Soviets seek cash, know-how. Joint ventures seen as way to perk up economy
With great expectations and some trepidation, the Soviet Union is planning to open up to foreign trade. Soviet leader Mikhail Gorbachev plans to turn the Soviet Union into a first-rank economic power by the end of this century. And Moscow hopes that a new law on joint ventures, due to come into force sometime in the first part of this year, will act as one of the catalysts in this radical transformation.Skip to next paragraph
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But there could be a serious clash of interests between Soviet hopes and Western interests.
``Western businesses want to broaden their markets, while the Soviet Union wants to broaden its exports,'' says Oleg Bogomolov, director of the Institute for the Economy of the World Socialist System. In other words, Western companies may see joint ventures as a way to produce goods for the Soviet market, while the Soviets see them as a vehicle for expanding exports.
Mr. Gorbachev's plans assume that by the end of the century the Soviet Union's balance of trade will have shifted away from its East European allies to the nonsocialist world. To help bring this about, he has called for dramatic improvements in worker productivity, in the quality and the quantity of output.
Joint ventures can play an important role in all aspects of these plans. Western corporations can provide expertise in management and quality control. The joint ventures may make credit available on more favorable terms than the present.
Most important, Soviet officials hope that they will provide access to advanced Western technology and Western markets - thus helping Moscow break out of the economic isolation that, the Soviets claim, is imposed on them by the West.
An accord with a Western company has already been signed: a hotel venture between the Finnish airline, Finnair, and the Soviet tourist agency, Intourist.
At least four United States companies reportedly have signed letters of intent; six others are said to be talking to the Soviets. So are about 10 Japanese companies and several West German concerns. Moscow expects similar ventures with its communist allies: The first joint venture with Hungary is being planned.
The idea has been mentioned in passing to the Chinese. Some Soviet officials hint that their country is still looking seriously at China's Shenzhen export zone. Despite its problems, a Soviet economist says, the idea has ``not been totally discredited.''
The terms under which joint ventures will be organized are still vague. Western diplomatic sources say that the draft law was submitted to the Council of Ministers about six weeks ago, and the delay in promulgating it could mean that it is proving more controversial than expected. Under the new law, a foreign corporation will be allowed up to 49 percent interest in an enterprise. Soviet officials say there will be some form of tax incentives and guarantees on the repatriation of earnings.
One role for joint ventures could be to help the Soviet Union move away from simply being an exporter of raw materials, something that it would like to do. The problem, Professor Bogomolov says, is that ``everybody is interested in selling, but no one is interested in buying.''
A Western diplomat confirmed this suspicion: Western European companies, the official suggested, would be most interested in selling anything produced here inside the Soviet Union. The companies ``don't want to spoil their overseas markets,'' he explained.
This would be a major setback for Soviet hopes.
``It's very hard for us to break into the world market,'' says Bogomolov.
Moscow's experience in marketing, for example, is minimal. Joint ventures would be one way of overcoming this disadvantage. Recent efforts by the Soviet Union to become involved in international financial bodies, such as the General Agreement on Tariffs and Trade, have been rebuffed by the US. Once again, the Soviets seem to hope that joint ventures might help them circumvent these obstacles.
An equally serious obstacle could arise over the question of technology transfer. Moscow is not interested in ``yesterday's or the day-before-yesterday's technology,'' says Bogomolov. ``We want the concerns to be the most modern, technologically advanced.''
But even if foreign companies are willing to bring in the most advanced technology, their own laws may not allow them to do so. The US and NATO both limit the export of advanced equipment, such as computers, microelectronics, and communications, to Eastern Europe.
The Reagan administration has in the past shown a lack of enthusiasm even for legal technology transfers to the Soviet Union. The legal and illegal acquisition by the Soviet Union of Western technology poses a ``serious and growing threat'' to the West, says a 1982 US government pamphlet. The pamphlet called for more effective protection of the West's ``military, industrial, commercial, and scientific communities.''
Although the Soviet government is pushing joint ventures hard, Western companies seem less eager.
``Most of the companies from my country based here are talking to the Soviets about the idea,'' one West European diplomat said. ``But I think they'll do their best to scale down the size of any ventures as far as they can.''