either to branch ministries or to combines, but will simultaneously be
under the supervision of the Ministry of Foreign Trade. The Ministry of Foreign
Trade retains management of just one foreign trade enterprise, for purchasing com-
pYete sets of equipment.
In the Czechoslovak SSR, there are in addition to foreign trade en~erprises subor-
dinate to the Federal Ministry of Foreign Trade, joint-stock societies managed by
the Ministry of Foreign Trade, but including as shareholders industrial assoCiations,
foreign trade enterprises and a foreign trade bank. At the same time, about 20 in-
dustrial associations carry on foreign trade activity themselves.2
The differences noted result not only from dissimilar conditions under which the eco-
nomies of the individual countries operate, but also from different approaches to
solving this problem. The industrial associations were advanced to the fore in the
course of improving the organizational-economic participation of industrial produc-
tion in foreign economic activity. Having assumed responsibility for the branch of
production subordinate to t~?em in the course of the economic refonns, they received
~ broad powers to develop relations with foreign partners. In a ma~ority of the so-
cialist countries, the industrial assuciations themselves determine the product as-
sortment produced by the enterprises comprising them, based on the principle of
maximum effectiveness. The associations have become conductors of structural
changes in the economy, initiators of aceelerated development of the most effec-
tive types of production from the viewpoint of international specialization.
H~ightening the role of the production link in the foreign economic sphexe has had a
substantial impact on the work of the ministries of foreign trade. New functions ap-
peared for tnem: coordinating and supervising the acCivity of state agencies parti-
cipating in foreign economic ties, questions of international production and scien-
tific-technical cooperation, developing forecasts for the entire foreign economic
sphere.
Experience in improvin~ economic ties shows that direct activity by production units
in foreign markets can be ensured given their active participation in international
specialization and production cooperation, strong dependence between exports and im-
port~, high profitability of the foreign trade operations they conduct, and the pro-
vision of skilled personnel. This is borne out by the work experience of such asso-
ciations as the "Karl Zeiss Jena" (GDR),"Balkankar" (PRB), "Medikor" (HPR), as their
proportion of. export production has reached 60 percent or more.
Organizational measures have been accompanied by changes in the field of planning
~ foreign economic activiry. As the experience of CEMA nations shows, one common di-
rection in improving the system of planning foreign ties has been implementation of
1iVerordnung llber Aufgaben, Rechte und Pflichten der Volkseigenen Aussen hadelsber-
iebe," in GBL, No 1, 1974, p 77.
ZSee: CHEKHOSLOVATSKAYA VNESHNYAYA TORGOVLYA, No 3, 1979.
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a comprehensive approach t:, planning them which is viewed as an integral part of na-
tional economic pZanning as a whole; ensuring.the most efficient combination of cen-
tralized planned leadership with the initiative of the production and foreign trade
et~terprises; creating joint interest within industry and the foreign economic appa-
ratus in carrying out export and import operations in the most effective way. In
' this regard, the primary thing h4s been to involve industry more actively in plan-
ning, preparing and carryir.g out export operations, to increase its material inter-
_ est in increasing the production of export output and in improving the economic re-
- sults of all foreign economic activity. Thus, in order to improve the combining of
centralized foreign economic activity management cairh development of the initiative
of associati~ns, combine, enterprises and foreign trade organizations, the number of
centralized plan indicators has been restricted, assignments on export products lists
= have baen reduced and consolidatesi and the range of cost tndicators has been expanded
and its importance increased. This has been one of the prerequisiXes for expanding
the operational independence of the enterprises. Another important trend has been
to broaden the circle of indicators reflecting the effectiveness of foreign economic
ties. Here, there has clearly been an effort to adapt planning to changing condi-
ti~ns in foreign ties.
The general tasks facing the fraternal countries in developin~ the socialist inte-
gration process have resulted in the creation of a special element in the CEMA plan-
ning system to regulate expanding and deepening mutual economic, scientific and tecti-
nical cooperation.l The development af a new section reflecting integration assign-
ments for the five-year and annual plans of a ma~ority of the CEMA nations plays a
leading role in this. The inclusion of integration measures as an integral part of
the national economic plans of the socialist etates testifies t the intensified,
planned interaction of the economies of the inCegrating states.
The system of CEMA foreign economic ties as a whole ine.ludes medium-range (five-year)
and current (annual) plans. Increasing atitention is being pa�id to forecasting f'or-
eign economic ties and working cut the long-range strategy for developing them, to
using a program approach to planning foreign economic activity. The medium-range
plans are currently primary. One can trace 3n their development the same prepara-
tory phases as in the five-year nati~nal economic plan: analysis of development
trends in the up-coming period, defining epecific tasks in view of the long-range
~ goals of economic policy and international agreements. The annual plans are based
on assignments set for the planning year in the five-year plans and are approved as
state plans. They are the operational plans of foreign economic ties and define the
specific tasks of their development.
It should be noted that medium-range and annual plans play a dissimilar role in the
development of foreign economic ties in differettt countries. Thus, their implemen-
tation is mandatory for enterprises as well in countries having approved long-range
plans at all levels. But in other states, the annual plan is considered mandatory
for the enterprises. There are differences in the amount and degree of centralized
foreign economic planning and planning such ties at enterprises in the CEMA nations.
1For greater detail, see: Bogomolov, 0. T., "Strany sotsializma v mezhdunarodnom
razdelenii truda" [The Socialist Countries in the Internat~onal Division of La-
bor], Izd-vo "Nauka", 1980, pp 199-207.
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A s.ignificant role in planning foreign trade ties in CEMA countries belongs to pro-
duction combines, associations and enterprises. Their rights in making independ~ent
decisions in the development and implementation of export production have been
broadened. Thus, economic units possess broad rights in approving the exports pro-
ducts li~t within tt~e framework of thE overall cost volumes for co~odity groups as
established by the gosplans and branch ministries.
- In accordance with the directive and indirect indicators {n the f~reign trade plans
of the individual countries, substantial differences exist, but they share a common
feature, *_hat of carrying out the tasks stemming from long-term agreements am-ong CEMA
countries on economic cooperation. In tfie HPR, for example, where indirect indica-
tors predominate, international agreement commodity lists are drawn up wit~? the par-
ticipation of indus~rial enterprises and foreign trade organizations, which agree on
the terms under which tl~ey can assume implementation of these agreements. After
that, they are obligated to ii:clude these lists in their plans.
- The planned character of CEMA-country economic relations with foreign countries de-
termine~ the very important role of central planning agencies in the system of for-
eign economi.c activity management, as they work out foreign economic ti~es develop-
ment pro~pects and the basic planning indicators for the foreign e~onv~nic sphere,
coordinate tl:em with the indicators of other sectiona of the national economic plans
and supervise calculations of the effectiveness of different econom~.c cooperation
variants. The search ~or an optimum resolution to this particular ,problem obviously
cannot be c~nsidered over. For example, the GDR and Bulgaria concluded that export
cost planning is not adequate for selling output on foreign markets. But in the HPR,
there are practically no assignments set enterprises for exp~rts at a11.
Given continued improvement in the forms of ties between industry and foreign trade
in the socialist countries, organizational-planning measures are ~b~eing combined with
economic ones, with improvement in the mechanism of cost accounting between the pro-
duction sphere and foreign trade activity. The basic line is to ensure the direct
participation of cost-accounting product~on associations and enterprises in profits
and losses from foreign trade operations, in changing over to the economic stimula-
tion of all participants in foreign economic ties as a function of the actual impact
of foreign trade activity. The dominant trend is towards coaverting the financial
results of foreign trade into one of the factors shapin,g the profit of production
enterprises. Thus, the Foreign Trade Law adopted in Hungary in 1974 anticipates the
intrnduction of integral cost-accounting elements into foreign economic activity,
setting prices based on calculations between industry and foreign trade for exports
and imports on the basis of actual foreign-trade grices recalculated in domest~c cur-
rency, and strengthening material incentives for foreign trade and induatry workers
for achieving the best import and export results.l
The same kinds of changes were also made in a number of other CEMA countries. At
the same time, of course, the specific methods of including foreign trade results in
the overall results of economic activity are dis,similar. Tn a number of countries,
for example, national expenditures on exported output are evaluated in domestic whole-
sale prices, and in others, foreign-trade prices are compared directly with output
net cost. However, the actual foreign-exchange receipts from exports are always re-
calculated, using special foreign-exchange calculation coefficients, izto the national
currency and become part of cost-accounting organization revenues.
1MAGYAR K~SZL~NY, No 76, 1974.
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The foreign-exchange calculation coefficients on whose basis foreign trade prices
expressed in foreign currency are recalculated into the national currency have taken
on important significance in the cost-accounting ties of industry and foreign trade.
In content, these coefficients determine the "prices" of a specific unit of foreign
currency. They are used as instruments for internal calculation between industry
and foreign trade, as tools to set prices in an economically substantiated way ar_d
to determine the effectiveness of the activity of organizations participating in
foreign economic ties. Their value depends wholly on the foreign-exchange effec-
tiveness of exports. Foreign-exchange coefficients are calculated based on the av-
erage national expenditures necessary to obtain a unit of foreign currency. The
overall purchasing power of a given currency or its gold content are not used in the
calculation. In this regard, two foreign-exchange coefficien~s generally operate,
those relating to the transfer ruble and those relating to the dollar.l
The actual effectiveness of foreign trade ties is determined with the help of these
foreign-exchange coefficients, which in turn enables us to work out on their basis
criteria for evaluating domestic and foreign economic activitq and to introduce them
into the cost-accounting system for industrial and foreign trade enterprises. These
coefficients perfonn the role of export operationa effectiveness normatives for cost-
accounting enterprises.2
The formation of profit on the base of a single financial result of production and
foreign trade activity stimulates an enterprise to lower production outlays, on the
one hand, and interests it in higher foreign trade prices, on the other. Enter-
prises with lower production expenditures, given identical foreign trade prices, re-
- ceive more profit from product sales on the external market than do enterprises ex-
porting output with high production outlays. The importer also gains an opportunity
to compare expenditures associated with obtaining goods he needs from abroad with
- prices for analogous goods made domestically.
In all the European CEMA countries, recalculating foreign-exchange revenues or ez;-
penditures is supplemented by a system of financial levers which change the amount
of revenues from foreign trade left to the enterprise. Tl~ese financial measures
lIn a number of CEMA countries, foreign-exchange coefficients have been transformed
into the sole official trade rate of exchange on whosi: basis foreign currency is
- recalculated into domestic currencies. In particular, foreign rates of exchange
were Cransformed :Lnto trade-payment rates of exchange in Hungary in 1976, when it
also stopped quoting the forint on the basis of its previously established gold con-
tent (BANK SZEMLE, No 11, 1976). In Romania, a single foreign trade rate of ex-
change expressing the average ratio of domestic and foreign trade prices was intro-
duced. In this regard, the values of foreign exchange coefficients to the dollar
and to the transfer ruble have drawn closer to one another in a number of CEMA coun-
tries. Thus, $1 was equivalent to 60 forints and the transfer ruble was equivalent
to 40 forints in the HPR in 1?68; those ratios are now 1:32 and 1:28 forints, re-
spectively. In the PRB, the dollar and transfer ruble ratios were 1:1.6 and 1:1.3
lev in 1971, and they are now 1:0.9752 and 1:0, respectively.
2For more detail, see: M. S. Lyubskiy, L. Kh. Sulyayeva and V. M. Shastitko, "Val-
yutnyye i kreditnyye otnosheniya stran SEV" [CII~iA Foreign Exchange and Credit Re-
lations), Izd-vo Nauka, 1978.
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bear different names, but the essence is the same they amortize the unalesi,reable
effects of foreign-trade price changes on the cost-accounting results of the acti-
vity of enterprises and associations, making up, when necessary, for differ~ences bew
~ tweeh actual production expenditures and foreign trade receiptb.
The size of the subsidy is determined on the basis of export and import deli~rer~
plans, generally in the form of price surcharges. The amounts are differe~tiated
by individual enterprise or commodity group as a function of the profitab~:lit~ ~of
the export or import. This system is especially well-developed in the Zi'Y,~t. Exp~ct
subsidies here are included in the overall financial results of enterprises and in-
crease their profit. When profit from foreign trade operations substan~~ally ~ex-
ceeds that needed to run enterprise cost accounting, deductions from export profit
to the budget are applied. Such a system com~ines material stim~la~io~ nf produc-
tion efficiency growth in associations and enterprises effected t.'~roug'h internal
factors with encouragement for the effective development of foreign ecor?amic ties.
A direct comparison of production expenditures with fereign trade p~rices stimulates
' making the export structure more efficient and lowering enterpris~ graduction out-
lays.
The growth spurt in worid prices in recent yeara has caused a significant gap be-
tween foreign-trade and domestic prices, which gap is increasin~ for reasons not
dependent on the enterprises, leading to growth in subeidies allocated basically to
. importers within the system of regulating domestic prices f~r importied goo3s. At
the same time, the excess exporter profit generated in connection with the rise in
foreign-trade prices is deducted to the budget, for subsequent redistribution, and
~ in particular, to subsidize imports. For example, the IiPR has since 1976 used a
production taxl to neutralize losses arising as a result of change in the condi-
tions of foreign economic activity. With a view towards adapting to altered trade
market conditions, calculation coefficients (HPR) or ad~usted surcharges (GDR, Czech
SSR) have been antici~ated.
Recent improvement in foreign ecox~omic ties management in the European CII~1A coun-
tries by disseminating cost-accounting principles to the economic ties of industry
and foreign trade has facilitated strengthQning planning, organizational and cosfi-
accounting relations between them and the creation of a united interest in improv-
ing the effectiveness of foreign economic activity.
Of course, that does not signify that no problems have arisen in the course of op-
erating the systems for managing foreign economic ties in CEMA countries. Thus, we
thought, in restructuring the system for stimulating foreign economic ties, to create
an economic mechanism which would arouse enterprises to expand export production in
. every way possible. In practice, however, it turned out that the use of cost cate-
gories did not solve the problem o= expanding export deliveries or improving their
effectiveness in many instanceg. We did not succeed in fully solving the problems
arising in improving the effectiveness of imports either. This resulted, in par-
ticular, from the fact that granting foreign-trade rights to industrial links,
along with its positive results, inteneified the departmental approach to solving
export and import problema and led in part to ignoring national economic interests.
The multistage organizational structure of foreign economic activity management and
the dual subordination of foreign trade organizations definitely complicated rela-
tions between industry and foreign trade in the economic-agreement system.
1MAGYAR KOZLONY, No 1, 1977.
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In particular, G. Husgk noted, in speaking about the management of foreign economic
activity in Czechoslovakia, that "the current level of cooperation between production
and tr3de is not satisfactory.i1 "Industrial enterprises and foreign trade organiza-
- tions must learn to be oriented more flexibly and efficiently towards the actual de-
mand in foreign maxkets for sales of our goods," said E. Honecker. "This requires
first ~f all even greater ~oint efforts by industry and foreign trade in the axea of
utilizing markets for our exports and assumes the organization of efficient, reliable
service.t2
The Romanian press has pointed out the lack of coordination in work between the Min-
istry of Foreign Trade ana International Economic Cooperation and the branch minis-
tries. It nas noted the necessity of greater coordination among all economic organ-
izations in the area of foreign economic ties, of areating a single export-import
agency with a view towards monitoring progrese in making export deliveries.
In this connectian, a majority of the CEMA countriea have constantly improved the
planning, organizational and cost-accounting tools for managing foreign economic ties.
Thus, in Hungary, world market prices have b~come a deciding �actor in price forma-
tion for output of a majority of branches which are primarily export in orientation,
beginning in 1980. This relates to exports to both capitalist and socialist coun-
tries, inasmuch as CEMA market contract prices are generally set based on world
- prices. The import price at which raw materials,energy carriers and a portion of
the basic materials and semifinished products are acquired in capitalist and social-
ist markets has been adopted as the normative basis for wholesale prices. The export
price at which the output of processing branches of industry can be sold in the non-
sociaZist mdrket (the price of exports, in dollars, recalculated to forints based on
a foreign-exchange coefficient) has become the basis of vrices for that output.
The improved system of state subsidies is aimed at creating normal consiitions for en-
terprise vperation. Some subsidies are constant and others temporary, intended for
replacement every 4-5 years, during which time enterprises must have reached a high
level of profitability. In the opinion of Hungarian economists, these measures must
facilitate improvement in the structure of industry, improving its efficiency, fore-
most from~the viewpoint of developing branches specialized for exports, branches
whose output is sufficiently competitive to be in demand in a foreign market.3
Similar steps arE being taken in Bulgaria4; Czechoslovakia plans such steps for the
current five-year plan. Improvement in domestic price fortnation along this line is
one of the leading trends in developing systems to stimulate foreign economic acti-
- vity in CEMA countries. Changing over to such a system of forming domestic whole-
sale prices results from the objective character o� Ec~ropean CEMA-country participa-
tion in the international division of labor.
1iXV s"yezd Kommunisticheskoy partii Chekhoslovakii" [15th Congress of the Czechoslu-
vak Communist PartyJ, Izd-vo Politizdat, 1977, p 45.
2iIX s"yezd Sotsialisticheskoy yedinoy partii Germanii" [9th Congress of the Social-
ist Unity Party of ~ermany], Izd-vo Politizdat, 1977, p$2.
3MAGYAR KOZLONY, No 12, 1979.
4D"RZHAVEN VESTNIK, No 90, 1979.
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_ Countries ~f the socialist community (Bulgaria, Romania and Czechoslovakia, for ex-
ampie) have recently begun creating mixed companies, with the participation of West-
- ern-country capital, in vari~us spheres of economic activity (industry, trade, bank-
' ing). Thus, the formation of mixed companies with Western companies is regulated in

- Bulgaria by State Soviet Ukaze No 535, under which cotitractual cooperation ~ithin
the PRB and other countries is permitted in the form of industrial cooperation and
mixed companies for the puxposes of increasing production and exp~rts, including
foreign-exchange receipts and increased efficiency of economic activity. All ques-
tions of joint economic activity are defined in the agreement, which is concluded
with the permission of the PRB Council of Ministers. A mixed company agreement can.
be concluded for a period not to exceed 15 years, and the proportion of foreign ca-
pital is not to exceed 50 percent. In this regard, it is anCicipated that the deci-
sions of the mixed company supervisory agency will be made only on the basis of the
prir.ciple of unanimity and that its chairman must be a Bulgarian citizen.l Mixedcom-
panies currently play a def inite role in the system of foreign economic activity
management. They include, for example, these 3oint enterprises created in Hungary:
- "Vol'kom" to produce Land Rover-type all-terrain vehicles with the participation
of Volvo Company of Sweden; "Radelkor" to produce blood analyzers with the parti-
cipation of Corning Medical Company of Britain; "Sikontakt-KFT", with the participa~
tion of Interkooperatsion foreign trade organization of Hungary and Siemens Company
of the FRG to produce elec~ric motors, household appliances, medical apparatus
- and computer equipment. In May 1980, the Hungarfan "Biogam" pharmaceuticals enter-
prise and the Swedish "Tsima" ~oint-stock company signed an agreement on founding a
joint pharmaceuticals enterprise to produce the new treatment preparation "Garergen."
In joint enterprises, the Hungarian organizations possess a controlling block of
shares. This ensures that they will control the activity of the enterprises. For-
- eign contributors provide technical documentation, deliver complete sets of parts
and assist in exporting the output. A Bank of Central Europe was created in Buda-
pest in 1979; its founders were the National Bank of Hungary and banks in Italy,
the FRG, Britain, Austria, France and Japan. Bank charter capital was $25 million,
with credit assets of $15 million. National Bank of Hungary's proportion of the
bank's capital has reached 34 percent. The bank is called upon to ~ointly finance
trade with countries of the West and make joint capital investments in developing ,
the services sphere, to serve as a source of funds in reversible foreign exchange.
Tt can also service joint operations between bank participants and third-party coun-
tries. A7.1 bank ope~:ations must be carried out only in reversibleforeign exchange.2
2'he "Rifil" Romanian-Italian enterprise, "Romkontrol Deyta" Romanian-American en-
terprise, "Roniprot" Romanian-Japanese enterprise and others operate in the Social-
ist Republic of Romania.
The formation of mixed companies is called upon to facilitate saving capital invest-
ments in creating new production capacities, setting up large~scale pr~duction and
raising the technical. level of the products released based on use of the latest
equipment and technology.
Individual CEMA member-nations grant Western partners broad opportunities for econo-
mic activity, as is borne out by an analysis of normative documents on the creation
1D"RZHAVEN VESTNIK, No 25, I980.
Zi~1AGYAR HIRLAP, No 263, 10 November 1975.
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of mixed companies. In particular, the aphere of their activity can be any branch
_ of the economy. Western partners are granted a number of ma~or privileges, as for
example, the free use of their portion of the profit in the country or taking it out
o~ the country, free either ~artially or completely from profit taxes, and so forth.
As of now, on~ly a comparatively small number of mixed companies has been created.
They are actually just beginning their activity. It is therefore not possible at
this point to evaluate their influence on the development of the economies of the
countries ir~ which they have been created.
The experie~.ice of CEMA countries in the area of managing foreign .:conomic ties is
doubtless of interest and needs to be comprehensively studied and thought out. In
our opinion, it is of definite importance to further improvement in planning, man-
_ aging and stimulating foreign economic activity in the USSR, naturally with consi-
deration of the specifics of our national economy and measures being implemented in
the area of managing foreign economic ties.
COPYRIGHT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1981
- 11052
CSO: 1825/34
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rux urrl~lEU. u5~ unLz
USSR-CEMA TRADE
CEMA MEMBER-NATION 1980 ECONOMIC RESULTS~ 1981 PLANS
Moscow VOPROSY EKONO:IIKI in Russian No 5, May 81 pp 115-125
[Article by L. Tarasov: "CEMA Natior. Economies: 1980 Results and 1981 Plans"]
[Text] Implementation of the CEMA nations' socioeconomic development programs out-
lined by the communist and worker party congresses for 1976-1980.was completed in
1980. Their results reflected the development trends which evolved in the 1970's
and simultaneously determined the directions of socioeconomic progress we are faced
with broadening and deepening in the 1980's.
The scale of social production has increased appreciably in CIIKA nations in this
past five-year period, its technical base.has been strengthened and the well-being
of the peaple has been improved. Production and acientific ties have been broadened
and deepened on principles of mutual cooperation. Measures anticipated in the Com-
prehensive Program of Further Deepening and Perfecting Socialist Economic Integra-
tion have been implemented; assisting the economic interaction and mutual supple-
mentation of the national economic complexes and the more effective use of economic
resources.
The material-technical foundation of improving social relations and exganding the
opportunities of socialist society in the field of spiritual and cultural develop-
ment of the fraternal peoples has been a substantial increase in and modernization
of the production apparatus and improvement in the qualitative parameters of mach-
inery and equipment.
As compared with 1975, fixed production assets for CEMA nations as a whole grew by
more than 40 percent. The significant scope of expansion of the material base of
production ha~ permitted appreciable up-dating of the te~hnical base for developing
the most important branches of the material sphere. At the same time, opportunities
for saving working time and reducing the number of workers employed at physical and
unattractive labor have increased.
Quantitative and structural changes in the material-technical base have been a most
- important element in economic strategy to ensure production growth while reducing
working time expenditures per unit of output. As a result of improved labor produc-
= tivity, four-fi~fths of the increment in aggregate national income was ensured.
Substantial quantitative and qualitative ch~nges occurred in the produc~ion of mater-
ial resources. For CEMA nations as a whole, national income increased 22 percent in
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1976-1980. The proportion of industry, cc,nstruction and branches of the circulation
sphere increased steadily in its structure. The proportion of agriculture and lumber-
ing in the production of material resources decreased appreciably. However, the re-
lA~ive reduction in agriculture's proportion of the social product was noted g3ven
an absolute increase in agricultural production volume. As compared with 1971-1975,
branch gross output over the last five-year period grew by nine percent for CEMA na-
tions as a whole.
In the sphere of interstate economic relations, countries of the socialist community
continued to carry out joint measures in production and science on a long-term basis.
This introduced new qualitative features into cooperation Qrocesses and raised the
level of planning, organizing and managing the international socialist division of
labor.
Given undisputed achievements in the area of socioeconomic and scientific-technical
progress, the fraternal countries had to.overcome difficulties and solvP difficult
problems in their own socialist and communist development.
"The change-over to intensive development of the economy," the CPSU Central Commit-
tee Accountabilit~ Report to the 26th Party Congress noted, "implementation of ma~or
social programs and shaping communist awareness all this does not come right away.
We need both time and tireless creative searching."
After an appreciable increase in the average yields of the main grain, fodder and
commercial crops in 1971-1975, the dynamics of agricultural growth indicators have
gradually decreased in a ma~ority of the European CEMA countries. The balance ties
between plant growing and stockraising are more complicated n