THE SOVIET CONSTRUCTION MATERIALS INDUSTRY: ITS ROLE IN ECONOMIC EXPANSION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89T01363R000200230004-3
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• Document Creation Date: December 22, 2016
• Document Release Date: August 8, 2011
• Sequence Number: 4
• Publication Date: January 1, 1986
• Content Type: REPORT

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Directorate of Secret
Intelligence
v 23
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in Economic Expansion
The Soviet Construction
Materials Industry: Its Role
Secret
SOV 86-10002
January 1986
copy 344
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Directorate of
Intelligence
in Economic Expansion
The Soviet Construction
Materials Industry: Its Role
This paper was prepared byl 25X1
Office of Soviet Analysis. Comments and 25X1
queries are welcome and may be directed to the
Chief, Economic Performance Division, SOVA 25X1
Secret
SOV 86-10002
January 1986
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The Soviet Construction
Materials Industry: Its Role
in Economic Expansion
Key Judgments Mikhail Gorbachev's aggressive modernization program will challenge the
Information available construction materials industry to supply more and better quality building
as of 15 December 1985 products for renovating and expanding production facilities. In addition,
was used in this report.
his program to improve consumer welfare depends, in part, on more and
better housing. Whether the industry can meet these challenges depends on
its ability to overcome a number of problems that have contributed to its
deteriorating performance over the past decade.
Growth in the production of construction materials slowed abruptly
between 1975 and 1982, when output rose on the average by only 1.5
percent annually. Factors contributing to slow production growth included
the deteriorating quality and shortage of raw materials, aging plant and
equipment, inadequate investment, shortages of labor, irregular supplies of
energy, and transportation bottlenecks. These deficiencies were exacerbat-
ed by the fragmentation of administrative responsibility for the planning,
production, and distribution of construction materials.
Performance improved slightly during 1983-85, because of increases in
industrial capacity and labor productivity. Growth, however, is still well
below the rates necessary to assure an adequate supply of materials to meet
the newly promulgated investment plans for the balance of the decade.
The poor record of the industry has had a substantial negative impact
throughout the economy. Shortages of materials have occurred consistently
since the mid-1970s, resulting in construction delays, plant shutdowns, and
worker layoffs. Major sectors of the economy have been affected by these
shortfalls in recent years:
? Soviet nuclear power stations under construction have faced shortages of
cement and prefabricated concrete.
? The campaign for a vast improvement in rural housing has floundered
from severe shortages of construction materials, especially wall and
roofing materials.
? Siberian oil-drilling sites and pipeline construction projects are experi-
encing shortages of cement.
? Facilities supporting construction within the defense sector continue to be
short of reinforced concrete, cement, and brick.
iii Secret
SOV 86-10002
January 1986
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Soviet officials have long been aware of the problems confronting the
industry. Official resolutions and numerous articles in the Soviet press have
recommended the expansion of capacity, automation, and conservation of
energy and raw materials. Investment, however, has been inadequate; there
has been little addition to the industry's capacity since 1980. Moreover, the
limited success in automation has hampered Soviet efforts to improve
substantially the quality of materials produced and reduce the labor
intensiveness of the industry. There has been no effort to consolidate
administrative control over construction materials production and distribu-
tion. The impact of these constraints has been magnified by Moscow's
inability to move ahead on the economywide conservation of construction
materials. As a result, Moscow has had to increasingly rely on imports of
these materials, especially insulation and refractory materials. By 1984,
imports had reached $675 million-nearly 40 percent of which was paid in
hard currency.
Many of the factors that contributed to poor performance in 1976-82 are
deeply rooted in the system. If Gorbachev's modernization program is to
succeed, increased attention to the industry's problems is in order. The
General Secretary obviously hopes that deemphasizing new plant construc-
tion and vigorous action to conserve construction materials will reduce the
growth in demand for these products. He must, however, deal with two
immediate problems: the inefficiency of construction materials production
and the past insufficient allocation of investment to the industry. Gorba-
chev took a major step toward addressing the first problem by appointing
Sergey F. Voyenushkin-a critic of current construction policies and an
established innovator-as Minister of the Construction Materials Industry
in July. We have yet to determine the industry's share of new investment in
the 1986-90 Five-Year Plan.
In the next year or so, indications that Moscow is moving smartly to
improve the performance of the construction materials industry would
include:
? An increase in investment allocated to the industry in the 1986-90 Five-
Year Plan.
? The replacement of ineffective managers.
? The formation of a "superministry" of construction materials or the
absorption of the ministry into the State Committee for Construction
Affairs to address the fragmentation of material-related responsibilities.
? The signing of major contracts with Western-possibly US-firms for
the renovation and modernization of cement and refractory plants.
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Gorbachev will be hard pressed to reconcile his concomitant needs to boost
investment in machine building, meet the investment needs of energy and
agriculture, and increase investment in the construction materials industry.
On the demand side, he will find it difficult to deemphasize new
construction as much as he would like and to otherwise get the econ-
omywide construction materials conservation he is counting on. Therefore,
unless investment in the industry is increased substantially to develop new
sources of raw materials, commission new production capacity, renovate
old plants, and increase output of processing equipment, continuing
construction materials shortfalls will seriously hamper Gorbachev's mod-
ernization and consumer welfare efforts. Specifically, new housing starts
will slow, capital renovation will be delayed, and the planned increases in
the production of advanced and higher quality construction materials will
not be realized.
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Key Judgments
The Setting
Page
iii
Deteriorating Quality and Shortages of Raw Materials 3
Problems With Capital Equipment 5
Inadequate Investment 5
Shortages of Labor 5
Irregular Supplies of Fuel and Electricity 5
Transportation Bottlenecks 5
Fragmentation of Administrative Responsibility 6
Impact of Poor Performance 6
Past Attempts To Address the Problem 7
New Capacity 8
Conserving Construction Materials 9
Foreign Trade 10
Looking Ahead 10
Long-Term Requirements 11
Perspectives 13
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The Soviet Construction
Materials Industry: Its Role
in Economic Expansion
The efficiency of the national economy and the rates
of our growth depend to a great extent on the
structure and quality of materials. At present we are
lagging in this task.
Mikhail S. Gorbachev
at the June 1985 Science and Technology Conference
Since coming to power, Mikhail Gorbachev has set in
motion the most aggressive economic agenda in the
USSR since the mid-1960s. His initiatives are aimed
at raising productivity and efficiency throughout the
economy by matching more and better equipment
with a motivated work force.' Although Soviet eco-
nomic performance has improved in recent years from
the low levels of 1979-82, accelerated growth is
required if targets are to be met
One of the constraints to growth is inadequate invest-
ment for economic modernization and expansion.
Renovating and reequipping existing enterprises rath-
er than building new ones is a key element of
Gorbachev's modernization strategy. Unless more re-
sources are allotted to expansion of the construction
materials industry, however, the goals for moderniza-
tion and renovation of industrial facilities will not be
achievedi
We agree with the General Secretary that construc-
tion is the main support mechanism that will facilitate
economic expansion. To maintain an effective con-
struction sector, the construction materials industry
must provide more and better quality materials, par-
ticularly cement, concrete, wall materials (especially
gypsum), and ceramic products. About two-thirds of
the total output of construction materials is used in
The Soviet Construction Materials Industry
The USSR Ministry of the Construction Materials
Industry includes more than 300 production associa-
tions, enterprises, and organizations at the national
level as well as 15 republic ministries. The all-union
ministry is organized into seven general divisions-
Administration, Industry, Economy, Science and
Technology, Supply and Repair, Workers, and Mis-
cellaneous-each of which contains several depart-
ments and administrations.
The Industry and Economy divisions are of primary
importance because they coordinate planning and
production targets with the State Planning Commit-
tee. Most of the other divisions provide contributions
to the Economy Division when their efforts may
affect plans and targets. The Economy Division mea-
sures performance and provides guidance when devi-
ations from plans occur. The Industry Division is
involved most heavily with the use of resources
needed for material production and distribution. It
contains the departments responsible for the eight
product sectors of the industry-cement, prefabricat-
ed concrete, asbestos cement, wall materials, roofing
materials, construction ceramics, glass, and other
construction materials.
Although the industry processes many varied prod-
ucts that have uses in all sectors of the Soviet
economy, output of the construction materials indus-
try constitutes only 5 to 6 percent of total Soviet
industrial production.
and structural metal elements (see figure 1).
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domestic construction-both civilian and military. 25X1
Construction is the largest consumer of cement, pre-
fabricated concrete products, lumber, glass, bricks,
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Figure 1
USSR: Estimated Disposition of Output From
the Construction Materials Industry, 1982
Construction
( Construction materials industry
Exports
Other sectors of the economy
Cement
Prefabricated concrete
Asbestos cement
Roofing materials
Wall materials
Construction ceramics
Glass
Other construction materials
0
Percent
Source: _CIA update of work done on the recontructed Soviet Input-Output
Table in Producers' Prices (Matrix of Direct Input Coefficients) by the
Center for International Research, US Bureau of the Census.
The various sectors of the construction materials A Troubled Industry
industry are closely linked, with poor performance in
one affecting the others. The key sector is cement, Rapid increases in the output of construction materi-
which "sells" over 60 percent of its product to six of als in the 1961-75 period-up by an average of nearly
the remaining sectors. Slow growth in cement sup- 10 percent per year-were followed by an abrupt
plies, for example, has constrained the production of slowdown in growth to only 2 percent annually in the
prefabricated concrete, a major ingredient in con-
struction.
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Table 1
USSR: Average Annual Growth
of Construction Materials Output
7.9
0.6
1.7
-2.8
3.8
1.5
0.8
9.7
1.2
1.8
-0.4
3.2
3.0
1.1
1.7
-1.6
0.4
-0.3
2.6
-0.6
NA
6.7
-1.3
2.0
1.5
4.1
2.8
NA
Construction ceramics
6.2
2.3
8.4
5.0
4.8
2.2
NA
Glass
6.0
4.4
0.0
-0.4
4.7
2.9
NA
Other construction materials b
4.7
1.1
1.1
1.1
-1.0
0.4
NA
a Estimated.
b Includes construction time, gypsum, rock products, and mineral
wool insulation.
last half of the 1970s. Since 1980, performance in the
industry has been mixed: production virtually stagnat-
ed in 1981-82 but made a moderate recovery in 1983-
84. The severe winter hampered output in the first
quarter of 1985; we currently expect the industry's
output to grow by only 1 percent for the year as a
whole, a significant drop from 1983-84 growth rates
(see tables 1 and 2).2 Overall rates of growth in the
output of construction materials will thus be less than
half those originally targeted for 1981-85.
Most of the industry's poor performance since the
mid-1970s is due to the substantial decline in both the
growth of capital and labor inputs and their produc-
tivity (see table 3). Many factors contributed to this
decline.
Soviet use of lower quality raw materials increases
both production problems and costs. For example,
according to one Soviet study, up to one-third of the
decline in cement production in 1979 resulted from
difficulties in processing low-quality raw materials.
Chemical additives-essential for building materials
exposed to extreme cold-as well as steel reinforcing
material and crushed stone are in short supply. Short-
ages of stone have caused concrete plants in some
construction administrations to operate at as little as
one-fifth of capacity in recent years. Although indus-
trial byproducts, such as blast furnace slag, nonfer-
rous wastes, and fly ash, can compensate for inade-
quate supplies of some raw materials, annual
increases in the availability of these substitutes have
fallen off with the drop in growth rates of the metals
Deteriorating Quality and Shortages of Raw Materials and coal industries.
The quality of quarry products, such as limestone and
gypsum, has been deteriorating because of increasing
reliance on the exploitation of marginal deposits.
2 Performance in the precast ferroconcrete sector was so abysmal
that the Soviets withheld monthly production statistics for three
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Table 2
USSR: Production of Major Construction Materials
Cement (million tons)
122.1
125.0
127.2
123.7
128.2
129.9
131.0
Precast ferroconcrete (million m')
114.2
122.2
124.5
123.6
128.3
132.4
133.8
Of which:
Prestressed reinforced concrete
27.2
27.2
28.1
27.6
28.5
29.4
NA
Asbestos cement (billion tiles)
7.8
7.3
7.5
7.6
7.9
8.1
NA
Wall materials (million bricks)
63.0
58.0
58.3
58.1
59.6
59.2
NA
Of which:
Construction brick
47.2
41.8
41.8
41.6
42.5
41.8
NA
Of which:
Refractory brick
33.7
27.5
27.4
27.1
27.6
27.1
NA
Soft roofing materials (million m')
1.8
1.7
1.7
1.7
1.8
1.9
NA
Roofing tile (million m')
1.9
0.6
0.6
0.6
0.7
0.7
NA
Linoleum (million m')
71.9
93.1
95.1
96.2
99.9
106.0
NA
Ceramic floor tiles (million m')
23.7
23.2
26.0
27.6
29.5
30.3
NA
Styled ceramic wall tiles (million m')
24.1
32.6
35.4
37.5
39.3
40.4
NA
Acid-proof ceramics (thousand tons)
601.0
609.0
605.0
601.0
616.0
612.0
NA
Sanitary ceramics (million units)
8.9
9.6
9.7
9.7
9.9
10.0
NA
Window glass (million m')
269.0
245.0
245.0
243.0
247.0
247.0
NA
Source: Narodnoye khozyaystvo SSSR, various years (hereafter
referred to as Narkhoz).
Table 3
USSR: Average Annual Growth of Productivity in the
Construction Materials Industry
Combined productivity a -1.2 0.3 0.6
Capital -7.9 -2.1 -3.7
Labor 4.6 2.3 4.2
-2.3
-1.2
-2.8
-0.6
0.2
-5.4
-4.3
-3.8
-3.3
-3.1
0.3
1.4
-2.1
1.7
2.9
a Combined productivity is calculated using a Cobb-Douglas pro-
duction function. Inputs of capital and labor are weighted with
their respective income shares in 1970, estimated in the derivation
of GNP at factor cost in that year. Labor is assigned 55.1 percent
and capital, 44.9 percent.
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Problems With Capital Equipment
The Soviets have added little new capacity in the
construction materials industry since 1980, and, ac-
cording to a plethora of Soviet press reports, much
new equipment operates far below rated capacity.
Moreover, the majority of the capital equipment
currently in use is over 20 years old. The amount of
repair work has consequently skyrocketed with shut-
downs for repair-exacerbated by shortages of labor
and materials-taking a significant toll on production
and efficiency. Because of the limited additions to
plant and equipment, Moscow-despite the growth of
the pool of skilled repair workers-has been unable to
compensate for this loss
Inadequate Investment
During 1971-75, the construction materials industry's
share of total industrial investment was 5.5 percent.
By 1984, its share had declined to 3.7 percent,
reflecting the higher priority accorded to other
branches of the economy. Moreover, the investment
that has been dedicated to the construction materials
industry, as in some other branches of industry, has
been skewed toward the construction of finished
product capacity to the relative neglect of developing
raw materials, storage facilities, and social infrastruc-
ture such as worker housing.
Shortages of Labor
In line with a general decline in the growth of the
Soviet labor force, growth of employment in the
construction materials industry has fallen since the
early 1970s, with zero growth recorded in 1984 (see
figure 2). This has resulted in an acute shortage of
skilled labor across the entire industry. A large,
continual turnover of labor because of inadequate
investment in social infrastructure has exacerbated
the problem.
the share of such investment in the cement industry
alone would have to be almost doubled to prevent
excessive labor turnover
Irregular Supplies of Fuel and Electricity
The construction materials industry is heavily depen-
dent upon electricity and gas, and interruptions in the
supply of energy have pushed down production of
Figure 2
USSR: Average Annual Growth of Employment
in the Construction Materials Industry, 1961-84
0
a Zero or no growth.
Source: Narkhoz, various years.
late 1960s, the industry has attempted to reduce its
reliance on coal by replacing it with gas, which is both
more efficient and reliable. Limited gas storage facili-
ties and distribution lines, however, have prevented a
faster transition.
Transportation Bottlenecks
Bottlenecks in transportation-especially in 1979,
1982, and 1985-have also restricted output. The
siting of many construction materials plants near raw
material deposits has necessitated the transportation
of building products over increasingly longer distances
(see figure 3). As a result, Moscow has to cope with
rising shipping losses due to theft and spillage along
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Figure 3
USSR: Average Length of Haul by Rail
for Construction Materials, 1960-84
I I I I I 1 I I
65 70 75 80 81 82 83 84
the route. Ironically, many of these same construction
materials plants have exhausted the supply of raw
materials at nearby quarries. As a result, heavy and
bulky materials must be brought in from elsewhere,
adding to the transportation system's already heavy
burden.
Fragmentation of Administrative Responsibility
Administrative responsibility for the planning, pro-
duction, and distribution of construction materials is
divided among a myriad of organizations. The Minis-
try of the Construction Materials Industry is nominal-
ly tasked with these duties, but we have identified at
least 16 other ministries, committees, and directorates
with material-related responsibilities. For example,
the Ministry of Ferrous Metallurgy produces the blast
furnace slag to be used in slag bricks; the Ministry of
Construction produces concrete for civilian construc-
tion projects; the Main Directorate for Special Con-
struction produces concrete for military construction
projects; and the Ministry of the Chemical Industry
produces and distributes polymeric materials and
phosphogypsum. This division of responsibility exac-
erbates poor performance caused by the other factors
noted above.
The poor performance of the construction materials
industry, along with excessive waste in Soviet use of
construction materials, has had a substantial negative
impact throughout the economy. Many different in-
dustries as well as specific geographical areas have
been affectedAlthough 1979 and 1982
were particularly bad years, shortages of construction
materials have occurred consistently since the mid-
1970s and have continued to affect Soviet enterprises
in 1985. Appeals to the State Committee for Material
and Technical Supply (Gossnab) and the Central
Committee of the CPSU have resulted only in the
issuance of decrees calling for additional production
from enterprises of the Ministry of the Construction
Materials Industry and increased availability of rail
transport.
The major sectors of the Soviet economy affected by
construction materials shortfalls in the 1981-85 period
include:
? Rural housing. According to Izvestiya, rural hous-
ing continues to face severe shortages of construc-
tion materials, especially wall and roofing materials.
This has led the USSR People's Control Committee
to reprimand the Main Administration for Trade in
Economic Goods for causing the shortages.
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? Oil and gas development. Siberian oil-drilling sites A variety of Soviet enterprises also faced shortages of
and pipeline construction projects are experiencing clinker and slag, glass, gypsum, refractory bricks, and
shortages of cement. Shortages of construction ma- slate during 1984 and 1985. These have resulted in
terials needed for well repairs and infrastructure construction delays, plant shutdowns, and worker
development in the oil and gas fields have been a layoffs.
chronic complaint of the oil and gas ministries for
several years.
? Military construction. Facilities subordinate to the
Defense Ministry's Main Directorate for Special The Central Committee supports the ideas expressed
Construction-a prime contractor for the initial and [at the June Science and Technology Conference/ on
ongoing construction support of facilities for strate- the need for ... the production of efficient construc-
gic offensive and defensive forces-continue to be tion materials.
short of reinforced concrete, cement, and brick.
Mikhail S. Gorbachev
at Tyumen' in September 1985
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Table 5
USSR: Commissioning of New Capacity in the
Construction Materials Industry a
Cement (million tons)
3.5
4.1
2.2
0
1.8
0.3
1.8
Asbestos cement shingles (million
tiles)
272.4
252.8
119.4
113.0
0
32.0
66.0
Precast ferroconcrete (million tons)
4.8
5.9
5.1
5.1
4.0
5.3
5.0
Window glass (million m')
5.5
6.9
5.0
0
0
0
2.3
a These figures include capacity originating in new construction and
in expansion of existing plants.
b Annual averages.
Senior Soviet officials have long been aware of the
problems confronting the construction materials in-
dustry. As long ago as 1972, they recommended
alleviating these problems largely by developing addi-
tional capacity, expanding automation, and instituting
an economywide effort to conserve construction mate-
rials. However, these exhortations were not backed by
sufficient investment throughout the 1970s. Since
1980, there has been little addition to the industry's
capacity. Moreover, the limited success in automation
has been unable to improve the quality of materials
produced and reduce the labor intensiveness of the
industry. The impact of these constraints has been
magnified by Moscow's inability to move ahead
smartly on eliminating waste in the use of construc-
tion materials and in reducing the material intensive-
ness of construction. As a result, Moscow has had to
increasingly rely on imports to reduce the ensuing
shortfalls.
New Capacity
.To meet growing demand in the late 1960s and early
1970s, the Soviets expanded production of construc-
tion materials. By the late 1970s, however, this was no
longer possible. Labor shortages hampered produc-
tion, and investment allocations dwindled. The build-
ing of new construction materials enterprises was cut
back so that, by 1981 and 1982, commissioning of
new capacity was virtually nonexistent. Even though
the industry was recognized by the leadership as
important for economic expansion, it was not until
late 1983 that this importance was translated into the
commissioning of new capacity. In 1984 a consider-
able amount of new capacity was added, but new
commissionings were still well below levels of the
early 1970s (see table 5).
Automation
With the decline in the growth of the labor pool and
slow additions to new capacity, the Soviets began to
look to automation as a means of expanding produc-
tion through the substitution of machinery for labor.
In addition, automation was seen as a way of assuring
uniform product quality. Problems frequently arose,
however, especially in the design of new plants.
Enterprises were usually designed without detailed
investigation of the specific types of equipment to be
used or whether the equipment was to be fully
automated, semiautomated, or not automated at all.
As a result, additions to new capacity were often
delayed.
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To correct these problems, the All-Union Scientific
Research and Planning-Design Institute for the Auto-
mation of Construction Materials Industry Enter-
prises developed three types of automated systems: the
automated control system of production processes
concerned with accounting, planning, and optimizing
production resources, especially applicable in the area
of inventory control; the automated control system for
technological processes for automation of conveyor-
type production lines (not robotics, but rather
computer-assisted automated control systems); and
the automated technological complex designed to
control all plant production operations.
The introduction of this new technology, however, is
being held back by the Soviet system's bureaucratic
inefficiencies and lack of appropriate incentives. Plant
managers, for example, are reluctant to try any new
production techniques because the time needed to
install a new system, train workers in its operation,
and then discover and correct defects substantially
hinders the plant's ability to produce planned output.
Management is also opposed to computerized inven-
tory control, as it would reveal resource stockpiles
used to ensure fulfillment of a subsequent plan,
decrease the manager's "cheat margin," and lower
the plant's chances to fulfill its production plan and
the workers' chances to receive bonuses. Gorbachev
may be hoping that some restructuring of the incen-
tive system and performance indicators will overcome
management's opposition to automation
Conserving Construction Materials
Moscow obviously hoped that a successful econ-
omywide conservation effort would reduce the growth
in demand for construction materials and thus allow
the industry to get by with reduced investment.
Although lipservice was paid to conservation as early
as the Ninth Five-Year Plan (1971-75), it was not
until the 1981-85 Plan that the conservation drive
picked up momentum. Between 1980 and 1984, the
Soviets adopted several resolutions, held conferences,
and implemented programs in an effort to conserve.
Two resolutions of the CPSU Central Committee in
1981 set forth both the problems necessitating conser-
vation and ways to solve the problems. These resolu-
tions were followed by an April 1982 All-Union
Conference on the Conservation of Material Re-
sources held in Moscow. This conference led directly
to the November 1982 plenum of the CPSU Central
Committee, which drew attention to the necessity for
improving construction efficiency through measures
for reducing the expenditure of fuel, raw materials,
metal, and other products, as well as financial and
labor resources.
In 1983, specific recommendations were adopted in a
CPSU Central Committee resolution, which the con-
struction materials industry coalesced into a three-
pronged conservation strategy, including:
? The preferential manufacture of products that fa-
cilitate a decrease in the weight of buildings and
structures and an increase in their heat insulation.
? The accelerated development and introduction of
energy-saving technologies in the production of ce-
ment, ceramic products, glass, lime, and reinforced
concrete.
? The conservation of raw materials within the con-
struction materials industry through a reduction in
the material intensiveness of manufactured products
and maximum utilization of secondary resources,
including wastes of other sectors of the economy.
Although the Soviets have implemented numerous
conservation programs, there are still relatively large
losses of material resources. Resolutions, conferences,
and decrees-the traditional cure-alls of the Soviet
bureaucracy-have had relatively little impact. Given
the shortage of building materials, construction crews
cannot make up for the material supplies they have
either failed to receive initially or wasted in the
process of construction. Inefficient shipment and use
of construction materials along with inadequate stor-
age facilities that lead to spoilage have thus contribut-
ed to the high value of unfinished construction, which
in 1984 amounted to 78 percent of annual investment
for the Soviet economy as a whole, and 87 percent of
investment for the construction materials industry. As
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Figure 4
USSR: Trade in Construction Materials,
1975-84
Q Exports
D Imports
Source: Vneshnyaya torgovlya v SSSR, various years.
a result of the continuing shortages, what little invest-
ment the industry received had to go toward increased
capacity for basic, rather than advanced, higher quali-
ty construction materials.
Foreign Trade
With lagging domestic output, the Soviet Union has
been forced to increase imports of construction mate-
rials, especially since the mid-1970s (see figure 4).
Soviet construction material imports are concentrated
in the areas of insulation materials, linoleum, refrac-
tories, and wall materials. The value of insulation and
wall material imports-$420 million in 1984-re-
flects the expansion of Soviet housing, especially in
the Far East, far north, and the densely populated
southern and southwestern portions of the country.
The large value of refractory imports highlights con-
tinued problems in the cement sector and the steel
industry. In 1984, refractory imports totaled $122
million or 83 percent of Soviet domestic requirements.
Since the mid-1970s, purchases from the developed
West have constituted approximately one-third of all
construction material imports. A large share of im-
ports-57 percent-comes from Eastern Europe and
North Korea. In 1985-86, the Soviets were scheduled
to import cement from Ethiopia, North Korea, and
Poland and insulation materials from CEMA coun-
tries. The Soviet Union imports insulation materials
from the United States, Italy, and Japan and buys
refractory materials from France. The United King-
dom supplies a variety of materials. Overall, hard
currency imports of construction materials totaled
$250 million in 1984.
The proportion of plastic materials, ceramics, and
other advanced nonmetallic materials is still small in
the overall volume of materials. [We must exploit)
highly effective scientific and technological research
developments, such as ... highly effective types of
polymer materials.
Mikhail S. Gorbachev
at the June 1985 Science and Technology Conference
Although automation and conservation efforts have
contributed somewhat to improved performance in
recent years, the industry still has a long way to go.
Gorbachev's emphasis on advanced materials in his
economic agenda means that further action will have
to be taken soon. Commissioning of new capacity
during the 12th Five-Year Plan (1986-90) probably
will remain relatively low given Gorbachev's emphasis
on the machine-building sector and the substantial
savings in construction materials envisioned from
renovating existing facilities. Although Gorbachev
recognizes the need to reduce shortages of construc-
tion materials, he probably hopes that his emphasis on
renovation as opposed to new plant construction,
along with an intensive, economywide campaign to
conserve construction materials, will allow him to hold
down the share of investment to the industry.
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He has also addressed problems within the industry
itself. In his 11 June 1985 address to the Science and
Technology Conference, Gorbachev chided the con-
struction sector and the construction materials indus-
try for the vast amount of unfinished construction. He
emphasized the need to focus future work on plant
modernization, a theme that has since been echoed in
Pravda editorials. Whether he will be able to reduce
demand is problematic. In any event, some new
construction will be necessary to bring down the high
level of unfinished construction in the industry and to
add new facilities dedicated to the production of new,
better quality construction materials that will be
demanded by the construction sector, such as basalt
plastics, glass ceramics, and polymeric materials.
Two major problems that thus require immediate
attention are the inefficiency of construction materi-
als production and the past insufficient allocation of
investment to the industry. Gorbachev has taken a
major step toward addressing the first problem; he
selected a new Minister of the Construction Materials
Industry, Sergey F. Voyenushkin, in July 1985.
Voyenushkin was elevated from the post of RSFSR
Minister of the Construction Materials Industry. The
new minister has openly criticized the current system
and has an established record of innovation. He is not
in a position to address the fragmentation issue,
however.
Short-Term Indicators
With the release of preliminary goals for the 1986-90
Five-Year Plan, we have some understanding of what
the industry will be tasked with over the next five
years, but little knowledge yet of the flow of invest-
ment to underwrite these tasks. Over the next year or
so, indications that Moscow is moving aggressively to
improve the performance of the construction materi-
als industry would include:
? An increase in the investment allocated to the
industry in the 1986-90 Five-Year Plan.
? Moves by Voyenushkin to replace ineffective man-
agers throughout the industry as he did in the
RSFSR.
? The widespread application of a system to ensure
delivery of materials to construction sites in com-
plete sets. This would alleviate excessive amounts of
material supplies at construction sites, reduce losses
of materials, and avoid work disruptions caused by
inadequate supplies of specific materials.
? The formation of a "superministry" of construction
materials, encompassing the material-related re-
sponsibilities of the 16 organizations currently hav-
ing such responsibilities, or the absorption of the
construction materials ministry into the State Com-
mittee for Construction Affairs.
? The signing of a major contract with a Western firm
for the construction of a cement plant in Mogilev 25X1
(Belorussia) or the renovation of the Novorossiysk
plant-possibly with a US firm-which could lead
to a contract for the renovation of a large portion of
the cement industry.
? The signing of a contract with a West German or
US firm to purchase a turnkey magnesite plant and
two other plants to be located in the Magnitogorsk
region for the manufacture of refractory brick for
the steel industry. This would double Soviet refrac-
tory output and improve substantially the quality of
brick produced.
Long-Term Requirements
Areas that will require long-term attention include
completion of unfinished construction within the con-
struction materials industry and improvement of the
system of reports and monitoring controls over the
expenditure of material resources. Increased materials
conservation and expanded automation will also be
necessary.
Conservation in the general economy will make a
long-term contribution by releasing scarce types of
primary raw materials and supplies, increasing mate-
rial resources, and reducing pollution of the environ-
ment by waste products. Specific measures probably
will include the assignment of specific tasks for saving
material resources both for the five-year plan and
25X1
25X1
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Age: 56
Member of the Commu-
nist Party since 1951
Graduate of the
Karelian-Finnish State
University
(Candidate of Economic
Sciences)
Voyenushkin has been in the construction materials
industry since 1958 and has held a variety of increas-
ingly responsible posts:
1958-65 Deputy chief then chief of the Adminis-
tration of the Construction Materials In-
dustry on the Karelian and Northwest
National Economic Councils
1965-70 Deputy chief then chief of the construc-
tion materials industry's Main Adminis-
tration of the Nonmetallic Ores Industry
1970-75 Chief of the Planning and Economic Ad-
ministration, USSR Ministry of the Con-
struction Materials Industry
1975-79 First Deputy Minister of the RSFSR Min-
istry of the Construction Materials Indus-
try
1979-85 Minister of the RSFSR Ministry of the
Construction Materials Industry
each individual year, the expansion of the production
and introduction of lightweight structural elements
and materials with high tensile strength, and the
increased utilization of industrial waste products.
Accelerated automation is a key to continuing growth
of the construction materials industry and could lead
Industry.
Voyenushkin has published numerous articles in the
Soviet press and technical journals, many of which
reveal his innovative tendencies:
? "Computed Net Production as an Index of Eco-
nomic Activity of an Enterprise" (Voprosy ekono-
miki, December 1976)
? "Construction in the RSFSR" (Pravda, 7 January
1978)
? "Effective Management of the Economy and its
Aspects in the Construction Materials Industry"
(Pravda, 16 April 1979)
? Discussion of the RSFSR State Plan and Budget
for 1981 (Leninskoye znamya, 21 November 1980)
? "Subsidiary Enterprises Advanced; Developmental
Problems Noted" (Sovetskaya Rossiya, 4 June
1982)
? "Development of the Glass and Ceramic Indus-
tries" (Steklo i keramika, June 1982)
In his former position as RSFSR Minister of the
Construction Materials Industry, Voyenushkin has
demonstrated a willingness to deal with problems:
? He dismissed personnel in a construction plant for
failure to meet construction deadlines and sched-
ules in 1982.
? He dismissed personnel at another facility in con-
nection with complaints of defective equipment in
1983.
? Under his leadership, the Ministry exceeded plan
targets for increased labor productivity and cost
reductions in 1984.
to a substantial increase in the efficiency of produc-
tion: higher productivity of labor, greater and more
uniform output, and reduced consumption of energy
and raw materials. This will require a number of
expensive measures over the long term, especially the
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mechanization and automation of basic and auxiliary
production processes through the widespread intro-
duction of computers.
Perspectives
Gorbachev will be hard pressed to reconcile his needs
to boost investment in machine building, meet the
investment needs of energy and agriculture, and
increase investment in the construction materials in-
dustry. He will also find it difficult to deemphasize
new construction as much as he would like and get the
economywide conservation he is counting on.
In sum, unless investment in the industry is increased
substantially to develop new sources of raw materials,
commission new production capacity, renovate old 25X1
plants, and increase output of processing equipment,
continuing construction materials shortfalls will seri-
ously hamper Gorbachev's modernization and con-
sumer welfare efforts. Specifically, new housing starts
will slow, capital renovation will be delayed, and the
planned increases in the production of advanced and 25X1
higher quality construction materials will not be
If investment in construction materials is not in-
creased in the 12th Five-Year Plan period, additional
new capacities will be slow to materialize, and the
inefficiencies associated with an aged capital stock
will continue. Sharply rising costs could exacerbate
this problem. The construction materials industry will
have few resources to use for mechanizing the numer-
ous labor-intensive production processes that current-
ly prevail. For example, according to press reports,
about half of the workers in the cement sector are still
employed in manual and auxiliary tasks. Planners,
who hope to raise labor productivity through introduc-
tion of new high-efficiency machinery, increased
mechanization and automation, and better social and
cultural facilities at production enterprises, will find it
increasingly difficult to modernize because all these
improvements depend on higher rates of growth of
capital investment.
The industry's efforts to improve its raw materials
supply position appreciably will also be affected by
the performance of other industrial sectors. The plan
to use more metal wastes and fly ash instead of rock
products, for example, may be hampered by continued
slow growth in the metals and coal industries and by
transportation constraints. If fuel and power supplies
cannot be made more reliable, production of construc-
realized.
tion materials will continue to falter.
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