NATIONAL INTELLIGENCE DAILY FOR 21 MAY 1988

Created: 5/21/1988

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Labonon: Talks on Syrian Move Hearing

USSR: Ligacnev Transfer

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Sn Lanka: Ruling Parly Under Aliack Prom Far

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Poland:llecis ol Strikes

USSR: Machine eWding. Peresfro/Ka'S 1*

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Talk* on Syrian Move Hearing Concluaion

TeiAs between Syrte and Iran on rhc flgtittna In Beiiui may be concluding, with Hizballah apparently prepared to allow Syrian forces Into the southern***

re Ihe southern

sporadic fighting In lhe suburbs Is In ils second week and Isar ol ailrllion. as pockets ol Amal lorces struggle to hang on. Amal leader Nabih Barri is reorganizing Amal8 military commandesult ol recent deleals. He (ired his military chief. Aqil Hamiyah. this week, according to press reports, accusing him of duplicity. Sarrl has publicly pledged lo dissolve Amal's military

Apparatus in Wesiyrian

as been saying putwciy mat ne"has no objectionHI SyTTBTI depioyrnenl ns long as neither aide is favored and probably calculates that Hizballah canmlted Syrian presence In the suburbs much as it has at the Bekaa Valley tor years Nonetheless, the cooperation ol the street fighters win be cirncuit to r

Barrl's replacement ol Hamiyah highlights tne fragmentation that has piagued the pro-Syrian Shia militia for several years. This problem and Amal'a Inability lo reverse Hizballah's recent gains may presage its dnci'ie io aratherational player.JS>NF).

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Transfer Rumored

USSR Supreme Sotltt session .. for Tuesdayerty Conira/ Commutesonprovide occasions when General Secretary Gorbachev could move egelnat Second Secretory" Ligachev; rumors of Ugachev's transJar to the presidency have reeppeered. but it la still uncertawhirther leadershipin beV

idelivered at the plenum, the

The Politburo announced Thursday mat adiscuss ihe outline of the rep All-Union Party Conference next month. Asacenda may also Includerie Poll

ichev already has neutralizedonsiderable degree by cutfli

critics have even begun to attack him publicly. Inpublished In thcormer chlel editor ot Ihe Moscow clly parly newspaper accused Ligachev of using his control ol lhe party par^'posr- lrom Ws Moscow

emoving lly In charge of

:hev's Influence'to

to hla de lecto deputyNiko wrested control Of foreign In ISflS.*"

Goru-unevier no. io dee: with the Ugachev problem Curing preparation, for the uS-Sovlet summit, but demesneo*trong motive for doing so anyway. Removing Ugachev Irom the secretariat before tho June conference would giveig ndvantoee in pushing through hie reforms bytrong signal that Opposition to pereatroyka will not be tolerated. Gorbacre. might then find it unnecessarygechevs Immodl from the PoMburc as well.

Leonid ri-eznTTev did thisnd Gorbachev

iromykcimilar maneuver

SRI LANKA:arty Under Attach From Far Left

Sinhalese extremists yesterday assassinated trie Secretary General ot tne ruling United Notional Parly. Nandalal Fernando, in their campaign to discredit tho government, toil provincial elections, and CntP tne Indian-Sri Lankan peace accord. The rraTtan: Janalha Vlmuktm Peramuna also kiMedP candidate and tailed in an atie-npi on another this week Last December the jvp kitted the UNP party chairmanimilar attack %Mass> Y? "3

wasignificant politic repentec? attacks on UNP politicians, however, ar meant to warn major political figures,ayewardene. of tho JVP's ability and willingness utfscka. Despite the killings, the government Is n< provincial elections scheduled early next month if provinces. Fear ol asaa tarnation, howjj tha roster of candidatea

figure,ndoubtedly esident

to intensifyikelylarcence! the.soul hern

ousry reduce >7

J

In Brief

protest by Taiwan farmers yesterday over low farm prices.

lack of government'follows series of

protests against agriculturalabor rowing, authorities reluctant to meet worker .demands.feefleff.rj'- 3

Valeriy Lagesov. member USSR'shernobyl' disaster, committed suicide. PiavOa repots* an.de unusually candid, quotes LcgasoVs notes Indicating despondency over continuing safety problems In nuclear power

IMF has5 million standby loan forill strengthen croditor confidence, help Budapest get needed commercialill seek more IMF assistance next year because of rising debt service, poor tradeiafK 2

Swedieh economlo aid to Nicaragua upercent,illion over next twomounts to more than one-third of all WestEuropean bilateral oldthfsncludes repairing antiquated lectricity plants

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Special Analysis

Efleet* of Strikes

The recent wave ot strike* hea seriously set back Warsaw's

eiitndy shaky reform program and wilt sharpen the country's

economic problems. Inflation Is certain to accelerate this year,

Industrial output may tell, end the uede surplut Is

shrink, dimming prospects tor assistance Irom the IMF end

foreign .

Tne regimes decision to buy off most striking workers with large pay hikes hasevere blow to reform efforts to link pay to-productivity and plant finances.-The reglmehopes nonetheless tohold to the line taken during theIncreased wage payments must be funded from factory revenues andnot Jrom slate subsidies. Onay the legislature,id to enforce financial-

discipline and control Inflation, gave the Council of Ministers

powers" over Industrial enterprises. These powers Include the right toeduce excessive wage and price hikes, order cuts In spending and theJabor force, dismiss factory managers, merge enterprises, and even declare enterprises bankrupt and

Enforcement of these directives Is likely to be weaki-however;-as Warsaw.trieB to avotd further unrest; the central ministriessimilar disciplinary measures after merllal law was declared iriT98C The purposo of the new spociolpowers Is to enforce reform; but they appear lo give back to the Council of Ministers aome ot the authority Il lost In the reslructurlngjif lhe government last falh-As enterprises run Into financial Iroubte In coping with reforms, the Coundl of

Ministers, Instead of forcing factories to make thoir own decisions.

may decide to reassert its Influence at the local level bysidcs and tightening administrative controlsaaasaasV ">

Suffers. Inflation Increasing

The strikes will accelerate Poland's upward wago-pricc spiral, Set off by consumer price hikes in February that averagedercent, inflation grew as many Polish lactones avoided unrest by granting large wagebefore the recent strikes. In the first quarter of this year, according to Polish statistics, these earlier pay concessions, combined with authorized pay hikes of aboutercent, pushed wagesomparedpercent increase In prices. Pay Increases as high asercent received by strikers In some plants wfll almost certainTy" Induce workers In other enterprises to seek higher wages In the months ahead through slowdowns and sporadic work stoppages^

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If* Polishn Attemptdercul popular sympattiy for lhe str*ers. seem to havewideimmediate Impact ot tne strikes on trie economy, especially in terms of Josi production ot consumer goods. Trie slceJ complex al Nowa Huta accounts forercent of Poland's steel production, but most o! its

custeniers apparently were able to draw on stockpiles and maintain

operations. The impact on industria^njlQ'mrmce may still.become

serious, nowtvcr Hccent rrporlln^aaaeaaVpaBBaal _

Indicates lhal absenteeism at Nowa Huta rerrums atoercent.

and. even wtin workers brought from Sllasia. outpyt_is down

ercent:

II Nowa Huta cannot"restore normarproVucYion bVmldsum.ner, industrialflrai quarterlower than last yeaTsZ-percent rate .or. decline;

Still Qreatar Need for Waatern Help ""

Warsaw now facesblerris than ever in mar-aging Its cbl-"PI4ns to Increase imports of consumer goods w'" 'educe the few funds available for debt servicing. More Imports and reducedpotential exchange earners are diverted to the consumer goodslopuah Poland's trade-oaJance below theillion surplus last year.-The result may be missed payments on Its rescheduling agreements and newfor debt reliefestern governments and benki Safjsatf*^

Tho damage to Warsaw's reform program also has jeopardized

prospects lor obtaining assistance Irom the IMF and

creditors. Warsaw win arguo that II needs help now more tnanIhe IMF will see little potentialigorous reform program.will have to decide whether to provide assistance and Hpolitical and

economic liberalization*

Special Analysis

Building. Peresfroy/fe'a Sputtering Engine

After (moaff years af fhe center of Cenersf Secretary Gorbachev's drlre loa economy, lie sweeping program lo modernise the critical machine-building aaclor fa sr/ff far behind achadule.To'Oferednia fhCs slew starts Gorbachev musteadership consensus fnafhla cMI modernization program well Into the next decade. Evan If na oretalla, the modernization program-currently"'unlikely lo trenstorm machine building 'nto tne aett-regulated engine ot technological advance end Indutirlel growth the economy needs.-

ducer of thvjstmentbeen In

sen Impresslveln Its-range and Intensity.

The program for restructuring.

produ her

l has addressed the most pressing Issues al each level of the sector. Introducing administrative measures to spur greater production, betteraster product turnover, and more frequent and regular plant modernizationso Included reforms to provide Initiative at lower levels that would make such measures rOi^rO-TBJBBBJJJj. >

Performance Lags, Fruetraf-on Builds

The moat significant e'fee: ot the prograrn. however, has been to threaten the sector's stabHTfy.'Tno administrative demands call on enterprises to meetcountervailing--performance targets all si once The decentralized reforms arentroduced into the sector piecemeal, leaving macnine builders reaponsible for operating under new rules for now, masters withoutr-elp o'po'i.ngB^kj-|

espectable showingverall performance so far has not only failed to meet leadership expectations but In some areas has bcon only marginally better than historically tow levels. Civil machinery production did not Increase at allroduct quality Is better but still well below leadership expectations. New equipment Improves only slightly on the technics' level of existing models, and new designs nave been slow to appear. Fleiooong has been plagued by inadequate equipment supples and difficulties installing and operating new machines. tsfjppS

continued

G *$ 5 O

Modernl/lnu Chit Machine UulMlna: The Inllial Push and Ihc Lonc-Teiru 1'ull

Anion Jo -AlikSlart" if rSf :er

unil tirinjccni iaigext

(Of ICMn:., vmin.

I " KMm punt-ice:(or tiron.it"

economic obi, plan arc mm lionhe ,

i>j

V" ore.

wjliiv concol

by an

rKOKC of

DUthaW Ui'^ MPplKM .'

Link fmili* to ulci

Uriels lor iIk- introduction"ofnio production.

Demand numtc wrilcofl* of old capital unit ihr mpitl introduction ufocwcipiiiil

ijnjgeri andfrom "predu'i" loir"uie" amiorodoet line*

ant ihtof eontomti dtnu**.

introiio* in ihe

Stimulate more efficient uie of production potentialliiiralh in productivity.

k creative ji'plii-jiion and ciploluiion of ixhnoloK'. '*

Introduce Liiuieil iu'i>|iriiiieHi lor ivpplicri and for produeln major projects

Rcdwe

bctnee reirircn and i

Dcccniraliic ptolH awnbuuon.

Authorize pinnu lo ict pnee* for product!.

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leadership apparently was surprised by tne extent of tne program's negative effect and whenot recover as expected became impatient and higruy critical of tne sector. Ono senior machine-building official complained early this year that he and his colleagues wore, "to put it 0luM<y. being shinned aliveTaskecr> unalienable goals and besiegta by hign-evei criticism, machine builders began toense of desperation.

Pursuing Civil Modern.ration Inis ire

apparentf the potentially volatilehe civilbegun leaning on the defenser trie production of consumer and capital gocda and.esser extent, on Eastern Europe to offset shortfalls. He has been more concHiatoiy in the implementation ol some reforms and has uncharacteristic ally praised the sector fo' some success At the same lime he nas stud pubticiy to his re'orm schedule and exacting performance targets to avoid giving opponents of reform any opening mat might fostei resistance to pa/miltoyka across the board xMHff'

Despite the poor record. Gorbachev must oerscade his ruling colleagues to stay the course intoh Fivn-Yeer) hi debate within (he leadership thai will almost certainly alfact his political future, tha party chiefocabiy argue strongly for continuing tne highhigh-growth strategy through a* leait the first lew years of the period to permit adequate renewal ol the sector's capital stock. To overt serious challenges, he has sought lo appease consumer Interests by expanding the defense industry's role in civi: production, and he appears to nave already cucoed the defense lobby, largely Oy replacing defense officials with personnel suppcrtivo of his polices,

?fi ort,ochavto abolish major ports Pfnn:nSP,i"o improve ouVelyits production equipment and produce advanced high-quality gooos. Without such reforms, hiscSJ"

Srs^ n0a* andompiele.the sector's production capital.

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