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Soviet Union [USSR] Structural Reforms, 1986 to Mid-1988
The cumbersome foreign trade bureaucracy contributed to a
number of problems that hindered the efficiency and effectiveness
of foreign trade. The lack of direct contact between Soviet
enterprises and their foreign customers or suppliers frustrated
both parties by unnecessarily delaying contract negotiations and
the specification of technical details. In a May 1986 interview
with Izvestiia, the general director of the Ministry of
Foreign Trade's All-Union Association for the Export and Import of
Technical Equipment, Boris K. Pushkin, reported that after an
enterprise submitted a request for a foreign item, two to three
years were required before it was included in the import plan and
funds were allocated for its purchase. In the interim, the needs of
the enterprise had often changed. Pushkin stressed the need to free
enterprises from unnecessary petty supervision and excessive
regulation.
Taking such problems into account, the Twenty-Seventh Party
Congress in February-March 1986 declared that the party anticipated
a step-by-step restructuring of [the country's] foreign trade in
order to make exports and imports more effective. In August of the
same year, the CPSU Central Committee and the Council of Ministers
adopted the decree On Measures for Improving Management of External
Economic Relations,"" which outlined drastic steps to change the
structure of the foreign trade bureaucracy.
Also in August 1986, the Council of Ministers' State Foreign
Economic Commission became a permanent body within the council,
giving more authority and visibility to the commission, the
domestic activities of which previously went largely unreported.
The staff was augmented, and the chairman acquired a rank
equivalent to that of deputy prime minister. The new charter stated
that the commission's role was ""to formulate and implement the
country's foreign economic strategy so as to enhance its potential
contributions to acceleration
(
uskorenie--see Glossary),
strengthen the Soviet position in the world economy, and promote
structured and organized development of economic cooperation with
all groups of countries.""
Until 1987 the forty-eight FTOs subordinate to the Ministry of
Foreign Trade administered more than 90 percent of Soviet foreign
trade turnover. In 1987 the ministry lost control of 20 percent of
Soviet foreign trade turnover. The government granted direct
foreign trade rights to twenty-one ministries and state committees,
sixty-seven industrial enterprises, and eight interbranch
scientific production complexes. Exporting enterprises gained the
right to retain part of their hard-currency earnings. Each ministry
or enterprise was to pay for its investment imports with its own
hard currency, and the heads of ministries and enterprises became
personally responsible for the efficient use of hard-currency
funds. These measures gave enterprises more influence in import
decision making.
On January 13, 1987, the Council of Ministers adopted the
resolution ""On Questions Concerning the Creation, on U.S.S.R.
Territory, and the Activities of Joint Enterprises, International
Associations, and Organizations with the Participation of Soviet
and Foreign Organizations, Firms, and Management Bodies,"" or, more
simply, a law on joint ventures. This legislation opened up
enterprises inside the Soviet Union for the first time since the
Bolshevik Revolution (see Glossary), to foreign participation.
Joint ventures were to facilitate the acquisition and assimilation
of Western technology, managerial know-how, and marketing
abilities. Optimistic about the economic effects of their new
undertaking, Soviet officials declared that 85 to 90 percent of
""the most important types of machinery"" would meet world
technical standards by 1990. The Soviet Union's vast natural
resources and its lucrative, previously closed, domestic market
attracted Western companies. By August 1988, more than 50 joint
ventures were registered in the Soviet Union, and approximately 300
were under negotiation.
Nevertheless, numerous obstacles arose in the first eighteen
months after the government adopted the joint venture law.
Complaints by Western partners dealt with uncertainties concerning
Soviet trade regulations, problems with the supply of goods, the
dilemma of the nonconvertibility of the ruble, difficulties finding
qualified Soviet managers, problems in projecting production costs
(as of 1989 Soviet domestic prices were administratively set and
not based on market forces), and even complications finding office
space in Moscow. Soviet trade officials' efforts to accommodate
these complaints have included the decentralization of the foreign
trade bureaucracy, the establishment of a management institute in
Moscow, price reforms, and various legal reforms.
Before Western businessmen could recover from the confusion and
disruption caused by this series of reforms, a second series began
in early 1988. Effective January 1, 1988, the Foreign Trade Bank
(Vneshnii torgovii bank--Vneshtorgbank) was renamed the Foreign
Economic Activity Bank (Vneshnii ekonomicheskii bank--
Vneshekonombank). The name change did not signify a major change in
the bank's duties but simply more accurately reflected the nature
of its operations. Vneshtorgbank had branched out from the simple
management of foreign trade transactions to provide currency,
credit, and accounting services as well. In a change from its
previous duties, Vneshekonombank was required to administer new
procedures dealing with Soviet firms that had recently acquired
direct foreign trade rights.
Also on January 1, 1988, the New Enterprise Law went into
effect, making enterprises economically accountable for their own
business operations by 1989. According to this law, the government
had the power to disband unprofitable businesses, and each ministry
and its subordinate enterprises gained the responsibility for their
own foreign trade activities. In addition, Gosplan, Gossnab, and
GKNT relinquished some of their rights to allocate money and goods.
Finally, the Ministry of Foreign Trade lost control of 15 percent
more of its foreign trade turnover when fourteen additional
enterprises and four other ministries acquired direct foreign trade
rights.
Yet probably the most significant change in the foreign trade
mechanism occurred on January 17, 1988, when Izvestiia
announced the abolition of the Ministry of Foreign Trade and the
GKES. The Ministry of Foreign Economic Relations, headed by
Konstantin F. Katushev, former head of the GKES, assumed the duties
of the two agencies. ""Thus, the state monopoly on foreign trade
and its state-wide aspects remains centralized,"" reported the
Soviet foreign trade monthly Vneshniaia torgovlia (Foreign
Trade), ""while operational functions are continually being shifted
to the business level."" In March 1988, the journal reported that
approximately 20 percent of foreign trade turnover was handled by
the eighty-one firms that had been granted the right to deal
directly with foreigners.
Other reforms followed in April 1988, when the Central
Committee and the Council of Ministers agreed on a new charter for
the Chamber of Commerce and Industry. In general, the chamber
monitored foreign trade conducted outside the new Ministry of
Foreign Economic Relations. In addition, the chamber assisted
Soviet production enterprises in locating Western partners and
learning foreign trade practices.
Data as of May 1989
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