Czech Ministers Find Economy Tied to Soviets'

By , Staff writer of The Christian Science Monitor

`WE don't want to lose the Soviet market,'' especially when the rest of the world now sees it as an opportunity, says Joseph Tosovsky, the chairman of Czechoslovakia's central bank. ``It's a potentially good market'' - he smiles - ``as long as it's profitable.'' Dismantling Czechoslovakia's inefficient economic past while preserving trade and investment opportunities for the future is the task of Mr. Tosovsky and other young economic advisers, English-speaking and Western-trained, appointed by President Vaclav Havel.

On their recent trip to Washington, Mr. Havel and several ministers sought advice on issues ranging from drafting laws to govern taxes and allow private ownership, to privatization of state-owned enterprises.

In interviews, several of the Czech ministers explained that their country has foregone decades of development by producing mediocre goods and services for the guaranteed East European markets that belong to the Soviet-dominated Council of Mutual Economic Assistance (Comecon).

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To meet Comecon production quotas, inefficient or failing industries have been artificially bolstered by government subsidies that could have otherwise been channeled to research and development or other productive purposes.

Now Czechoslovakia, with its broad but outmoded industrial base, is a prime example of how difficult East European reformers are finding it to extricate themselves from Comecon, the target of 75 percent of Czech exports.

``Our enterprises are perfectly oriented to the Soviet market,'' says Minister of Finance Vaclav Klaus.

THE Czechs are limited by quality problems, ``the inability to produce for the international market,'' declares Tosovsky.

According to a United States Treasury economist, the Czechs have ``pursued production of too many goods. They produce three-quarters of all the types of products in the world.'' That is ``an astounding figure,'' he says.

And Comecon is not the trade haven it once was. At a Comecon meeting in Sofia this past December, Soviet trade officials introduced their interest in selling oil and gas for hard currency rather than on a barter basis. The cash-strapped Czech government, which imports virtually all of its energy needs from the Soviet Union, could not sustain such payments now nor in the near future.

``If the Soviets press this demand for hard currency, they will electrocute Czechoslovakia's economic recovery,'' warns Roger Robinson, an analyst with the Center for Security Policy.

Mr. Klaus says emphatically, ``We will not accept it now, but only when the Soviets are paying hard currency for our goods as well. Then, as a final goal, when the ruble is converted to hard currency, we [and the Soviets] can pay hard currency for all goods.''

Still, Deputy Prime Minister Vladimir Dlouhy, chairman of the State Planning Commission and his country's chief trade negotiator with Moscow and Comecon, supported the Soviet recommendations for world market prices and hard currency payments in Sofia and again in February when he met with Soviet trade officials in Moscow.

``It will move us away from the buffer of distortion by forcing us to produce higher-quality goods and to integrate into the world market,'' Mr. Dlouhy says.

Right now, though, many Czech enterprises are ill-prepared to sell in the West.

Dlouhy estimates that the initial five-year trade loss to Czech industries, should their goods be sold for hard currency at world market prices, could reach $10 billion.

Tosovsky stresses the need for his nation to ``move toward a market-driven economy. We want to integrate politically and economically to Europe, to the European Community. In fact, there's a proven model [of a successful market-oriented economy] that exists in Western Europe, but there's no map of how to get there.''

Prague's reformers are also looking for help in updating antiquated factories and developing managerial skills. Negotiating favorable trade conditions for exports is a top priority for Minister of Foreign Trade Andrej Barcak. He is looking to Western markets, especially the European Community.

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