NATIONAL COOPERATIVE OF SMALL INDUSTRIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00246A053100150001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: December 22, 2016
• Document Release Date: October 7, 2010
• Sequence Number: 1
• Publication Date: March 16, 1960
• Content Type: REPORT

Sanitized Copy Approved for Release 2010/10/07: CIA-RDP80T00246A053100150001-5
WN10-1016 M01
CENTRAL INTELLIGENCE AGENCY
...trial contains information affecting the National Defense of the United States within the meaning of the Espionage Laws, Title
.to, U.S.C. Secs. 793 and 794, the transmission or revelation of which in any manner to an unauthorized person is prohibited by law.
2 mail'
xi-Man" fa.aps stir. of 91ea7.1
REPORT L_
DATE DISTR.
NO. PAGES
REFERENCES
1 1960
RD
~-50X1-HUM
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IS
hldnslriY.. (Qiai) that .,stains intbs+nsilL.a .a- ttis !'ai]iawdn~ sdJanlfs: MM
lls.tie and pawWstiaa daUa, tAM.s of ? * pWt of raw n&*wiala
tlar lii6L iadustri., a: of rsiss ~tiss within the asst ns., and
13i~tdiaiSas of privates tills.
a, it As belt wed that this r p t An be at Interest p 1asri]7 t....os~i .s
STATE ARMY NAVY AIR FBI AEC
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 Sanitized Copy Approved for Release 2010/10/07: CIA-RDP80T00246AO53100150001-5
SECRET
HUNGARY
ECONOMIC
Hungarian Small Industry (OKISZ)
Thirty-five per cent of the total industrial output in
Hungary is produced by the small industries subordinated to OKISZ
(Orszagos Kisipari Szovetkezet - National Small Industries Co-operative
Association). This Association functions as a Ministry and its President,
Jozsef ERAS, holdo the rank of Minister.
2. The OKISZ small industries produce cheaper and bettor quality
goods than the general industry. Production costs work out at 50%
for raw materials used, the remaining 50% covering wages and all overhead
exponsos. In the general industry this ratio works out at one third
for raw materials, two thirds for ;rages and overhead expenses. General
industry nevertheless always receives preferential treatment from
Govcrnnent and planners.
3. Workers in OKISZ industries earn on an average 20-25% more than
factory workers. Their annual bonuses, known as "dividends", amount to
approximately three to four months' earnings. The average factory
worker's annual bonus (known in his case as "profit sharing") does not
amount to much more than the equivalent of one to two weeks' wages.
4. Production of the OKISZ industries is naturally co-ordinatod with
that of the general industry., 150 ] tt -s . rrterest y. h r?i always
i2, VbdXb_ Bulbs - in -freq1atimt cr fusion.
(Thus: under the third quarter plan in 1959 an order
was placed with OKISZ for 500,000 Kgs of PVC grey,
synthetic clothing material (the grey colour was
important as waste material can be used in its
manufacture, thereby halving production costs). :1
1Jt rlr in+.c ' +.hia nnsan am, +. lrnr atmtr frnn nXTS1 .-
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b Nu$4AStY
C material is iirpcrte, fro-m the U.S.S.R.
quarterly quarti1ies involve' were 5-6,000 tons from the
placed with enoral industry, OKISZ at the sane
time receiving instructions to manufacture
synthetic tubes. As prodt.ction had already bocn
geared for the manufacture of the clothing material,
OKISZ carried on with it, producing however coloured
instead of grey PVC material for which there is
always a ready market abroad. ',rran,-or1_ents, however,
had to be raade for the pro'uction of the synthetic
tubes as well, resultin, in consic'erablo confusion in
thy': two soot ors of, the, industry.)
In 1959 the
U.S.S.R. 1
3:1). The
(i.e. a rr.tio of approxi::atcly
raw material is of excellent quality, and has
appearance of crystalline yowler; the Soviet arterial is of an inferior
quality and rougher consistency. The OKISZ industries pay 13.65 F:-:rints
por Kg for PVC raw material, whether of Soviet origin. 50X1-HUM
6. Imports of Polyamid', and Polyctilane represent about a tent. of
t'.o quantity of PVC ir.ported.
7. The manufacture of synthetic materials is handicapped by
insufficient or imperfect raw materials, as well as bad planning and
misr:ana-ouont. chronic shortage of foreign currency prohibits the
import of better quality raw materials from Western c?untrios. The
ch_nical industry cannot keep pace with the required producti m of synthetic
row materials. Plans arc now being elaborated for the manufacture of raw
PVC at PET, but initial output is not expected, to exceed six hundred. tons
per annum. The necessary machinery for the chemical industry was obtr in o-.
from Czechoslovakia and Mast Gorrany in 1958, but for reasons unknown ' .~.s
not yet been assembled. The quality of this r .chinery is poor.
8. Only about 10% of the home demand for synthetic cloth oan be
s#pliecl by industry.
SECRET
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9. Raw materials allocated to industry are sold at different
prices .to the g-uneral industry, OKISZ industries and trades and
craftsmen, the forcer receiving them on the nos-;, adv.zntag0ous terms.
The re-phasin; of raw rnteri al prices at the beginning of 1959 has ':ac:
little effect in isproving the onsuin anonalous situation.
10. It frequently happens that the Russians cancel orders at the
last f or rent when ;;ooc's have alrea y been rianufacturod. ~, typical case
occurred in 1954 when the Russians sudc'.enly refused acceptance of two
million shirts, not because they were below the required standard, but
because they had "made arrangenonts elsewhere". The shirts were
eventually soli to 3elgium for re-export to :.frica at very considerable
loss. This incident is still talked of as a warning to :IUNNNGAROT'+
planners
ll. more recent case occuered in 1958 when the Russians refused
acccntanco of one ._n]lion pairs of ;;loves on the grounc'.s --f inferior
quality. At the same titre they instructed the Roumanians to take over
the consignment.
12. Incidents such as th:;sc are quite connon with other Soviet floc
')untries. The strictest buyers are the Russians, follower': by the
Czechs. It has beccno an established ~,ractico a:_.on the Satellite countries
t,, cheat one another in this type -f business. lJhen ecrious diffcronc s
arise they arc settle' either by Russian ir_tervention, or between hih
Party officials of the two countries concerned. Frequent differences
of this nature occur between Iiun;-:ary and Roui_k nib and to a los-or extent
In all cases Russian wishes are accepted as unquestionable
orders. No-one will dare refuse to take over inferior quality goods
fro-; the Russians or, on their instructions, fro*: other countri_s This
S^viet practice of otherwise 'isposinE of ~-?oods ordered, thus frcein.,
Soviet trade of all connorcial risks, is the cad - t deal of t' .U
confusion prevailin;-; in Satellite i d Em, a,pwid ;rablc
firai.ei al losses.
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13. In joneral the Hungarian textile industry will try to satisfy
Soviet requirements with inferior quality oods, retainin; the hi---host
quality goods for export to Western countries with a view to obtainin?
precious foreign currency.
14. In 1959, owing to over-production in general in_duQ ;;ry, ooric
branches of the OKISZ industries were forced to reduce output by 30-40;'
in order to avoid a surplus. This applied mainly to finished clot%ir .
Normally the demands of the home market for those good's are satisfied by
.-enoral industry, while the OKISZ industries work for cxnort whore
existing trade a -roerents permit this. In 1959 this was not the case;
hence the reduced'_ production and re-phasing.
'LiSZEK (priv).te snail firms) continues to be liquidated,
Thus, in 1959 no private firri was permitted to :-manufacture PVC synthetic
cloth. On liquidation equipment owned by the firr_i, if under the value
of 50,000 Forints, is valued by exports of the "MUSL.IICI 3IZO2,i;NYI
.;RL L z" (Tec':hinicai Commission Shop) and, if t h e owner elects to join
the OKISZ industries, he is entitled to the assessed value. (Crafts:-.-.on
usually lot their wives join the OKISZ industries, while they themselves
try to stay on in private business, .cnufacturin? ;-ooJs not yet or the
prohibited list.)
If the equip": nt is worth ::ore than 50,000 Forints, a
valuer from the Ministry concerned will assess it. to law co::pen-
sation must be paid within three years of the date of liqui.-'ation. Owing
to the prevailing practice of corruption, it is possible to obt:.pin this
compensation within three months. Similarly, valuers are often bribed
by owners to raise the value. Corruption is widespread in everyday- business
life, and on the increase. Officials will do almost anythin: ? to lino t' eir
pockets, despite all rules and, Party slo?cans.
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