RESEARCH AID PLANNING AND FINANCING OF CAPITAL INVESTMENTS IN THE USSR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79S01046A000600090001-6
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 34
• Document Creation Date: December 12, 2016
• Document Release Date: June 21, 2002
• Sequence Number: 1
• Publication Date: September 24, 1958
• Content Type: REPORT

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RESEARCH AID
PLANNING AND FINANCING
OF CAPITAL INVESTMENTS
IN THE USSR
- - CIA/RR RA-40
24 September 1958
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
FOR OFFICIAL USE ONLY
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FOR.OFFICIAL USE ONLY
RESEARCH AID
PLANNING.ANDFINANCING OF CAPITAL.INVESTMENTS
IN THE USSR
CIA/RR RA-1O
CENTRAL INTELLIGENCE AGENCY
Office of Research a cl Reports
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I. Terminology . . . . . . . . . . . . . . . . . . . . . . 1
A. Capital Investments and Fixed Capital . . . . . . . . . 1
B. Fixed Capital Distinguished from Working Capital . . . 1
C. Comparison of Soviet and US Concepts of Capital
Investments and Fixed Capital . . . . . . . . . . . . 1
II. Planning Capital Investments . . . . . . . . . . . . . . . 2
A. Annual National Economic Plan . . . . . . . . . . . . .
B. Annual Plan for Capital Investments . . . . . . . . .
1. Total Volume of Capital Investments . . . . . . . .
a. Construction . . . . . . . . . . . . . . . . .
b. Machinery and Equipment . . . . . . . . . . . .
c. Installation of Machinery . . . . . . . . . . .
d. Instruments and Inventories . . . . . . . .
e. Other . . . . . . . . . . . . . . . . . . . . .
2. Goals for Bringing New Capacity Into Operation . . 6
3. Above-Limit Projects . . . . . . . . . . . . . . . 7
4. Housing Construction . . . . . . . . . . . . . . . 8
5. Design, Research, and Future Planning . . . . . . . 8
6. Construction Industry . . . . . . . . . . . . . . . 8
III. Sector Breakdown of Capital Investments . . . . . . . . 9
A. Industry . . . . . . . . . . . . . . . . . . . . . 10
B. Agriculture . . . . . . . . . . . . . . . . . . . . . . 10
C. Transport and Communications . . . . . . . . . . . . . 11
D. Internal Trade . . . . . . . . . . . . . . . . . . . . 11
E. Other Investments . . . . . . . . . . . . . . . . . . . 11
IV. Financing Capital Investments . . . . . . . . . . . . . . . 13
A. Volume Versus Financing . . . . . . . . . . . . . . . 13
B. Sources of Financing . . . . . . . . . . . . . . . . 15
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Page
1. State Centralized Capital Investments . . . . . . . 17
2. Decentralized Investments . . . . . . . . . . . . . 20
3. Kolkhoz Investments . . . . . . . . . . . . . . . 25
4. Private Housing . . . . . . . . . . . . . . . . . 25
Appendixes
Appendix A. Terms Frequently Used in Soviet Capital Investment
Planning and Financing . . . . . . . . . . . . .
1. Sources of Financing the Volume of Soviet Capital
Investments, by Category . . . . . . . . . . . . . . . . 16
2. Sources of Financing the Volume of Soviet State Centralized
Investments, 1955 Plan and 1956 Plan . . . . . . . . . 19
3. Soviet State Centralized Investments Planned for 1958, by
Volume and Financing . . . . . . . . . . . . . . . . . . . 21
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PLANNING AND FINANCING OF CAPITAL INVESTMENTS
IN THE USSR*
I. Terminology.**
A. Capital Investments and Fixed Capital.
In Soviet terminology the term capital investments (kapital'nye
vlozheniya) refers to outlays related to the creation of new fixed
capital and to the expansion and reconstruction of existing fixed capi-
tal. 1/*** The term fixed capital (osnovnye fondy), or fixed assets,
refers to property which is used over and over again in the production
of goods or to assets which wear out gradually over a long period of
time. Fixed capital usually includes buildings, machinery and equipment,
and installations, and it falls into two classifications: (1) fixed
capital used in production and (2) fixed capital not used in produc-
tion. 2/ Production (or productive) fixed capital includes plants,
factories, machinery, equipment, and instruments lasting more than
1 year and costing more than 300 rubles; transmission facilities such as
pipelines and powerlines; transportation facilities such as roads and
railroad tracks; irrigation projects and other improvements of the land;
and working and productive livestock. Nonproduction (or nonproductive)
fixed capital includes buildings and equipment of residences, offices,
schools, hospitals, and theaters and facilities for consumer service;
and all military equipment and installations.
B. Fixed Capital Distinguished from Working Capital.
Fixed capital (for example, a machine) retains its natural
physical form in the course of the production process and transmits its
value to the finished product gradually in the form of amortization
allowances by adding a small fraction of the value (original cost) of
the machine to the cost of each object produced by it. After a lengthy
period of time, fixed capital is replaced in its entirety. Working
capital.. (for example, steel) is used up and physically transformed in
the production process, and its entire value (cost) is transmitted to
the finished product (a tool).
C. Comparison of Soviet and US Concepts of Capital Investments and
Fixed Capital. 3
The Soviet concept of capital investments corresponds in general
to the US concept of fixed capital investments or fixed capital formation.
* The estimates and conclusions in this research aid represent the
best judgment of this Office as of 1 June 1958.
** For definitions of additional terms frequently used in Soviet in-
vestment planning and financing, see Appendix A.
** For serially numbered source references, see Appendix B.
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There are several differences, the first being the exclusion of capital
repairs from Soviet capital investments and its partial inclusion in
US investments.* Repairs were part of Soviet investments during the
first two 5-year periods, but-they were removed in 1938 and put under
separate accounting control because, according to one Soviet writer, 5/
the necessary appropriations were not forthcoming and amortization
funds were not being used for repairs -- in other words, repairs were
not being made. Another distinction between US and Soviet investments
is, as stated below, the occasional inclusion of changes in the value
of working and productive livestock in the Soviet concept and its ex-
clusion from the US concept. There are other differences, but these
are minor in relation to total investments.**
Soviet and US concepts of fixed capital are similar. One of
the major differences is that the USSR theoretically includes military
end items and working and productive livestock and the US does not.
Another difference is that the US includes the value of land and the
USSR does not, for the reason that all land in the USSR belongs to the
state. In practice, however, military end items have not been in-
eluded in Soviet data on fixed capital in postwar years, and expendi-
tures on end items have never been considered part of capital invest-
ments. Apparently there is no general working rule in the case of
livestock. Some assets and investment data include livestock values
while others do not. Assets and investment data in the various hand-
books which have been published in the last few years, exclude live-
stock.
II. Planning Capital Investments.
A. Annual National Economic; Plan.
Capital investments are a basic part of the total annual na-
tional economic plan. This plan is divided into 11 sections, as
follows 61: (1) Summary table of basic indexes; (2) industrial pro-
duction program; (3) agricultural production program; (4+) transport and
communications work program; (5) capital investments; (6) development
and introduction of new technology; (7) labor and training; (8) costs
of production and the plan for lowering costs; (9) trade turnover;
* The US does not have a concept of capital repairs. Part of what
are considered repairs in the-USSR are new investments in the US; most
are treated as part of; operating costs. Soviet investment data occa-
sionally include capital repairs. )+/
Soviet practice includes certain items in investments but excludes
them from assets; other items are included in assets but not in in-
vestments. For additional detail, see B, 1, e, below.
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(10) culture, health, and communal economy; and (11) development of the
economies of rayons, republics, oblasts, and krays. All of these
sections are independently detailed and together provide the direction
and goals for the year's economic activity.
Investment plans are made up for periods other than 1 year --
for shorter periods (monthly, quarterly, or semiannually) and for longer
periods (usually 5-, 10-, or 15-year plans). The annual plan, de-
scribed below, is the basic operating plan for investments, and plans
for shorter and longer periods contain similar indexes.
B. Annual Plan for Capital Investments.
The annual plan for capital investments is itself made up of
six basic elements and their breakdowns, as follows 7/: (1) The total
volume of capital investments (broken down by branch and/or ministry,
sector, structure, and union republic) and the financing of this program;
(2) the goals for bringing new capacity into operation, both in money
and in real terms (broken down by sector, branch and/or ministry, pro-
ductive and nonproductive assets, and selected commodities); (3) above-
limit projects; (4) the amount of housing construction; (5) design,
research, and future planning; and (6) the construction industry.
The main tasks of this plan are to provide for the growth of
the total economy and of the different sectors of the economy in the
desired proportions (1 and 2, below), to assure that key projects are
included in the plan (3, below), to raise the living standards of the
people (4, below), to provide the necessary designs, blueprints, and
other documents for the investment plan and to formulate long-range
plans (5, below), and to insure the most efficient use of construction
resources (6, below).
1. Total Volume of Capital Investments.*
The total volume of capital investments (obshchiy ob"em
kapital'nykh vlozheniy) in the USSR is broken down in rubles by sector
of the economy, and each sector is further subdivided into branches
and/or ministries.** The total is also categorized by union repub-
lics. In addition, it is subdivided by the nature of investment
(called "structure") for each branch and/or ministry in both physical
units and rubles. By calculating in both physical units and rubles a
measure can be made of both the total number of machines to be acquired
* For the financing of the volume of capital investments, see IV,
below.
** For additional detail, see III, below.
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and the total cost of these machines and of both the total area of
buildings to be constructed and the total cost of the buildings.
The subdivision of the total volume of capital investments
by structure contains the following categories 8/. (a) construction,
(b) purchase of machinery and equipment, (c) installation of machinery
and equipment, (d) purchase of instruments and supplies, and (e) other.
These categories are discussed below.
Construction includes erection, expansion, or recon-
struction of buildings-of all kinds -- factories, plants, warehouses,
stores, and dwellings. Included with the erection or expansion of a
building are its heating, wiring, and plumbing facilities; the clearing
of,the land beforehandor the demolition of any preexisting structures;
landscaping; and any irrigation or drainage work necessary. Also in-
cluded in the category of construction are such activities as the con-
struction of blast furnaces, mines, dams, motor roads, railroad lines,
bridges, airfields, and canals and the erection of powerlines.
b. Machinery and Equipment.
The category of machinery and equipment includes the
purchases of the machinery and equipment that must be installed in a
building (such as turbines, presses, boring machines, lathes, and the
like) and the purchases of equipment goring into a building that does
not have to be installed. Purchases of movable machinery and equip-
ment that do not go into buildings (such as trucks, locomotives,
airplanes, tractors, construction machines, and agricultural equipment)
also are included in this category.
c. Installation of Machinery and Equipment.
The category of installation of machinery and equipment
refers to the assembly and setting in place of machinery and equipment,
such as installation of rolling mills and of electrical and steam power
machinery.
Construction and installation are generally considered
together. Construction-installation work in the past has amounted to
an average of about 60 percent of the total volume of capital invest-
ments, although of course there are large variations among sectors and
among projects. Machinery and equipment on the average have comprised
about 30 percent of capital investments., the remaining 10 percent being
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for instruments and supplies and other minor expenditures.* This
60-30 relationship between construction and machinery not only varies
among projects but also varies over time. During the beginning stages
of a project, most expenditures are for construction, whereas in the
finishing stages the proportion of machinery increases in the total
investment as machinery and equipment for the plant are purchased and
installed. The introduction of new technology is another factor which
influences the relationship between construction and machinery. If
the main trend in activity is the introduction of new machinery into
existing plants and/or if the relative share of movable machinery and
equipment in total investments increases, construction will be less
than 60 percent and equipment more than 30 percent. This has been the
case in the past few years and probably will continue into the future,
for the introduction of new technology, modernization, and reequipment
of'existing facilities have become major investment targets. A factor
offsetting the shift to a larger share of machinery in total invest-
ments since 1949 has been the more rapid fall in machinery prices than
in construction prices. For example, machinery prices fell by about
30 percent between 1950 and 1956, and construction prices fell by less
than 10 percent.
d. Instruments and Inventories.
The category of instruments and inventories includes
all instruments which cost more than 300 rubles and last more than
1 year. Also included are those inexpensive and short-lived instru-
ments and supplies which are necessary for the beginning of operation
of a new plant, such as hand tools and hardware.
The category of other includes a miscellaneous group
of capital investment expenditures, some of which do not cause an
Several of the recently published Soviet handbooks have contained.
structural breakdowns of investments, annually and by 5-year periods,
for the categories construction-installation, machinery and equipment,
instruments, and other. These series do not indicate a 60-30-10 re-
lationship over a period of time but rather an average relationship for
prewar years of 81-16-3 and for the postwar years up to 1956 a 64-30-6
relationship. The reason for the discrepancy is that the handbooks'
series are in 1 July 1955 prices, not prices of the periods in which
the investments occurred. And construction costs in 1955 prices are
higher in relation to past prices than machinery prices in relation to
previous prices. Also, besides removing several items from the category
of other, these expenses must have been put in the handbook statistics
in current prices. This would help explain why the share of the category
of other was so low in prewar years.
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increase in fixed assets. Among those expenditures which do cause an
increase in fixed assets are geological survey work connected with a
specific project such as oil prospecting and outlays for soil improve-
ment and melioration work. Expenditures for the formation of basic
herds are theoretically part of capital investments but are established
separately in the national economic plan and the budget and may or may
not be included in investment and assets data. Among those investment
expenditures which are:not included in fixed assets are the training of
construction workers, the costs involved in closing down unfinished
projects which are abandoned, expenditures for the supervision of con-
struction jobs, the costs of moving people from areas which have been
selected for construction work, and several others.*
2. Goals for Bringing New Capacity Into Operation.
The goals for bringing new capacity (or new fixed assets)
into operation (vvoda v deystviye osnovnykh fondov or moshchnostey) consti-
tute the second element of the annual plan for capital investments.
These goals -- for finishing structures and beginning operations -- are
set in both physical units and rubles for (a) the total economy, (b) pro-
ductive and nonproductive assets, (c) sectors, and (d) more than 100
basic kinds of industrial commodities and particular indexes such
as those for rail lines, electrification, hospitals, houses, and the
like. Also included in this element of the investment plan are the tasks
for increasing capacities of existing facilities through such devices as
improvement of technological processes, modernization, introduction of
new techniques, and reconstruction of existing aggregates.**
Until the Fifth Five Year Plan (195:L-55), all general geological pro-
specting and surveying'were included in capital investments. Subsequently
the long-range and general surveying and exploration carried out by the
Ministry of Geology were removed from investment statistics. In addition,
project and survey work carried out in planning capital investments has
not been included in the investment budget since 1950. Although not in-
cluded in investments, project research work, general geological prospect-
ing, and expenditures involved in expanding livestock herds (such as ex-
penditures for the purchase of livestock from private owners) are included
in fixed assets. 9/
Examples of these goals are the following: (a) For the Fourth Five
Plan (19+6-50), the total centralized capital investments planned amounted
to 250 billion 1945 rubles, 10/ and the goal for bringing new capacity
into operation amounted to 237+ billion :L945 rubles, of which productive
assets represented 200billion rubles and nonproductive assets 34 billion
rubles. It is estimated that the balance of unfinished (nezakonchennyye)
investment at the beginning of the Fourth Five Year Plan period was about
35 billion rubles. This would imply that it was planned that the volume
of unfinished investment planned to be carried over to the next Five Year.
Plan period was about 51 billion rubles ffootnote continued on p. 77
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3. Above-Limit Projects. 12/
The total volun3e of capital investments (see 1, above) in
the.Soviet economy, for each sector and branch and for each republic,
is approximately established according to broad objectives and indexes
by the Soviet leadership and the Soviet Council of Ministers. Specific
projects in the plan are worked out by ministries (union, union-
republic, and republic), sovnarkhozes, and local governments. These
are reviewed by the union-republic council of ministers and the union-
republic Gosplan and are then passed on up to the Soviet Gosplan, which
combines into a single, total capital investment plan all the plans for
the union republics, the union ministries, and the economic regions for
presentation to the Soviet Council of Ministers for final approval. The
Soviet Council of Ministers, in order to insure that large projects
which have national economic significance were included in the plan for
capital investments and that the necessary financial and material re-
sources were provided, until 1956 individually reviewed and approved all
above-limit projects (sverkhlimitnykh). Above-limit projects were
defined as projects planned to cost more than a certain amount, ranging
from 5 million rubles for administrative investment to 25 million rubles
for most heavy industry projects. The specific document submitted for
approval was the so-called title list.* In 1955 the Soviet Council of
Ministers authorized individual projects representing about 50 percent
of the total annual plan for capital investments. Individual below-
limit projects (nizhelimitnyi) were approved by ministries and by
union-republic councils of ministers (if under republic or local sub-
ordination).
During 1956 and 1957 the system of authorization changed
several times, and further changes probably will occur in the future.
Currently the Soviet Council of Ministers reviews and authorizes all
above-limit projects of union subordination and all projects of union-
republic subordination (including union-republic ministries and sovnark-
hozes) with a planned cost of more than 50 million rubles (the latter
now being called above-limit). Union-republic councils of ministers
authorize projects of union-republic subordination costing less than
50 million rubles (now called below-limit) and all projects of republic
(250 + 35 - 23 = 51). This 51 billion rubles would also include in-
vestment expenditures which would not cause an increase in capacity.
(b) For the Sixth Five Year Plan (1956-60), new facilities planned to be
put into operation provided for the production of 15.8 million tons of
steel, 84 million tons of iron ore, 6,500 kilometers of new railroad
lines, and 205 million square meters of state housing space. ll/
* The title list included the following data: dates for beginning and
completing the projects, a detailed cost breakdown of the projects,
capacity of the structures, and the volume of work to be done each year.
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subordination. Small projects for the construction of housing and com-
munal facilities (under 5 million and 3 million rubles, respectively)
are approved by local governments. Sovnarkho4zes do not approve new
projects, but they have the authority to redistribute investment funds
among projects of a single branch of industry if they do not change com-
pletion schedules. With approval of the Soviet Gosplan, they can re-
distribute investment funds among different branches of industry or
sectors of the economy.
1!. Housing Construction.
Housing construction represents 25 to 35 percent of con-
struction work in the USSR. 13/ For this reason and because it is the
major nonproductive investment, housing is presented as a separate
element in the annual plan for capital investments.
The planning of housing construction has changed signifi-
cantly in the last few years. Beginning in 1958, for instance, local
planners rather than central planners will plan to cost the, outlays of
their housing construction programs. 14/ The most significant change
has been the shift of housing in the total construction plan to a
higher priority.
5. Design, Research, and Future Planning.
A fairly new separate element in the annual plan for capital
investments is the work of projecting organizations. These organiza-
tions are concerned with the design, working drawings, and cost esti-
mates of construction projects. They are also concerned with projecting
and research for future construction programs. The main central pro-
jecting organizations for investments are the Committee on Construction
Affairs attached to the Soviet Council of Ministers and the republic
counterparts of this committee.
6. Construction Industry.
Because of the peculiar character of its output, the de-
velopment of the construction industry is planned as an integral part
of the annual plan for capital investments, and its indexes (for output,
labor productivity, and cost reduction plans) are reported separately
in the plan. A number of goals and indexes are established, such as
division of. work among the various construction administrations and minis-
tries, plans for labor inputs and efficiency, material-technical supplies,
mechanization of operations, and the introduction of new techniques.
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III. Sector Breakdown of Capital Investments.
Soviet investment data are usually reported on the basis of a
breakdown by ownership, sector, branch, and/or ministry. For this
reason,. an understanding of this classification is a necessary tool
for investment analysis. (Unfortunately, Soviet writers frequently
use investment terms loosely, so that determination of the inclusive-
ness of the data reported is often difficult.) The breakdown by
ownership and sector used in reporting planned Soviet investment data
is shown in the following tabulation:
State Ownership Sector Nonstate Ownership
Industry
Heavy industry Producer cooperatives
Light and local industry Handicraft industry
Agriculture
Ministry of Agriculture
Ministry of Grain Products
Other state agriculture
Kolkhozes
Private agriculture
Transport
and Communications
Ministry of Transport
Ministry of the Merchant
Fleet
Ministry of Communications
Civil aviation, the river
fleet, and motor transport
Internal Trade
Ministry of Internal Trade Kolkhoz market
(public dining rooms) Consumer cooperatives
Other Investments
Municipal housing and utili-
ties
Other housing and utilities
Health, education, and cul- Private urban and
tural facilities rural housing
Science, administration,
military, and special proj-
ects
Other
Capital repairs Capital repairs
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This breakdown of planned capital investments is discussed below by
sector.
A. Industry.
Heavy industry under state ownership includes all the branches
and ministries of heavy industry for metallurgy; fuels (oil, coal, gas,
and others); electric power; chemicals; machine building and metalwork-
ing; timber, paper, and wood processing; and industrial construction
materials.* Light and local industry under state ownership includes
all branches of industry for manufactured consumer goods, food products,
meat and dairy products, fish, textiles, and local industry. In the
nonstate sector of industry are found producer cooperatives and the
handicraft industries which produce consumer goods and services. Re-
flecting the importance of heavy industry in the Soviet scale of priori-
ties, investments in this branch during the postwar years have com-
prised 88 to 90 percent of total industrial investments, light and
local industry have represented 8 to 11 percent of the total, and pro-
ducer cooperatives and handicraft industries have comprised 1 to 2 per--
cent. Productive investments in industry as a whole have averaged
about 45 percent of total capital investments in the postwar period.** 15/
Although total fixed assets doubled from 19+0 to 1956, fixed assets in
industry and construction increased by 200 percent as a result of the
emphasis upon industry.: Assets in agriculture increased by 130 per-
cent, although transport assets grew by only 69 percent and nonproduc-
tive assets (mostly housing) by 61 percent. 16/
B. Agriculture.
Most state investments in agriculture are carried out by the
Ministry of Agriculture, which has under its jurisdiction MTS's;
sovkhozes; administrations for forestry, cotton growing, animal husbandry,
shelter belting, and planting; repair enterprises; motor pools; water
resources installations; and several other administrations which have
relatively insignificant investment expenditures. Apart from those
directed by the Ministry of Agriculture, state agricultural investments
include general agricultural projects such as large irrigation schemes
and investments of the Ministry of Grain Products (previously part of
state procurements). The latter investments have -been included in
agricultural investment: statistics since 1956.
Nonstate investments in agriculture represent an important part of
total agricultural investments. Kolkhoz investments immediately after
* Investments in the construction industry are occasionally included
specifically in the investment and assets data for heavy industry.
** These and subsequent :investment statistics exclude investments in
private housing and capital repairs unless otherwise stated.
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World War II and during the last years of the Fifth Five Year Plan were
larger than state agricultural investments. Under the directives of the
Sixth Five Year Plan it was anticipated that kolkhoz investments would
be greater than investments in the state sector. The transfer of pur-
chases of agricultural machinery to the nonstate sector may increase the
kolkhoz share of agricultural investment to three-fourths of the total.
Private agriculture is made up of private plots and a fair number of in-
dependent farmers. Investments in this sphere, consisting mainly of
tools,. implements, and farm sheds, are not calculated, because of lack
of data. These investments are assumed to be relatively small.
Productive investments in agriculture have comprised an in-
creasing share of total investments during the postwar period -- from
15 percent in the Fourth Five Year Plan to 18 percent in the Fifth
Five Year Plan and 21 percent in 1956. 17/
C. Transport and Communications.
There are no nonstate investments in transport and communica-
tions. Included'in the state sector are the Ministries of Railroads,
the Merchant Fleet, and Communications. Motor transport and highways
and the river fleet are included as branches of transport under re-
public governments, and the civil air fleet is an administration attached
to the Council of Ministers. Investments in railroads have comprised
65 to 80 percent of total transport and communications investments in
postwar years; the other branches sharing the balance. Productive
investments in this sector as a share of total investments have de-
clined steadily throughout the postwar period, from about 13 percent
in the Fourth Five Year Plan to 9 percent in the Fifth Five Year Plan
and 8 percent in 1956. 18/
Investments in internal trade are very small, estimated in
the past to have been 2 to 3 percent of total investments. In the
state sector the Ministry of Trade invests mainly in urban trade out-
lets, storage facilities, and public eating places. The Ministry of
Trade handles about 60 percent of total retail trade (including
workers' supply departments). In the nonstate sector the kolkhoz mar-
ket accounts for about 10 percent of total trade, but investments are
very small -- several hundred million rubles a year --.consisting
mainly of stalls and a few simple structures. Consumer cooperatives
handle rural trade and comprise about 30 percent of total trade. 19/
E. Other Investments.
A dual explanation of the items included in the sector of other
investments is necessary. The items listed under this sector and
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under internal trade in the tabulation* are all nonproductive invest-
ments in the economy and represent 25 to 30 percent of the total.**
Most of the investments in the former category, however, do not com-
prise a separate sector but are an integral part of the investments of
other sectors -- industry, agriculture, transport, and trade. For ex-
ample, state centralized investments in industry are planned to be 130
billion rubles for 1958. Of this total, it is estimated that 25 bil-
lion to 30 billion rubles are for the construction of houses, clinics,
and schools and for other social-cultural facilities, scientific re-
search facilities, and other nonproductive investments. Of the total
planned investments in ferrous metallurgy in 1958 of 12 billion rubles,
about 2.5 billion rubles are for housing, schools, and other nonpro-
ductive measures. In Soviet statistical. practice, unless otherwise
stated, a sector, branch, and/or ministry breakdown of total invest-
ment includes the nonproductive investments of that sector or branch
with the productive. For example, planned. financing of centralized in-
vestments for 1958 was announced as follows 20/:
Percent
of Total Investment
Industry 130 64
Agriculture 30 15
Transport and Communications 20 10
Trade 1.
Residual 23 11
2o4 100
Included in the residual, which represents about 10 percent of the
total, are administrative investments, municipal housing and utili-
ties, and investments of the ministries of higher education and of
health; of the Academy of Science; of th.e ministries of culture, de-
fense, and geology; of special projects; and of others, some of which
are not known. Municipal housing refers to that housing built and
owned by municipalities' and comprises less than 10 percent of total
state housing investments. Utilities refers to investment expendi-
tures of municipalities on heating plants, electricity, sewerage,
water supply facilities, and the like. Administrative investments
include buildings and office equipment of such organizations as
Gosplan, Gosbank, the Ministry of Justice, and the Ministry of Finance.
P. 9, above.
If private housing were included, the share of nonproductive in-
vestment would be about5 percent greater. As stated above, private
housing investments have not been included in data presented.
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Social-cultural investments in the sector breakdown include
only investments of the ministries themselves -- those of higher educa-
tion, health, and culture -- and of the Academy of Science and a few
special committees such as the Committee on Sports. For example, the
construction of the University of Moscow, which is under the Ministry
of Higher Education, was financed under this category of other invest-
ments. If, on the other hand, the Ministry of Medium Machine Building
constructs schools or nurseries or clinics for employees and their
families, these investments are included in heavy industry. Military
investments include construction of airfields, military ports, harbors,
barracks, and other types of installations and bases. Special proj-
ects would include such things as the Stalin Great Projects and probably
also investments in certain strategic projects.
The only significant nonstate investment in the category of
other investments is private housing construction, which includes almost
all rural housing built and more than 25 percent of the urban construc-
tion. 21/
IV. Financing Capital Investments.
A. Volume Versus Financing. 22/
Data on investment planning and plan fulfillment for periods of
1 year or more for the total economy, for sectors, and for branches
and/or ministries are calculated in terms of volume, which essentially
refers to the amount of investments in fixed base-year prices and de-
signs. This amount is called the estimate value of investments (smet-
naya stoimost').* The calculation of the estimate value of a project
is shown in the following diagram:
* For example, during the period 1951-55 the volume of investments was
calculated by using wholesale prices of 1 July 1950 for all machinery,
equipment, construction.materials, and freight and power rates and by
using construction-output norms established as of 1 July 1950. These
norms refer to the amount and cost of the labor, materials, and other
items making up 1 unit of construction output (for example, 1 cubic
meter of building or 1 kilometer of railroad line). The plan for the
period 1956-60 and investment plans for 1956-58 have been calculated
in prices of 1 July 1955 with construction-output norms established as
of 1 January 1956. Base-year estimate prices for calculating the
volume of investments in other periods were as follows: for the Second
Five Year Plan (1933-37), 1933 prices and norms; for the Third Five
Year Plan (1938-42), 1936 prices and norms; for the Fourth Five Year
Plan (1946-50), 1945 prices and adjusted 1936-38 norms.
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Base-year estimate prices of
Lmaterials and freight rates
Wage rates of construction
workers
Estimate norms of the amount
of materials and worker
L strength to be used
Estimate norms and prices
for work of construction
L machinery
Norms of overhead, including
planned profits
L Estimated cost of installing
equipment
Base-year wholesale prices
Lof equipment
Other expenditures
Value of construc-
tion output
Total estimate
value or volume
of investments
Value of equipment
and its assembly
Using these fixed values makes it possible to measure the physi-
cal growth of investments without the effects of price changes, over-
expenditures for wages, and other factors.
The financial plan for capital investments, as revealed in the
state budget, in assets data, and in investment cost data, although
based on the planned volume of investments, can be more or less than the
volume, chiefly because the financial requirements are calculated in
terms of current-year wholesale prices, not base-year prices. Certain
additional adjustments, described in B, below, cause a divergence between
volume and financing.*
For example, on 1 January 1952 there was a general lowering of whole-
sale prices of machinery, construction materials, and freight and power
rates. This had the effect of lowering the total cost of the investment
program by 6 to 8 percent. The volume of investments in 1952 and there-
after in the Fifth Five Year Plan continued to be calculated in 1950
wholesale prices, and all volume statistics were released in these prices;
however, the financial requirements for this volume were less by 6 to
8 percent. On 1 July 1955 there was another lowering of wholesale prices,
which lowered the financial requirements for the second half of 1955, but
the volume was still calculated in 1950 prices.
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B. Sources of Financing. 23/
The most basic difference between investment financing in the US
and in the USSR is the fact that US investments are financed by borrow-
ing and by plowing back profits whereas planned state investments in the
USSR are financed by nonreturnable budget grants. State enterprises,
with minor exceptions, do not borrow to finance investments. Investment
funds for the development of heavy industry have been obtained in huge
amounts in a small number of years, without foreign borrowing, by severely
taxing all elements of the economy and by funneling these tax receipts
into heavy industry investments through the state budget.
Soviet practice divides investments into four general groups
according to the financial sources peculiar to each group.* These groups
are as follows:
1. Centralized state capital investments, comprising more than
75 percent of total capital investments. This is the only part of capi-
tal investments for which materials, labor, and financial resources are
centrally planned. This is the financial plan that is presented in the
budget each year, the major source of financing being the budget. The
centralized state investment plan includes almost all of the investments
of heavy industry, transport, state agriculture, administration, science,
and other state activities as well as the bulk of housing and light indus-
try investments.
2. Decentralized state and cooperative investments, comprising
about 10 percent of total investments. These investments are planned
locally insofar as material and financial resources are concerned, al-
though guidelines and general targets for these investments are estab-
lished by Gosplan. A major purpose of this second group is to stimulate
the growth of consumer industries and services with the use of local re-
sources and talents. Included are the investments of cooperatives, and
a large part of the total investments in trade, local industry, and
social-cultural facilities. Sources of financing are varied, lor}g-term
bank loans and retained profits being two major sources.
3. Kolkhoz investments, comprising about 10 percent of capital
investments and financed either by bank loans or by income received from
sale of agricultural products.
4. Private housing, comprising about 5 percent of total invest-
ments. This group should also contain private farm investments but, as
previously stated, these investments are not calculated. Private housing
construction funds come from saving and from bank loans.
A breakdown of the sources of financing into the four categories
described above is shown in Table 1.3- The percentages represent an
* A fifth group -- capital repairs -- is not included in this discussion
of sources of financing.
** Table 1 follows on p. 16.
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estimate of the approximate share of the total for each category financed
by the various sources in 1956.
Sources of Financing the Volume of Soviet Capital Investments,
by Category
1956
Percent of Ruble Investment of Each Category
Source
of Financing
Budget
Amortization
Profits, above-
plan profits,
retained income
Private savings
Loans
Savings from
price reduc-
tions
Mobilization of
internal re-
sources
Other
Total
Percent of total
investments
Centralized a/
Decentralized b/
Kolkhoz _/
Private C
74
10
e/
14
5
9
25
77
e/
e/
e/
80
e/
25
23
20
f/
3
V
fl
e/
e/
f/
35
e/
100 100
100
100
77 9 10 4
a. State investments.
b. See 2, p. 15, above.
c. Nonstate investments.
d. This source of financing is available by decree only.
e. This source of financing is not available to this category.
f. This source of financing is available to this category but was not
used in 1956.
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As may be seen, centralized investments are almost the same as
state investments indicated in III, above, except that the state carries
out some decentralized investments. The shares of financing from each
source in a given group may change over time. For example, in 1946,
loans provided about 6 percent of kolkhoz investments whereas their
share in 1956 was almost 25 percent. 24 Also, one of the four groups
may grow more rapidly in one year than another depending on economic
policy. In recent years, for example, decentralized and other nonstate,
investments have grown more rapidly than state centralized investments.
Thus, whereas the share of the latter was about 85 percent of total
capital investments in 1950, it is now more than. 75 percent. 25/
1. State Centralized Capital Investments.
State centralized capital investments are mainly financed
by the budget, which assures that the financial resources will be avail-
able regardless of the success of the fulfillment of other financial
plans. From the enterprises themselves, retained profits earmarked for
investments and amortization deductions are the chief sources of invest-
ment funds.
As a source of investment funds, retained profits provide
about 10 percent of the total centralized plan. To provide a greater
freedom of redistribution, the general policy of the state has been to
allow only small retained profits for investments, to levy high profits
taxes, and to redistribute the funds through the budget.
Amortization. deductions provide 13 to 14 percent of cen-
tralized investment funds. Amortization rates are based on the original
cost of an asset and its life expectancy. For example, if the original
cost of an asset is 1,000 rubles and it is expected to last 20 years,
its amortization rate is 5 percent and the annual amortization deduction
of 50 rubles is treated as an operating cost of the enterprise. Amorti-
zation deductions are kept in separate bank accounts which cannot be
used for operations. The funds are accumulated for new investments and
capital repairs in a ratio of about 40 percent to 60 percent, respec-
tively. That part earmarked for new investments is at the disposal of
the government for redistribution among other plants if it is not used
by the plant which set the money aside. The part for repairs must stay
at the plant to be used for its own repairs. 26/
Amortization rates and the share of amortization as a source
for financing new investments will probably rise in the near future.
This increase will reflect, on the one hand, the impact of a revaluation
of assets, scheduled for the fall of 1958. On the other hand, the grow-
ing awareness of the effect of technological obsolescence upon costs will
lead to earlier retirements and higher amortization rates. In some
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industries, amortization rates have been so low that assets were physi-
cally worn out and discarded before they were completely amortized.
Losses in these instances amounted, to more than 6 billion rubles in
1954. 27/
Another source of financing which has become increasingly
important in the last few years is the Reserve Fund of the Council of
Ministers. This is a fund of financial and material resources "set
aside each year in the union budget and in the union-republic budgets
to finance auxiliary capital investments and other measures which could
not be foreseen in the established plan.." 28/ Thus these funds are not
included in the original plans for volume or financing but are included
in the fulfillment of the volume and in the actual amount of financing
as a budgetary source. No specific figures have been announced for
funds of the Council of Ministers as a source of investment financing,
but they are estimated to have been 6 billion to 10 billion rubles a
year for the years 1956 and 1957.
Several of the remaining sources of financing include funds
which are not deposited in the banks for investments by the government
but which are nevertheless part of the financial resources required for
a-given volume of investments.
Savings from price reductions represent the difference
between base-year and current-year wholesale prices for machinery,
equipment, construction materials, and freight and power tariffs. As
stated above, the financial requirements are less than the volume if
wholesale prices and tariffs of the base year are higher than in the
current year. Thus this entry really represents a bookkeeping adjust-
ment to reconcile the volume of investment with its financing. During
the Fifth Five Year Plan, for instance, the volume of investments was
calculated in 1950 prices, but in 1952 and subsequent years the finan-
cial requirements were calculated in 19`52'wholesale prices. There
were other minor wholesale price reductions, such as that of 1952, on
selected machinery in years between major reductions which were probably
also included in this item, although Soviet writers have never been
clear on this point. The effect. of the July 1955 wholesale price reduc-
tion on the share of each source in financing investments is shown in
Table 2.*
The reason that there were no savings from price reductions
in 1956 is that the 1950 price base for computing volume had been
dropped at the end of 1955 and a new price base introduced for the next
Five Year Plan period. The new price base contained the wholesale
prices of 1 July 1955, which were the same as current wholesale prices
Table 2 follows on p. 19.
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Sources of Financing the Volume of Soviet State Centralized Investments
1955 Plan and 1956 Plan
Percent of Total Ruble Investment
1955 Plan
1956 Plan
(Wholesale
(Wholesale
Source
Prices of 1950) a/
Prices of 1955) b/
Budget
Profits retained for invest-
64
74
ments
7
9
Amortization deductions
13
14
Savings from price reductions
All other, including mobiliza-
15
tion of internal resources
1
3
a 29
b.. 30/
in 1956. There have been no major wholesale price reductions in the
years 1956-58, so that the volume and financing figures are very close.
Mobilization of internal resources refers to any money the
contractor is scheduled to collect for work already done and to the
value of above-norm supplies of construction materials or equipment on
hand.
Among other sources, as indicated in Table 1, are the value
of materials to be received at no cost, amortization deductions on the
fixed capital of the construction project, sums to be received from
sale of used up or unwanted fixed assets, income from certain byproducts
produced during the process of construction, and the amount of planned
profits and planned cost reductions from increased efficiency of con-
struction-installation work done by the economic method.* 31/ Some
writers treat other sources as mobilization of internal resources.
The sources of financing do not include the planned profits and
planned cost. reductions. of work done by the contract method (see Appen-
dix A for definitions of the contract and economic methods), by which 80
percent of construction work in the country is performed. Profits and
amounts saved from cost reductions are included in the contract price
paid by the client to the contract Footnote continued on p. 20/
- 19 -
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The above sources -- savings from price reductions, mobili-
zation of internal resources, and others -- tend to reduce the financial
outlays made by the government in a given year to obtain a given volume
of investments. There are several factors which tend to increase the
financial outlays necessary to obtain a given volume of investments.
The first is the inclusion in the financial requirements of auxiliary
expenditures, such as increased wages, which were not in the base-year
price estimates by which the planned volume was calculated. Payments
for prizes and bonuses.are also included in financial requirements but
excluded from volume. A second factor which will cause an excess of
financing over volume is the frequent inclusion. of funds for increasing
supplies of working capital* (materials, supplies, and equipment) in
financing. The volume of investments does not include these until they
are used.**
In some years the factors tending to reduce the financial
requirements by the government are greater than, the factors tending
to increase the financial requirements so that the financial require-
ments are less than the volume. In the 1958 plan, however, the finan-
cial requirements are greater than the volume (see Table 3). This
plan calls for a volume of planned state centralized capital invest-
ments of 199 billion rubles. The total financial requirements for
this program were announced at 204 billion rubles.
2. Decentralized. Investments.
Decentralized. investments (detsentralizovannyye kapital'nyye
vlozheniye) are not included in state planned.capital investments,
because, as the name implies, the planning of the material and financial
construction organization, and thus are part of the necessary financing.
These funds are retained by the contract organizations for premiums, in-
creasing working capital, and other uses.
* This practice is sometimes called immobilization of internal re-
sources.
-* For example, a cement plant is under construction in 1957. The
client organization pays the builder 600,000 rubles for work fulfilled
in 1957. The client advances the builder 500,000 rubles to buy materials
for later use (in 1958). The client buys equipment valued at 200,000
rubles and stores it in a, warehouse for later installation (in 1958).
The builder removes equipment valued at 250,000 rubles, and paid for in
1956, from the warehouse and installs it on the job. The volume of in-
vestments is derived as follows: 600,000 + 250,000 = 850,000 rubles.
The financing is derived as follows: 600,000 + 500,000 + 200,000 =
1,300,000 rubles.
Table 3 follows on p. 21.
Decentralized investments as a separate category of investments
first occurred in 1937. During the war, Lootnote continued on p. 217
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Table 3
Soviet State Centralized Investments Planned for 1958
by Volume and Financing a/
Volume
Percent
Investment
(Billion 1 July
1955 Rubles)
Financing
(Billion Rubles)
of Total.Ruble
Investment
Budget
143
70
Profits
29
14
Amortization
28
14
Other
4
2
Total
199
204
100
a. 32
resources for these investments occurs locally. The sources of financ-
ing are as varied as their uses. Most of the investments are consumer-
oriented, as the partial list presented below indicates. Since 1954 the
financial sources and uses of decentralized investments have broadened
significantly and continually, but surprisingly little information has
appeared on the subject. No breakdown of these investments by sector
or use has ever been published. In general, the increased role of de-
centralized investments is part of the attempt to move decision making
from the center to the locality. In the investment field, this attempt
has occurred mainly in consumer areas. As can be seen from the partial
listing below, direct budget allocations are not made for financing these
investments except in extraordinary cases. On the other hand, bank loans
are used extensively, although they are not used for investments in the
centralized state plan. Sources of financing include, besides those
decentralized investments were quite large. In 191+9 a decision was made
to include them in the central plan, and the category of decentralized
investments was abolished. But in 1951 they were again separated from
the central plan, at which time certain aspects were eliminated, the
financial sources were reduced, and the sources and uses or purposes
were more closely related than previously. 33/
Two other terms are used to describe decentralized investments --
above-the-plan (sverkh plan) and outside-the-plan (vne plan). The term
decentralized refers to the sources of financing, the terms above-the-
plan and outside-the-plan refer to the fact that these investments are
not in the state centralized capital investment plan.
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enumerated in the following tabulation, which are all specialized sources
established by the government, the same types of sources described above
for centralized investments -- that is, mobilization of internal re-
sources, savings from price reductions, and other.
Enterprise Fund
An amount, ranging from 1 to 6 percent of
planned profits of enterprise (depending
on branch of industry or sector of econ-
omy), set aside for investments (about
50 percent) and bonuses and other
measures (about 50 percent). Deductions
to this fund from profits increased as of
1954. Formerly called Directors Fund.
Increased between 1954 and 1957 from
about 1 billion to 2.4 billion rubles, or
by about 1.5 billion rubles. 34/
Above-Plan Profits
An amount, ranging from 20 to 50 percent
of above-plan profits after payment of
bonuses (depending on branch of industry
or sector of economy) to also be placed
in the enterprise fund. Deductions to
this fund from above-plan profits also
increased as of 1954. 35/
Certain Profits of Local Industry
U'p to 60 percent of profits of local in-
dustry are set aside for investments.
Although on the books before, this
source is used increasingly in the last
few years. In the 1957 plan, total
profits of district and province indus-
try were planned at 7.4 billion rubles.
Of this amount, 3 billion rubles went
to the budget as taxes, with 4.4 billion.
rubles to be retained for decentralized
investments. 36/
Modernization
Introduction of new tech-
niques
Housing, utility construc-
tion
Housing repair
Construction of cultural
facilities for employees
Same as above. Also for
purchase of typewriters,
accounting machines, and
fire-prevention and other
special equipment.
Further capital investment
in local industry, above
that in state plan. Also
for housing, municipal,
and cultural facilities in
the locality.
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Funds for Soviet Decentralized Investments
(Continued)
Modernization Loans
A new source and use as of 195+, whereby it Modernization
was decreed that 1- to 3-year loans Introduction of new tech-
obtainable at Gosbank in amounts up to niques
1 million rubles at enterprise director's
order and 2 million rubles and more on
higher authority. 37/
Long-Term Loans (Other Than Modernization)
Long-term borrowing by municipal enter- Construction of public
prises service facilities such
as laundries and water
lines
Long-term borrowing by local industry Construction of facili-
ties for production of
consumer goods, fuels,
and construction materials
Long-term borrowing by sovkhozes 38/
Construction of enterprises
to produce building ma-
terials and for several
other purposes
Above-Plan Revenues of Republic Councils
of Ministers
Beginning in 1955, union-republic councils Housing and communal con-
of ministers were given the right to use struction uses increasing
above-plan revenues of republic budgets gradually
for investments. Total amount in the
first year (1955) was 1.5 billion
rubles. 39/
Other Miscellaneous Sources )+0/
Beginning in 1957, union-republic councils Construction of warehouses
of ministers were permitted to establish and food-processing plants
deductions from receipts of vegetable and
potato trading organizations for decen-
tralized investments of Ministry of Trade.
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Funds for Soviet Decentralized Investments
(Continued)
Rental receipts and part of tax receipts of Construction of kolkhoz
kolkhoz market market premises
Premiums from All-Union socialist competi-
tion
Profits of enterprises from sale of con-
sumer goods on the side
Local revenues of station masters
Fund of state farms of strengthening
management and extending the economy of
state farms
Special revenues of MTS's
Deductions from profits of subsidiary
farms belonging to nonagricultural
enterprises
Special budget allocations and own re-
sources
Cooperatives
All investments of cooperatives, both
producer and consumer, are decentralized
investments. These organizations use a
certain percentage of planned revenues,
a certain percentage'of profits, and also
bank loans and amortization deductions as
sources for financing investments. 41,E
Housing and social-cultural
and other miscellaneous
uses
Purchase of small-value
instruments, office equip-
ment, appliances for ex-
isting housing facilities,
urban telephone and radio
equipment, and the like
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3. Kolkhoz Investments.
Kolkhozes deduct 18 to 20 percent from their money incomes
which are put into a fund in the Agricultural Bank called the "indivisi-
ble fund." This fund is the major source of investment funds of kol-
khozes. In a bad crop year, if incomes are low, investments are also low
Another source of financing for kolkhoz investments is bank borrowing,
which currently comprises about 25 percent of kolkhoz money investments.
There are two major types of investments which require no money outlays --
kolkhoz labor used in construction and the value of increases in numbers
of productive and working livestock. The former is given an accounting
value equivalent to the average wage paid construction workers in state
agriculture. The latter is given a special price for investment pur-
poses, but the value of these increases is generally not included in
kolkhoz investments at the present time.
Although recently published statistical handbooks have pre-
sented series on the volume (or base-year price) of investments by kol-
khozes, the technique employed in calculating these series is not known.
It is difficult to imagine how the tremendous variety of investment
expenditures -- including such items as expenditures for planting
orchards and other perennial crops, purchase of construction materials
at retail prices, and purchase of machinery and equipment at a variety
of prices ranging from wholesale to retail -- were converted to a common
base.
4. Private Housing.
The fourth group of investments consists of private housing
construction, both urban and rural. Sources of financing are private
savings and bank loans. There is also significant labor involved which
is usually done by the builder-owner, although in recent years construc-
tion labor has been hired for private building. Soviet investment sta-
tistics do not include private housing construction, although estimates
should be made for purposes of comparison with US investment statistics.
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TERMS FREQUENTLY USED
IN SOVIET CAPITAL INVESTMENT PLANNING AND FINANCING*
Terms Used in Construction Pricing )42/
Estimate Value Used in calculating the volume of con-
(smetnaya stoimost').** struction.
Estimate Cost Same as estimate value except that esti-
(smetnaya sebestoimost'). mate cost excludes profits of construc-
tion organizations -- accumulations --
which are currently planned at 2 1/2 per-
cent of the total cost of construction.
Plan Value Used in calculating the financing of con-
(planovaya stoimost') struction. The major difference between
estimate value and plan value is that
the latter takes into account changes in
wholesale prices after the base year as
well as changes in working capital.
Plan Cost Same as plan value but lower by the amount
(planovaya sebestoimost'). of profits of construction organizations
and by the directives for lowering the
cost of construction by increased effi-
ciency.
Actual (or Factual) Cost , Factual cost is the actual ruble outlay
(fakticheskaya sebestoimost') for construction, the so-called report
cost (otchetnoy).
* Soviet writers seldom use these terms precisely. Their use of the
word stoimost' may refer to any one of the terms in Appendix A.
** See p. 13, above.
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Methods of Carrying Out Construction Work L3/
Contract Method of Under this method, construction work is done by
Construction permanently functioning, special construction
(podryadnyy sposob). ' organizations for clients on the basis of con-
tracts -- the same method generally used in US
construction. The contract price includes an
estimate of direct cost plus over-head plus prof-
its. More than 80 percent of construction
activity is currently carried out by the con-
tract method..
Economic Method of Under this method, construction work is done
Construction directly by an operating enterprise, using its
(khozyaystvennyy own resources. There is no outside construction
sposob). organization, no contract. There is no profit
involved-, and the state does not provide funds
for working capital. An example might be the
use of plant employees to build houses using ma--
terials and equipment purchased by the operating
plant. This term is equivalent to the US term
force account construction.
Terms Used in Valuing Fixed Assets 44/
Fixed Assets Accord-
ing to Original Value
(osnovnykh fondov po
pervonachalnoy stoi-
most').
Fixed Assets Accord-
ing to Reproduction
Value (osnovnykh
fondov po vos-
stanovitel'noy stoi-
most').
Original value refers to the value of an asset at
the moment it begins to operate. It is the actual
cost of its original manufacture or acquisition.
For domstically produced machinery, original value
refers to the industrial wholesale price; imported
equipment is valued at the so-called "accounting
price," which is based on the current foreign ex-
change rate. For construction, original value
refers to the contract-price paid to the builder
by the client for work done by contract and to the
actual outlays for work done by the economic
method.
Reproduction value refers to the cost of repro-
ducing an asset at a given moment. It is the
actual manufacturing or acquisition cost at
current prices.
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Full Value (polnaya
stoimost') and Resi-
dual Value (ostatoch-
naya stoimost' .
Capital Works (kapital'-
nykh raboty).
Capital Investments
According to the State
Plan (kapital'nykh
vlozheniy po
gosudarstvennomy planu).
Total Volume of Capital In-
vestments in the National
Economy (obshchey ob"em
kapital'nykh vlozheniy
v narodnoye khozyaystvo).
Used in connection with the above
terms. Full original value and full re-
production value refer to the fact that
these assets values have not been adjusted
for depreciation. Residual original value
and residual reproduction value refer to
depreciated values that is, original full
value - amortization allowances = original
residual value.
Other Terms 45/
Capital works includes construction, equip-
ment requiring installation, installation of
equipment, bureau work, and instruments and
supplies. It excludes equipment not requir-
ing installation.
This term includes centralized investments
only.
This term includes both centralized and de-
centralized investments but in practice ex-
cludes the investments by kolkhozes unless
otherwise stated.
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