Profits? Free market? Can this be Communist Bulgaria?

Bulgaria, smallest of the East-bloc nations, has stolen a head start on its East European allies and adopted a far-reaching economic reform in which the market is to replace the classic form of communist plan almost entirely.

The reform is a bold move toward a sensibly, realistically planned economy, with a scope for management and a regard for the work force that Poland might have achieved by now had it not been for the escalation of confrontation politics.

Amid East-bloc concern over impoverished Poland, Bulgaria's step was announced quietly a few days ago. It could prove the most notable development in the area in many years.

Other East Europeans - both developed countries like Czechoslovakia and East Germany and much less developed ones like Romania - have looked askance at the Polish economic breakdown.

Poland itself has talked for 18 crisis-laden months about reform and still has done nothing about it.

But Bulgaria, which is often regarded by its allies as the poor Balkan relation, has got on with the job. Last week it unveiled a ''new economic mechanism'' to make all enterprises strictly profitable and independent.

Bulgaria's measures, to be applied forthwith, were detailed Jan. 13 at a conference of prominent persons engaged in the Bulgarian economy - ministers, experts, managers.

The report delivered by Grisha Filipov, who is chairman of the Council of Ministers and acknowledged to be second only to President Todor Zhivkov in the Communist Party leadership, was published at the weekend.

Mr. Filipov called the reform ''a great event'' in the life of the party and the Bulgarian people.'' An outside observer might add that it is an event for Eastern Europe, too.

It is likely to prove as significant as the Hungarian reform of the late 1960 s, from which this new Bulgarian model obviously derives more than the name ''new economic mechanism.''

In all likelihood, Polish events have hastened this development. But the Bulgarians began even before the Hungarians to try to modify the strictly centralized bureaucracy for planning copied from the Soviets after World War II.

Experiments in Hungary putting light industries on a ''go it alone,'' unsubsidized basis were successful. Later, reforms were introduced into agriculture, with the big collectives getting a free rein to plan production and sell independently at market prices.

The process in industry was more tentative. At the Soviet party congress last year, however, President Brezhnev lauded the Hungarian economic reform as an example others might follow. But he did not make clear why the Soviets themselves were not doing so.

The Bulgarians, of course, make no bones about loyalty to the Soviet alliance and concurrence in Soviet foreign policy. Yet in terms of economics and trade their path has been one of hard-nosed interest and common sense for some years.

The general tenor of the Filipov report was that the market is to replace the plan. ''Market forces will decide relations between enterprise and enterprise and between enterprise and the center,'' he said.

The whole present process is being reversed, with responsibility from below - from enterprises, their work forces, agro-industrial complexes, and local government. Only overall guidance will be exercised at the top government level.

As chairman Filipov outlined them the main features are:

* A speeding up of the switch-over from extensive to intensive production and productivity, with establishment of direct market links. This means abandoning the emphasis on mere production figures (the old bugbear of communist planning) and replacing it with efficiency and quality critieria.

* Market forces alone are to determine production and meet the needs of society.

* The role of central government and planning will be confined to ensuring economic ''balance'' and guiding the ''general proportions'' of the economy. Specific decisions and action are left to individual enterprises.

* Every economic unit will have to operate on the basis of cost-effectiveness in its use of labor and materials and be strictly self-supporting. Inefficient enterprises may no longer expect budget subsidies; in future, such aid will be granted only in exceptional cases, for a limited term, and on strict conditions.

* Incentives for management and workers alike will depend on competitiveness, the quality of the final product, and its profitable marketing ''inside and outside the country.'' Given the nature of this reform, one may take that to mean hard-currency markets.

Mr. Filipov stressed independence for individual enterprises under the new rules, with an assured ''protective barrier'' against ''subjectivist'' interference in planning by higher bodies.

The new economic mechanism makes no direct reference to workers' councils as such. But it stresses the role of the ''work team'' in enterprise production and other planning.

The appointment of enterprise managers remains a state function. Other posts are to be filled on a basis of qualification and competition. Final choices will be confirmed from the factory floor.

''Dialogue'' in Poland broke down on Solidarity's demand that the workers' councils alone should appoint the boss. The union also wanted a syndicalist brand of enterprise ''ownership'' vested solely in its workers. The government balked at both points. Confrontation - and martial law - followed.

Under the Bulgarian reform the state is the ''owner of social property.'' The workers are its ''keep.''

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