JPRS ID: 8722 EAST EUROPE REPORT ECONOMIC AND INDUSTRIAL AFFAIRS

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~ RF ~

i9 OCTOBER i9T9 CFOUO i3l79) i OF i
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- JPRS L/8722 i
- 19 October 1979 -
East Euro e Re ort
p p
- ECONOMIC AND IN~~JSTRIAL AFFAIRS
(FOUO 13/79) ~
FB~~ FOREIGN BROADCAST INFORMA~'IOtV StRViCE
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~ ~ ~TPRS L/8722
19 Octo}aer 19 79
EAST EUROPE REPORT ~
, ECONOMIC AND INDUSTRIAL AFFAIRS -
- (FOUO I.3/79) ' _
- CONTENTS PAGE -
INTERNATIONAL AFFAIRS �
= Investment Credits Among Socialist Countries Discussed
- (Vladimir Jarkovsky; POLITICKA EKONOMIE, No 7, 1979)..... 1 _
- CZECHOSLOVAKIA
Computer Nomenclature, Increase by Type Presented
(Various sources, various dates) 18 -
JSEP, SMEP Equipment and Its Uses
Growth of Computers by Type
POLAND
Briefs
IL-86 Components . 23
, -
- a- [III - EE ~ 64 FOUO]
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INTERNATIONAL AFFAIRS =
IYJVESTMENT CRFDITS AMONG SOCIALIST COUNTRIES DISCUSSED
- Prague POLITICKA EKONOMIE in Czech No 7, 1979 pp 723-732 _
- [Article by Vladimir Jarkovsky: "The Economic Efficiency of Investment
.
Credits Among Socialist States"] =
[Text] Recently it has been coming evEr more clearly to light that the -
further development of cooperation in certain branches ~rill require, within _
_ the framework of socialist economic integration, a concentration of resources
in the building of important structures, especially for the securing of
sources of raw materials. The form of internat3.ona1 invest`.nent c~cedits is ~
considered the most advantageous form. The complicated p~r:,blem nf their
efficiency is the center of interest of economic theory in all soc3aliat =
~states. It is being reviewed from many viewpoints and the depth of these _
- treatments varies. Some authors fornrulate directly a model for the calcula-
- tion of economic efficiency; others remain with the3r considerations in
the area of verbal formulations.
� Most authors consid~r international investment credits within the fxamework
of socialist economic integration as a component of a complex of activities
- oriented toward specialization, cooperat3on and the division of labor, and -
condition their efficiency on the efficiency of the structure of mutual _
economic relations. As a representative of this direction we may consider _
- J. F. Kormnov, who emphasizes the role of profit and the utilization of the
~ price functions of world markets and concludes with international socialist =
khozraschet as a planned method o~ the realization of the exte~r?al economic
relations of socialist countries. His views are very stimulating. Theory
_ and practice will, clearly, return to him for a long time. -
. Another group is formed by authors who view the proble~n oi international
inve'stment credits solely from the viewpoint of the 3nvesting (i.e � debtor)
st~tes. They perceive in them an important direction of international
economic and scientific technical cooperatibn, wh3ct~ is creating the condi-
tions for the wide application of the results of the scientific technical
revolution, for the gro*ath of the economic potential and raising the
= efficiency of social l~bor. International investment credits should, "
according to them, serve the establishment and devel~pment of sophisticated,
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- investment-intensive products with a large volume of manufactured production _
and mutual exchange. They hold that these are often a necessary condiCion
for the activity oF individual economic complexes and have an influence on
investment policy, on the structure and efficieilcy of production and on the
- character and efficiency of foreign economic relations. Because the _
acceptance of credited resources for t~e financing of construction does not -
coincide, temporarily, with repayment, the debtor cauntries are able to make =
a profit from the total volume of production factors, even though the
financing of the construction was realized in part or wholly owing to the
credit. Fur its use, interest is paid to the lending country~ I Motorin _
is a representative of this group.~
Individual economists hold that in the building of structures with the use
of credit from foreign countries, the category of investments d3sappears,
because resources are not taken away from the production and economic
circulation of the debtor country.3 This is an extreme view, the correctness
of which has been refuted.2 Some authors proceed in the area of net income, _
some operate with transferred costs.4 ~
Comt~won to all o,f them is an underestimation of the reproduction process and
a lack of understanding of the difference between the efficiency of the
credit financing of investment construction and the eff3cienc,y of the invest-
ment i;:.self. The author of this article has also made the same mistakes in
the past in the solution of the probl~ms of securing raw materials for the
_ metallurgical industry.5 Because the securing of raw materials for ~etallur- '
- gical plants is a matter of the development of the structure of our economy, _
it is necessary to be clear concerning the efficiency of this forzn of coopera-
tion from the viewpoint of the production sphere. In this article, we shall ~
summarize the most important results of research completed by the author in
the past year. We shall begin fraun the concept of an international socialist
investment credit as the transfer of an amount of funds, removed from the
- national circulation of one socialist country, for ~he use of another socialist
country, with the condition of reciprocity. Under socialism, the goal of a _
credit relation is not the mere concentrated movement of value, but a~low _
of material goods, of usable value, which is accompanied by a correspond3.ng
movement of value. The credit form of economic relations is characterized -
_ by the ability to separate the movement of value from the movement of _
material substance in such a way that the movement of value can either precede -
' the flow of material goods (in the granting of credit) or lag behind it (in
the repayment of credit).
- International socialist investment credit is a form of the movement of
~ investment resources among the countries of the social3st community. Zt
includes 3s a basic component an element of conscious proportionality, a
planned character, complemented by an aspect of conscious internationalisffi
and mutual advantage. (See note 7). -
rorms oi InLernaL3.onal Tnvestment Credit
International investment credit within the framework af soc3alist economic
- integration is provided in two basic forms, as intergovernment credit and
bank cr~edit. Both forms 2ciffer as to r~lations and effects.
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An intergovernment investment credit presumes common economic and political
intentions of two or several partners in the area of the development of
mutual economic relations (deliveries, division of labor, specialization,
cooperat3.on). In these, it is a question of the contact of sovereign states
- ~aith independently balancing every other enterprise. It is a matter of the
~ cooperat~on of the partners that its operation be economically effective.
In the following text we shall analyze our conception in the case of inter-
government credits.
- The lending state includes in the amount of the credit, in addition to the
cost of material and financial fulfillment involved in the provid3.ng of
resources, also interest from the resources cammitted during the provision
of credit and during the delay between the final fulfillment from its side
- and the start of the period of repayment. (Financial mathematics has the
name intercalary interest for these 3nterest payments,) These interest
payments represent a component of the amount of credit, at least for the
requirements of tfie calculation of economic efficiency. The method of its
calculation is already well enough known from the principles of the Federal
~ Ministry for Technical an3 Investment Dev.e~opment (FMTIR) for the determinat~.on
- of the economic efficiency of 3nvestments. The lending state takes ~.t into
its calculations in a percentage rate carresponding to the desixed rate of
increase of basic funds and supplies.
This is not an 3nterest rate stemming frrnn the normative coefficient of the
economic efficier.c~ of investment, because only a portion of the achieved
net income is invested and produces net 3ncome. The xema~,ning poxtion covers
the noninvestment needs of the khozraschet sphere and social expendituxes
(overhead expenses on a social scale, extraenterprise overhead costs). There-
fore, the following relationship e~ists between the norm of economic efficiency
and the interest rate corresponding to the desired rate of growth of basic
- funds and supplies:
- kd - Pa~pinv,
~ where kd is the normative coefficient of economic efficiency,
pa is the per.centage of the desired interyearly growth of basic ~unds
and supglies,
' pinv is the percentage allotted to investment needs from the'realized
~ net income.
From this pa - kdpinv' ~M�re detailed treatment in the author~s criticism ~
of transferred costs; see note 6).
. In providing intergovernment credits, the form of goods 3s often ut3.li.zed~
We meet this 3n the most varied forms.. TfiPse include deliveries of
capacities, services and a~paratus for a constructed factory from the design
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_ phase right ug until its introduction into operatiori, in a varied range
from small deliveries right to the delivery of a whole factory with key.
The provision of resources can also consist of deliveries of the most
_ varied goods (even goods imported frrnn foreign states), so that foreign
_ exchange resources may be freed up to the investors for the purchase of
machines, apparatus and licenses from third countries.
- Partners can, at the same time, have differing conceptions of the sum of the
- provided rasources. This happ~~ns for various reasons, as, for example, d~ue
- to differing price relations, higher transport costs for delivered material
which must overcome great distances, higher incidental personal costs
(separation allowance, trips to the family, a longer paid vacation,� etc) and
others.
- The lending state�evaluates the granted credit in terms of the r~eal expended
- social costs of the realized del3veries. This leads to an amount which we
will designate with the term "evidential (or reproductive) value of credit"
_ ~Ke)�
On the other hand, the investing state recognizes an amount based on the
- approved project documentation, :tn which deliveries and services are evaluated
according to its own valid wholesale prices and imported apparatus and
licenses according to bids in the cons3deration of arriving leading world
manufacturers who guarantee an excellent technical level. This amount will
- appear in our discussions under the designation "nominal value o~ credit"
~ ~ Knom~'
The author has chosen the designat3ons evidential and nominal value of credit,
because they describe the characteristic signs og the described quantities.
Evidential value does not appear in contract documentation. The lending
state takes due note of it however, works with it in its calculat3ons of
- economic eff3ciency and has an interest in its reproduction from the
advantages. The term nominal is justified, because nom3n~1 value appears
_ in the contract documentation. (The author does not insist on this
designation. If a bet~er one be found, let it be used. "tt is a question
- here for us only of a description of the phenomenon and nofi of new termin-
ology.)
- Let us note that the difference in both levels cons~,sts also in the diff er-
entiation of interest rates for the interest frmn the committment of xesources
during the provision of credit.
The Amount of Credit
- The a~a~unt of credit cannot be arbitrary. It ~nust be beaxable fox both (all)
- partners, who, as independently balancing economies, judge it on the basis
of their own interests. The lending state evaluates it with a view to the
effects of a long-term removal of resources. The investing state must pay
attention to the effects of the acceptance of resources. These effects wust
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- be absorbed in both states without an overloading of the central sources of
redistribution. Failure to satisfy this requirement could evoke a dis- ~
proportion connected with a strengthening of inflatiqnary pressures.
- This applies for both states. _
The lending state has an interest that the overall ~ffects of the provision
of credit correspond, at the end of the repayment, to the situation, had -
- the evidential a~nounts of credit been invested at home. This, however, -
- does not mean that they must be identical. Because it does not invest this -
amount, the necessity ceases of its having to c~ver t~ie noninvestinent needs -
of the khozraschet sphere and those social expenses dep2ndent on the volume
of production. It need not, therefore, realize from the contribution of
tne credit the same net income as in the case of domestic investment. However, _
~ at the end of the repayment period, it ought to have at its disposition the -
same amount for investment needs. This is the amount K qn, where q is the
_ bearer of the compound interest computation fox the 3nterest rate pa, and n
is the period of repayment expressed in number of years.
, Let us presume that the credit is repaid in yearly amounts equal to the
annuities (that is, including averaged interest). The amount of annu~,ty will
be computed by
a = Knomqn~q^l~Qn-1)
where a is the annuity, and the e~ression _
, qn(q-1/qn-1) - UP~n . -
. is the amortizer for the agreed upon interest rate p and the pexiod of xepay-
ment n.
The lend~ng state can invest the snnuities. The investment is gradual. We -
can interpret it as saving. In investment, after all, we count on a
normative net income, but this is distributed, because one accrues shares -
in distribution. Toward the amount for covering investment needs, the lend~,ng
- state, at the end of the repayment period has saved ~
a(qa - 1/qa 1) � .
This is a different amount from K qn. This difference should be compensated -
= for by price concessions on delivery transactions~ This concession should
be continually invested by the borrowing state and thereby saved. The yearly
price concession for the compensation of effects is computed from the
~ equ?tion .
Keqa - a(qa -1/Qa"1) + x(qa-1/qa-1) -
from which
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- x= K U - a= a - a
= e Pa'n Pa�n p'"~
~
Because the provision of intergovernment credit usually follows an improvement
- of the structure of mutual trade, it is necessary to lower the demands for =
price concessions by the effects of this improvement. Considered in the
- effects is only an amount for the coverage of inc:reasss in basic funds and
- supplies, because these are distributed. Requests for price concessions, _
= however, ought to be raised by a thus corrected amount of unfavorable _
effects.
We can summarize: so that the provision of credit not be inefficient for -
the lending state, there ought to be pref erent3al delivery transactions for
it in a yearly amount equalling the corrected difference of the annuities -
- at the level of the evidential value of the credit and the interest rate of
the desired increases of the basic funds and suppl3es, and at an agreed upon
- level. The difference of both annuities is corrected with regard to the .
effects of the change in the makeup of mutual deliveries. _
Let us note that price concessions in delivery transactions need not always
move at the expense of prices at the producing factory. Insofar as the
_ credit project is supposed to lead t'o the replaceinent of some other resource,
_ this concession can, in part or totally, consist of a lowering of the -
accompanying purchase costs. Tt is further necessary to consider the
possibility that the credit might be repaid separately from interest payments. -
- Similar cases may easily be cited in the form of annuities. It is, however, -
possible that during transmission circumstances bring about another interest
rate than agreed upon. In the calculation of efficiency, it would be
necessary to reckon with this new interest rate. .
Condit~ons of the ~!.3vantageousness of Credit
An accepted investment credit certainly revives the reproduction process, but
at the same time brings with it the concurrent tasks of the xepxoduction of
the ~nvestment and the reproduction of the borrowed capit~l within the -
= repayment period. (As a simplification, let us take the aupposition that
the repayment period equals the period of the amortization of the invest- ~
ment. Because the amortization period ought to equal the moral lifet{~ue of
the investment, these periods ought not to be too different and this
supposition therefore wi11 not color our view~. The concurrent tasks o�
- both reproductions requi~res that a net income be realized whi.ch would
cover: . "
--increases of basic funds and supplies necessary to the securing of smooth
_ devel.opment;
--the nonproduction needs of tr~e khozraschet sphere; ~
- -~social expenses;
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_ --agreed upon annuities;
--price concessions in delivery transactions to lending states.
= The requirements for the creation of net income must be lowered on the
- investor's side by the favorable structural effects with which the acceptarac2
- of credit is connected, and thia again ~n an ad~usted amount covering
- invest~ant needs. Unfavorable effects in the structural area understandably
increase the requirements for net income. A mathematical expression:
D~n = Ikd + a+ V(C-N) - H
= where I represents the total investment costs for the constructeii factory,
V is the yearly volume of production of the factory,
C is the average price of a unit of the volume of production, which
= includes also price concessions for delivery transactions of the
_ lending states (lowered by ~his concession)
= N represents the actual costs of production and circulation of a unit
of the volumP of production,
- H represents the structuraZ effects, 3n an adjusted amount, on the
side of the investor state.
- Increases of basic fnnds and supplies, nonproduction needs of th~
khozraschet sphere and social expenses are covered by the normative
efficiency expressed by the product Ikd.
If net income does not reach the minimal necessary level, prot~uction has to
- be secured from redistribution. More would be distributed monetarily than
was materially produced. Inflationary pressure would be evoked. (~Matters
" would lead to inflationary pressure on the side of the lending state as
" well, if the requests for price concessions were not satisfied in the amount
defined here). From the considerations concerning the efficiency of
provided and accepted credits, we can conclude that there exists a marginal
- profitable amount of credit and that this amount depends on the accepted
~ price of the deliveries for the lending partners. This, to be sure, stems
from an equation for the minimal necessary net income achieved by a factory
built ~.aith the help of investment credit, in which we shall introduce a
small, p~rmissible adjustment. The member V(C-N) we shall rewrite
V(C-N) = V1C1 + VZC2 - (V1+V2)N
~ because V= V1+V2 and VC = V1C1 + V2C2
where V~C1 is the yearly volume of deliveries for the lending states in an
estimation for them in terms of accepitable prices compensating
for the negative effects Qf the long term removal of resources,
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V2C2 is the yearly volume of deliveries for the remaining customers,
- C and C are understood in terms of parity at the factory. Therefore,
1 2 in the actual costs, N, are not included the costs of marketing
- beyond the extent of preparation for shipment and t~he loading
of products on the means of transportation.
Then
- a =VC +VC - (V+V)N+H-Ik
- p;n 1 1 2 2 1 2 ~d
- Knom - aP~n
P~n
- where R is the supplier of compound interest computation for the interes~
p'n rate p and the period of capitalization n. It has a numarical
value the inverse of t''~ie value of the amortizer, that is ,
~ R = U 1
p;n p;n'
This solution has economic significance for positive, nonzero values of a.
- For negative values, the acceptance of credit is not economically profitable.
We can transfer the consideration of the profitability of the acceptance of
credit to the area of production which can be delivered on the account of
annuities, without the needs of the securing of the operation of the factory
~ having to be covered from reuistribution. The condit3on of independence from
redistribution (above the extent of social consequences e~ressed in H) is
fulfilled only when deliveries owing to annuit~es are within the framework
- of an increase in.net income in comparison with the norm. In other words,
when the actual costs of deliveries owing to annuities are covered by above-
_ normal net income. The norm is the minimum. We can formulate this condition
with the syste~natic equiations
V11N = (V2+V12)(C-N) + H - Ikd
- V11=V12+V2=V
t ~
~ Knom - ~11�~11�Rp;n .
where V11 is the volume of yearly production del3vered owing to annuities,
;'12 is the volume of yearly production delivered to the lending states
against payment,
~ VZ is the volume of yearly production for other consiuners,
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- C is the selling price for a unit of the volume of product for
deliveries outside the frame of annuities,
_ Cil is the selling price of a unit of the volume of product acceptablE
for the partners who have provided credit,
~11�~11 is the annuity. _
~ For the acceptibility of the price of deliveries in the framework of
- annuities, from the viewpoint of the i~terests of the lending state, '
applies: -
V11�[C-C~1 +P)] = ap ~n - a - B
_ a p;n
where C is th~ actual price prepaid freight processing factory) given delivery
from the represented source~, -
P represents auxiliary actual costs, given deliveries from a factory
built with.the help of credit, ~
_ B represents effects of a change of structure in the lending state in
an amount covering increases of bas3c funds and supplies (unfavorable -
effects are included).
Between both conceptions of the expression of the acceptability of credit
exists the connection:
t
~1~1 - ~11~~11 + v12~~2 -
,i
~ll + V12 - ~l
.
_ From tnese considerations it also follows that price concessions do not have _
- to move only at the expense of the factory price. They can rest in part (or
_ even totally) on a lowering of incidental actual costs, compared to deliveries
from the represented source. f~-
- .
Cred9.t and Prices
~ We have concluded that an acceptable amount of credit depends on acceptable
- prices. Thus prices have extraordinary significance. It is necessary to
elucidate what they ought to be, because contractual responsibilities last~
a e;~ecific, limited time. During their validity, the prices of deliveries -
_ have to satisfy the partners. However, at the same time these change, and .
along with them change the conditions of the efficiency of a factory built
with the help of credit. Three quest3ons therefore arise:
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1) Shoul.d the partners agree on delivery prices over the long or the short d
term? ~
2) Should fixed, or f lexible, prices be negotiated?
3) What should their relation be to world prices? ~ _
The first question must be understood more widely than the establishment of -
concrete prices. It is a question~of the princ3ples according to wr.ich prices
wil]_ be formed during the period of validity of contractual relations. It is
- a needed economic pressure against the stagnation of factory production on
~ the qualitative side and for the stimulation of the growth of the technical _
level of products during th3s perind.
- The construction of the factory itself is not a short-term matter. The length ~
of time needed for it depends on conditions and on the character of the under-
~ taking. It can even be longer than 10 years. The period of pro~ected _
operation is at least 15 years long. It is therefore necessary that the -
partners be clear, over the long term, concerning the smaller questions which
- influence efficiency from their positions and the viewpoint of their -
- interests. It is impossible to project only the effect of factors influencing -
current development into long-term cor~sideration. It is necessary to ~
~ estimate development as we11 over a J.onger period. Therefore, price negotia-
tions should in principle be long-term. They should keep 3n mind possible
risks and technological development, both from the side of the production
= process and on the side of the product and its use. At the same time, it
~ is necessary to take note of the general tendency of the development of
_ prices.
For these reasons, it is impossible to request in good faith that specific
- prices be negotiated over the long term, but only the principles which will
_ be applied in setting prices during the val3dity of the contractual relation.
This means that at the most the price function according to which prices -
will be created, could be negotiated. At the same time, however, the -
conditions of its validity must be outlined. Price negotiations, then,
should be long term, but negotiated prices must be dynamically flexible and
respect development trends. This is the fundamental answer to the first two
questions. ~
J The answer to the third question stems, basically, .�rom the answers to the
first two questions, . Under development trends which should be respected ~
are considered trends in the development of world prices. There ought to -
develop, however, an effort to purge the undesirable elements of the
development of world prices from negotiated prices. The price should be
such *l,at it not be advantageous for either partner, during the val3dity
of the contractual relations, to break the agreement. At the same time,
conditions of the efficiency of the cred3.t relation must be integrated into
the negotiated prices. If this does not happen, there would arise on one
or the other side a s3tuation whose resolution would depend on redistribution.
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It would evoke inflationary pxessure, not covered financially by the drawing
- down o~ material resources, which would have a more long-term chara~ter. -
~ This ahort discussion of the problem of grices undoubtedly argues for new =
elements in the views on Che prlce of individual products and their deaired
~ dependence on usefulness. If this dependence is not incorporated into _
_ prices, space cannot be created within their framework for the coverage of
- excess costs connected with the acceptance of credit (the concurrent tasks
~ of the reproduction of investment with the repraduction of borrowed capital "
without disturbing the inter~~ts of the participating states or at least -
one of them). -
Sources of the Financing of Credit -
It is desirable to add to th~se considerations a remark c.oncerning the sources
of financing of the provided credits from the side of the lending state. The
basic source, is r_aturally, accumulation. This is not, however, the sol~
source. A1ong with it, it is necessary to remember a source which is created -
within the framework of the economy, as a result of a shift of its structure,
- and whose mobilization it is possible to,;fully calculate. This is the .
- lowering of the complex national economic capital intensiveness, which has
_ been evoked by a shiTt of the structure i'n the direction of less capital- �
intensive branches and which will take place given the provision of credit
for the capital-intensive branches of basic industry.
Thus, at least in the near future, we will be granting oriented credits,
- because they will have as the ma3n goal the securing of the delivery of raw
_ materials for our industry. As a result of this shift of structure, it _
_ would be possible to shif t resources earmarked for the development of capital
intensive branches, which will be limited, to the support of the prov3ded
credit. At the same time, however, it will be necessary to keep in mind the -
capital securing of the production of goods for the export equivalent
toward covering deliveries above the framework of annu3ties. This production
must be guaranteed along the whole vertical social production process,
beginning with the supplying of initial raw materials and materials. _
Summary
When w~e summarize the remarks contained in the preceding parts of this article, _
we reach the conclusion that the effects and economic efficiency of long-term
investment credits are different on the side of individual partners, who
work under different cond3tions and are motivated differently. Credits
= should help them resolve different problems. Nevertheless, we have seen that
effects are mutually conditioned. -
- On the foundation of this commentary, we can construct a scheme for the
' calculation of economic efficiency:
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~ a) the providing of credit:
~ agreed upon annuity
+ price concessions on yearly deliver3es
- + in~rease decrease) of the creation of net income on a social scale,
= evoked by a shift of structuxe, and this in an amount covering increases
- of ba.sic funds and supplies
- - annuity at the level of the real costs of praviding credit (the evidential
_ value of credit) and an interest rate covering increases of basic funds -
and supplies
~ = yearly eff ects in the area of net income (+favorable, -unfavorable) -
X supplier R -
Pa~n
= efficiency of provision of credit efficient, - inefficient) =
b) acceptance of credit:
overall net income realized by the factory through deliveries to the lending ~
states;
+ through deliveries to remaining clients
+ increase decrease) of creation of net income on a social scale, evoked
by a shift of structure, and this in the amount of coverage of increases
of basi~ funds and supplies -
- - normative net income of factory .
- agreed upon annuity
= effects in the area of net income (+favorable, -untavorable) .
X supplier R .
p ;n
a
= e^ _ ~
eff~_.iency of acceptance of credit (+efficiency, inefficiency) I
In addition it is necessary to not~: the investing state, after the repaytnent
- period of the credit has elapsed, gains the amount of the accepted credit
including interest payments (both are 3ncluded in the saved amount of that
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_ porti~n of net income which is earmarked for the coverage of increases in _
_ basic funds and supplies and which, when ~nvested, produces additional net _
~ income), in orde.r that a broadened production of ~he whole investment be
guaranteed. However, it is not possible to evaluate this amount as the -
- efficiency of the acceptance of credit. It is the efficiency of an invest- _
_ ment, financed through credit. Efficiency of the acceptance of credit is =
the efficier.cy of the means of financing.
_ It would scarcely be possible to speak of the efficiency of the acceptance -
of credit, if the responsibility for its repayment has to be covered through
_ redistribution (beyond the ext~nt of the positive effects of structural
shifts in the amount of satisfaction of investment needs). Such a method
of repayment would draw down material resources and weaken the economy. It
would be necessary to secure the expanded reproducti~n of the investment at
least in part with the help of additional credit. It is, therefore, necessary
_ to differentiate between the efficiency of an investment and the efficiency _
of the method of its financing.
It is clear that financing by means of credit can effectively contribute to
a balancing of the level of economles, through the orientation of
= concentrated resources at the most eff3.ciently mobilizable sources, without
the interruption of the individual interests of the lending states given
_ the current deepening of the international di~vision of labor, specialization
and cooperation. Aiter all, the idea o� providing investment credits is
the improvement of the structure of the economy of the lending state by `
= means of an improvement of the makeup of its imports and exports. And the
balancing of levels of economies can be most effective precisely when
weaker economies will oain while stronger ones do not lose. The weakening -
of the stronger economies would limit the resources for the balancing of
levels.
In addition to the securing of material resources, and concurrently with it, ~
_ international investment credit, it seems that such credit ought, therefore,
to develop above al.l in this direction, within the framework of socialist
economic integrat3on. It would thus become a very successful instrument
_ for the strengthening of integrative relations.
Example of Computation of Efficiency of Credit
An example of the computation of the efficiency of international 3.nvestment
credit: State A provides state B a credit for 12 years at 2 pexcent interest.
The provision has a material form. The real costs of ihe provision (.the
evidential value) of credit amounts to Kcs 1.25 billion, the agreed upon amount
(the nominal value) has been established at Kcs 1 billion. The interyear
- incrc:se of investment needs amounts in both states to 6 percent. Thxough
- providing credit, state A secures yearly deliveries of 2 m~,llion tons of
iron ore concentrate.
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The noninvesting state substitutes the supplier's resources without
� additional effects on the economy in the area of structure for a price -
concession on deliveries of Kcs 30 per ton. -
The investing state, B, advantageously changes the structure of exports.
It can limit less efficient production, which to date it had been forced to =
- export, and replace it with the production of a factory built with the help _
of credit. The factory, in part, covers its needs as well. The investing
state complements the credit with its own resources and builds the factory -
' at a cost of Kcs 2.5 billion. Yearly production should total 6 million
tons of concentrate. It sells the production to the lend3ng state for Kcs
- 380 per ton and to the remaining customers for Kcs 395 per ton. The norm
of efficiency amounts to 20 pe.rcent, of which 30 percent is assigned to
- investment needs, so that the percentage p reaches, as stated above, 6.
The change in the structure of exports brings in yearly Kcs 25 million (after _
distribution, that is 30 percent of the gross amount). The actual costs of 1
~ ton of concentrate, prepaid freight the lender's processing plant, amount to: -
_ Kcs 540, given deliveries from elsewhere, and Kcs 510 given deliveries from -
- the factory built with the help of credit. At the same time, its own costs
_ of production and marketing per ton af product amount to Kcs 290. The
numerical values of the suppliers(R) and amortizers(U; for 12 years amount _
to:
2 percent U= 0.09455960; R= 10.575341 "
- 6 percent U= 0.11927703; R= 8.383844 ~
Annuities a6,12 = Kcs 149,096,000, a2~12 = Kcs 94,560,000 -
~
The annuity for 6 percent is calculated on the basis of the evidential value -
of credit.
Economic efficiency of provision of credit: _
~ agreed upon annuity Kcs 94.56 million
+ price concessions on deliveries +Kcs 60 million .
(2 riillion tons at Kcs 30)
- annuity on basis of real costs of -Kcs 149,069 million ~
providing credit
yearly contributions from providing Kcs 5.4~i4 million
cred3t
economic eff3ciency of provision of
_ credit (5.464 X R6~1~) Kcs 45.808 million
~
_ ;
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~ Economic efficiency of ~!,cceptance of credit:
net income from deliveries: _
_ to lending country (2 million tons at Kcs 90) Kcs 180 million _
to remaining countries (4 million tons Kcs 42Q million
- at Kcs 105) -
+ contribution of change in mak~up Kcs 25 million
of e~-ports X Pinv
~ - normal net income (20 pexcent of Kcs 500 million ~
Kcs 2.5 billion)
- ~
- agreed upon annuity Kcs 94.56 million =
i-
yearly contributions from acceptance Kcs 30.44 mi111on -
of credit -
economic efficiency of acc2ptance of Kcs 255.204 mi.llion
- credit (30.440 X R6;12~
Both the provision and the acceptance of the credit is, in the example, .
efficient.
From the example, we can read tfie difference between.the efficiency of the
investment and the eff3ciency of tTie acceptance of credit. For the credit to
be efficient for the investor, the investment must secure, in addition to
a normal net income, the repayment of the credit includ3ng interest payments~ ~
that is, on a yearly scale the payment of the annuity~, lessened by incidental, _
favorable effects. Here it is a matter of Kcs (94.56-25.0) million, that is
_ of Kcs 69.56 million yearly. This amount, capitalized by R6,12~ gives
Ksc 583 million. The requirement for efficiency is 3ncreased, that is, by
Kcs 583 million. In our example, the efficiency of the investment reaches
583 + 255 = Rcs 838 million, but the efficiency of the acceptance of credit _
- only Kcs 255 million.
We can also demonstrate the calculation oF~'the maxginal amount of cxedit:
290x = y(395-290) +(25 x 106) -(500 x 106)
x~-y=6x106 ~
x= 392,440 tons; y= 5,607,560 tons.
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The factory built with the help of credit can, owing to annuities, deliver _
yearly 392,440 tons of concentrate, i.e., roughly 6.5 percent of its
production.
Profitable actual price for lending state: =
~ 540 -(149.096 x 106 - 94.56 x 106)/2 x 106 = Kcs 512.73 per ton. _
Breakdown of profitable price: =
' . 512.73 = [392,440x +(1,607,560)(540)]/2 x 106
x= Kcs 400.10, prepaid freig~t processing plant, i.e., given parity at the
factory of producer, 400.10 - 130 = Kcs 270.10 (Kcs ].30 are incidental actual
_ costs.) -
Profitable amount of credit:'' (270.00)(392,440)R2~12 = Kcs 1,121,000,000.
; -
- It is natural that the investing state does not know in detail the relations
and conditions of the lending state. It must, however, sensitively estimate
them.
~ The article submitted here attempts a view of the economic efficiency of -
international investment credits as we11 as the efficiency of the method of _
- investment finance, from the viewpoint of the production sphere. It takes
~ into account the differing interests of the participating states. Therefore
it investigates the separate effects on the side of the lending states and
on the side of the investor state. It reaches the conclusion that there
exists a marginal profitable amount of cred3.t. This amount depends on prices,
- which have great 3lnporfiance in credits. Tnternational investment credits,
that is, can be an effective instrument as well in the balanc3ng of.the
levels of economies, Frithout weakening tfie stronger economies. The article -
presents a partial view and does not pretend to definitiveness af viewpoint.
BZBLTOGRAPHY
1. J. F. Kormnov. SPECIALIZATION .AND THE COOPERATTON OF PRODUCTION 0~ THE -
CEMA STATES UNDER CONDTTI~ONS OF SOCTALTST ECONOMIC INTEGRATION. Prague:
Academia, 1974. -
- 2. I. Motorin, "Investment Credits of Foreign States and Their E$f~ciency,'~
PLAI~OVOJE KHOZJAJSTVO, June 1976, pp. 77~88.
3. B. Vajnstejn, R. Tachnenko, ~'Compensation Agreements and Problems of
Efficiency," MIROVAJA ERONOMTKA I MEZI~UNAAODNTJE OTNOSENIJA, rtay 1974, p. 97.
_ 4. Z. Srein, L. Rusmich, "The Economic Effic3ency of International Investment
Credits in Socialist Countries," POLTTTCKA EKIJNOMT~, November 1965, pp.
977-985.
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5. V..Jarkovsky, "The Economic Ffficiency of Inteznational .T.nvestment
Credits," POLITICKA EICONOMIE, December 1971.
- 6. V. Jarkovsky, "An Indicator of 'Pransferred Costs and the Measurement of-
the Economic Effir_iency of Investment," FTNANCE A UVER, February 1978.
7. Z. Ku~is, "International Socialist Credit under. Condit~ior~s of the
_ Devel4pment of Socialist Economic Integration of the CEM.A ~Iember Countries,"
KMDPSI OF THE INSTITUTE OF ECONOi~1ICS, Czechoslovak Academy of Sciences,
- Prague. 1977.
8. Announcement Number Three of the k'ederal Ministry f.or technical and
Investment Development of 11 March 1975 on the principles of the evaluation
of the efficiency of investment. BULLETIN OF THE FM'TIR AND THI; MINISTRY OF
THE INTERIOR OF THE CZECH SOCIALIST REPUBLIC AND THE SI,OVL~K SOCIALIST
REPUBLIC,. VII (1975), nos. 2,3.
COPYRIGHT: ACADEMIA, Praha, 1979
9276
- CSO: 2400
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-
CZECHOSLOVAKIA
- COMPUTER NOMENCLATURE, INCREASE BY TYPE PRESENTII~
J~EP, SMEP Equipn.ent and Its Uses
- Prague PODNIKOVA ORG~~NIZACE in Czech No 6, 1979 pp 277-278
_ [Excerpts] The exhibition "JSEP and SMEP Equipment and Its Uses" will be held
in Moscow between l~+ June and 15 July 1979�
The yerzr 1969 marked an importa.nt milestone in the development of computer
- er.~gineering, which is a relatively youn~ field. In that year, the "Agreement
on Cooperation Between Socialist CountriES~in Computer Engineering" was signed,
puttin~; an end to separate, frequently unsystematic and chaotic, development in
this important economic sector by the various states and layin~ the foundation
for rz~.listic and effective cooperation under the leadership of an internat;ional
commissior.~. In the 10 years since the founding of the International Commission
of Socialist StatES for Computer En~ineering, progress in sacialis~ integration
has led to many important successes in computer engineering in the socialist
countries. The research on and development of the third-generation series of
" JSEP [Ur.~ified System of Electroric Computers] computers was completed in 1973,
and in the same yeax an exhibition of the Unified Series of Electronic Computers,
,"Moskva 1q73," was held in Moscow, documenting the successes achieved by the
- individual countz�ies in third-generation computer technology.
While the third-generation computers Y~a.ve been gradually incorporated and have
been successfully serving numerous users, research and development workers of
thE socialist countries hatie continued work on a higher-generati~n series of
computer~, called the JSEP 2. At the same time, cooperation between socialist
countries has beF:n expanded to the System of Small Electronic Computers [SMEP];
in vie~:.l of ~he increasing number of com~u~:ers in use, international agencies
- which monitor and assure the effective use of computer technology have gained
increased importance.
The Czechoslovak exhibits can be divided into hardware and software on one hand
and illustr~ations of the utilization of computer facilities on the other.
The main exhibit in the Czechoslovak section at the Moscow exhibition will be
the ES-1025 computer system, laid out in the main hall in the following con-
figuration:
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The ES 2025--the basic unit, which has, besides its own modules: -
= the ES 5U74 fZoppy disk memory,
the ES 0101 contactless alphanumeric keyboard,
the ES 7934 operator's printer unit, -
_ the 79 MI operator's display;
_ the ES 500~+ magnetic tape unit;
the ES 5066 Soviet-produced magnetic disk memory (2 100-MY>yte units); ~
the ES 6016 fa.st punched-card reader (2 units);
the ES 703~+ alphanumer~c drum printer; -
- the ES 7039 chain printer; �
the ES 5075 floppy disk I/0 unit.
The ES 1025 computer systEm may include the following reception units: ~
~
the ES 9080 pLnched-card receiver;
the ES 9111 dual floppy disk drive.
Other Czechoslovak-produced hardware at the Moscow exhibition is described
below.
The SM 3-20P Minicomputer: -
_ r
the SM 2301 processor for the SM 3-20P;
_
_ ~
the SM 3103 ferrite core storage unit;
1'~,
the SM 1012 system interface unit;
the SbI 6002 universal IRPS controller (2 ur~its);
r
the SM 6001 universal IRPR contrcller (3 units);
the Sbt 8105 nu11 modem;
the SM 5105 disk control unit; "
= the SM 5403 disk pack unit [kazetovy disk];
the SM 5605 floppy disk internal storage unit;
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the SM Fi208 punched tape reader;
the Sb4 7202 1920-character display;
- the SM 7108 matrix printer with keyboard.
Tt~e SM 4-20 Minicomputer:
the SM 2302 processor for the SM 4-20P, including semiconductor internal -
memory; _
- the SM 0102 system interface unit;
- the SM 6002 universal IRPS controller (4 units); ~
the SM 6001 universal IRPR controller;
the SM 2001 programmable tin~er; ~ -
the SM 5105 disk control unit;
~ the SNt 5403 disk pack unit (2 units);
the SM 7202 1y20-character display units);
the Sb~ 71G8 matrix printer with keyboard.
-~I The ES 7907 complex for gr~.phic input and output:
~
a graphic information input unit;
a plotting unit. _
~ The KA 10 system for data acquisition and preparation: ~
the~ 3010 processor;
the 3011 operator's console;
the 3030 acqt~.isition station; ,
the 3032 input� unit;
the 3033 input unit (2 units);
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,
the 30~'0 printer; .
the 3036 printer; !
_ . ; '
� the 3035 display unit; ,
1
{
the 3(.j34 toke:n recorder. '
mhe ZKD 2C?1 circuit boaxd tester:~
test frame; ~
control unit; .
~ the ES 5~69 disk pack unit; _
. the ES 5569 disk drive cor.~trol unit; ~
the ES 7186 matrix printer; -
the ES 7186 display;
the ADT 4500 minicomputer. ~
- In this article we will not go into further c~etail regaxding the hardware in
the Czechoslovak section of the exhibit, si.nce it,has been described in other
- articles. Instead we will focus on some exhibits of the systems application
of computer hardware.
The use of computers in the CSSR in a system for monitoring plan fulfillment _
is sr~own in the "nationwide" section of the exhibit through diagrams and slides.
~i'he exY~ibitors are Czechoslovak organizations of the Computer Equipment Enter-
prose (PVT), which is prc:viding information on automating the national electoral
- system. '
COPYRIGHT: Podnikova organizace, 1979 '
Growth of.Computers by Type -
Prague� HOSPODARSKE NOVINY in Czech 13 Jul 79 p 2 ~
[Text] At the end of last year the following were on record in the national ~
econona,,r: 1194 digital computers, 211 punched-card computers [electronic account-
= ing equipment�], 454 minicomputers, 161 control computers, 7 hybrid computer sys-
tems, 432 analo~ computers and 679 sets of punched card machines. The Unified -
System of Electronic Computers accounted for 30.~+ percent of all digital com-
puters at year's end. Last year. total computer assets increased by 2,777.7 .
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million kor~unas, or 20.9 percent above the figure for 31 December 197i. Totel
- assets as of the end of the year amo~nted to 16 billion koruna.s, or 1,057 -
korun~.s pEr capita.
1200 119N
' poeitace computers aae2 -
(000 ~ cislicove digital .
~ derno- p~ched~-cardQ7 .
'stitkovE .
. SQO -
- g~ 609
~ Kt6
g 400 t06
_ 331 -
' 475 . 253 -
~oO 236 185 ; 215 t ' 440 ' 232 : > 221 i 211 _
- - - - - - ~
, ~109~ '
;106
~ 0
1910 �197f 1972 1973 1914 1915 1976 1977 1978 -
Number of Di.gital and PuncheC-Card Comput~ers, 1970-1978.
g42 i
CS0 : 2400
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\Y~, -
POLAND
- BRIEFS
IL-86 COMPONENTS--The FINANCIAL TIMES reports that Polish industry is ~
going to play an important role in IL-86 serial production. The Mielec
and Swidnik Plants of the Polish Aviation Works have begun the manufacture
_ of slats, flaps ~nd ailerons for this type of aircraft but as of next
year will deliver more important sub-assemblies, namely IL-86 wings (ailes). _
In return for this participation of the Polish aeronautical industry, LOT
wi.ll receive the IL-86 when serial production begins. [Text] [PRris AIY
& COSMOS in French 1 Sep 79 p 10]
CSO: 3100 E~
~ -
' y
l
I ~ -
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