Created: 9/1/1963

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Economic Intelligence Report



cia historical review program

Office of Research and Reports




Suraary and


II. Log In Growth Bate of Producers Machinery Coo pored

with Total Output of Machinery

HI. Contribution of

TV. Plans for Mult1shift Operation of Plants to Increase

V. Plant Specialisation Under Central Control

for Future

VT. Little Stress on Capital Investment in Machine


Appendix A. Chronology of Selected Policy Statements

Concerning Machine

Appendix B. Source Referenceo


in Total Output of Machinery, Producers

Machinery, and Military Machinery in the USSR,

in Output of Selected Producers Machinery

in the USSR, Selected, end Original

Imports of Producers Machinery In the USSR,

"In many branches of our Industry there is not sufficient capacity or supply of machines and equipment to assure the uninterrupted planned grovtharticular project." Kozlov,

"Of course, had the international situation been better, had it been possible to achieve agreement and to shake off the burden ofthat vould have multiplied tbe possibilitiesurtherof thc Khrushchev,

Surcary and Conclusions

The Soviet machine building Industry is required simultaneous ly

to increase the supply of producerso the econony and

to meet the needs of thc expanding Soviet military and space The diversion of labor, materials, and producers machinery in support of the letter has weakened somewhat the present ability of the aiachine building industry to support the growth of the economy. This weakening is reflected in the reduction of the growth rate of output of producers machinery from an annual average of almootercent68 toercent9 Thc estimated grovth rate of output of all types of machinery (including military) roseercent toercent In the respective tlae' periods. he total Increase in production of machinery la estimated to have beenercent, including an increase in producersercent and an increase in military machinery' of

* The estimates and conclusions in this report represent the best Judgment of this Office as* The term producers machinery as used in this report includes all durable machinery and equipment employed in the processes of mining, agriculture, manufacturing, transportation, and communications. and structures as such are excluded. Durable military goods are excluded with the exception of some types of machinery that may be utilized for either civilian or military purposessuch as trucks and communications equipment. All types of machinery for which production figures are published in Soviet plan fulfillments are to be classified as producers machinery.

*** This report will utilise en index produced by this Office and labeled "index of civilianut vhlch is not adjusted tomilitary procurement of such producers machinery as trucks ond communications equipment and thus is synonymous with "producers machinery" as used herein.

1 The term military machinery as used in this report includes all machinery and durable equipment purchased [footnote continued on p. 2]

lk percent.

Io spite of failure to meet production goals In several linos of producers machinery, there were, nevertheless, seme Important gainsspecially in lines that were recently granted increased priority In the allocation of capital resources. The value of output of agricultural machinery roseercent, vith particularly high growth ratee for corn and beet combines. Output of instruments increased more thanercent and additional models of transistorized electronic computers and industrial control equipment were placed Into production, thus effecting noteworthy gains in quality ae well as quantity. of me tai cutting machine toolsercentnite, more than four times the number produced yearly in the USa growth trend that has been in evidence for several years.

Although the planned growth rate of production of chemicalwaaercent, there was an actual Increase In production ofercent In many instances the quality of chemical equipment was poor and the development of new models behind schedule. Thc failure of the chemical equipment industry to meet planned goals is of great concern to the Soviet leaders, because substantial Increases in Imports of equipment will be needed to meet chemical productionof the Seven Year Plan. An under fulfillment of the plan forof rolling mill equipment and problems in producing equipment of the desired quality and productivity helped to aggravate the shortage of large-diameter pipe for oil and gas tranoport.

Output of motor vehicles increased it percent andercent; neither achieved the annual growth rate necessary to fulfill production targets These industries are revamping productionso that spec1allzed engine and components planta will supply major assembly plants, somewhat disrupting the present rate ofbut also increasing the possibility of higher rates of productioneare.

In aplte of tbe underfulflllment duringI2 lnof major lines of producers machinery,2 plan for capital expenditure for producers machinery* was fulfilled, demonstrating a

by thc military, aa estimated on the basis of costing military mlsalons and tables of organization. Insofar as military procurement of such items aa trucks and cccBunications equipment is Included, these Items being recorded in statistics on producers machinery, therelight overlap with the preceding category of producers machinery.

* The term capital expenditure for producers machinery aa used ln this report includes all expenditures for machinery and equipment made on capital account andse made of the output of producers machinery. Because Soviet statistics on capital investment include some oxpenditureu for capital Investment [footnote continued on p. 3]

ercent increase, compared vithercent increase in domestic production of producers machinery In part, the meeting of this goal for machinery purchases vas made possible by an Increase in imports. 3 plan for capital expenditure for producers machinery callspercent Increase above2 level andnlikely to be met unless more resources are allocated to production of civilian machinery than vould nov seem to be intended or unless imports of machinery can be increased enough to fill the gap likely to be left unfilled by domestic production-Plans vere formulated2 to run machine building plants two or three shifts rather than one or two. Some progress ln adding shifts at plants producing major types of machine building may be expected during theears in selected major cities. Gains in output will be limited by problems associatedecruiting the necessary laborbtaining vorkerbottlenecks imposed by certain scarce types of equipment already being used at full capacity, and (U) assuring the necessary supply of basic materials (especially castings). Because of the importance of overcoming present deficiencies in the supply of variouo types of chemical equipment, particular emphasis has been given to running chemical equipment plants on tvo or more shifts.

apital investment in the machine building Industryercent over1 level of expenditure, although the plan calledl*-percent increase. The plan3 cells forercent increase. In spite of the nonfulfillment2 oftargets for several major lines of equipment, as discussed belov, Soviet planners at the end2eduction in the pace of capital expansion ln tbe machine building industry (although not in all product lines). Instead, the planners appear to place even greater reliance than2 on measures to develop moreuse of existing capacity in order to meet3 production targets. Although some gains3 may result from efforts to increase the number of shifts vorked at plants and to Increase the specialization and concentration of production, Soviet performance2 does not justify an assumption that large gains ln production will result immediately from such measures.

made by the military establishment, consisting of tlie procurement of durable equipment for installation at fixed military facilities, this use category falls short by anoercent of beingcivilian.


I. Introduction

Soviet machine building, which2 provided larger quantities of machinery in support of ambitious plans for economic development* and continued the expansion of output of military hardware begunb the largest and the fastest growing branch of Soviet industry. It employsercent of the Industrial labor force andercent of the fixed capital used ln industrial production andf gross industrial Duringears6ts average annual growth of output wass measured by the machinery index of this Office, or almostercent as measured, by Soviet indexes. zj

The full Soviet designation of this branch of industry is "machine building and metalworking." Itast grouping of industrial activities including production of Industrial machinery, electrical machinery, transportation equipment, instruments, ordnance, military shipping and aircraft, many types of fabricated metal products, and consumer durable goods as well as the repair of theae products. The end products of tho Industry directly support the ability of the USSR to wage war, to maintain grovth of the economy, to support foreign economic assistance, and to aatlsfy the desire of the Soviet consumerew washing machine or television set.

II. Lag in Growth Rate of Producers Machinery Compared with Total Output of Machinery

* rief chronology of the more Important recent events and statements of policy directly affecting Soviet machine building, see Appendix A.

** Data are0 but vould be in approximately the

*** For serially numbered source references, see Appendix B.

1 The official Soviet claim was that the index for production of "machine building and metalworking" roseercentcomparable with average annual grovth during the last decade. Outside the USSR, students of the Soviet economy have raised manyabout the reliability of the official Soviet index for machine building ln viev of the methods followed [footnote continued on p. 6j

Production trends in Soviet machine building2ot sharply different from thoseontinued to reflect the change of emphasis that begant which time the grovth rate formachinery ln aggregate dropped vhlle the estimated grovth rate for military machinery rose sharply above the rate of theears.* 6efore Increased emphasis vas

assigned to military output, the index of producers machinery rose by an average ofercent per year, and92 the average fellercent.* otal Soviet machinery productionmilitary and producersrose by an estimatedigure comparable to the average rate of growth9ut the index for producers machinery roseercent whereas the index for military machinery rose an estimated v* percent. V

Atlan overfulfillment wae claimed for theof several types of producers machinery, including agricultural machinery, instrumentation and equipment for automation, and machine toola. Production targets were not met for several major categories, however, Including chemical equipment, petroleum refining equipment, rolling ad lis, turbines, motor vehicles, and tractors.

Output of electric power equipment continued to expand rapidly2 in atrone aupport of efforts to improve power supply and to further tbe mechanization of the economy. Production increased as follows: generators, l6 percent; turbines,ercent; transformers,ercent; and electric motors,ercent.** Generally, thesewere comparable with rates achieved during theears. Continuation of such growth (whicb ls expected) ahould permitof5 targeto originally published. The trend towardof large-capacity steam turbines and turbogeneratorn continueda as follows:

Units Produced

Steam turbines


by Soviet atatiaticians in computing lt and the gaps in thc published data that prevent others from reconstructing it. Therefore, this Office has constructed its own index of Soviet machinery production on the basis of announced statistics on the production of commodities.estimates of production, and methodologies more comparable with those followed in the US.

See Tablehich follows on* See Tablehich follows on p. 8.

Substantial progress was made in tbo preparation for production of both turbines and turbogeneratorsegawatt capacity. began2 on hydrogenerators and hydraulic turbines of this capacity for the Krasnoyarsk Hydroelectric Powerplant; first delivery is not scheduled, however,

Table 1

Growth in Total Output of Hachinery, Producers Machinery, and Military Machinery in the USSR

Percent of Increaae over Previous Year



Figurebre revised estimates of this Office2 estimates are baaed on plan fulfillment data and commodity production estimates.

Under the pressure of agriculturaltate decree in2 directed that additional resources be allocated to theof agricultural machinery." Virtually every plant in Uieia being expanded or reconstructed. In addition, during the courseumber of plants were converted from other uses to tbe production of agricultural machinery. According to thc decree, two new plants are to be built. In consequence of measures already taken, there hastrong improvement in the output ofmachinery. Output roseercent over the preceding year andercent higher than the initial plan for the year. The highest rates of increase were for the production of combines, especially for corn and beets.

* Tractorseparate category (seeelow).

The production of instruments grew byercentodest overfulfillaient of the production plan. The output of such

Table 2

Growth In Output of Selected Producers Machinery ln the USSB a/ Selected, and5 Plan

Farcent of Increaae over Previous

Typa */


of Maaaura







to lS-k




'< '

nav rubles


sua refining equipment


stetrlc tons

art leal equipment

aatrlc tons

antora (AC)


to 3*

conmialcatlooe equipment


new rubles




to SO.k

mala-lice elactrlc



new rublea




nachlne tools




machine tools






maln-llne dlesel



nev rublea

Bated oc plan rulflLjMDtf., Intelligence eetlsatee (far civil aircraftr Plan lata, and

ln order of sagnltade of2 grot>t& rate.


products as electrical measuring instruments, process controland computers uas stimulatedapid rise In civilian and military demand. Overfulflllment of2 production plan wae made possibleupplementary allocation of investment resources added to2 investment plan by state decree in Seme enlargement of capacity has been necessary ln this industry totbe rapid grovth of production; most of the major plants are working two shifts and at high levels of production relative to capacity. ajor advance in the quality of product occurred with the introductionumber of transistorized models of electronic computers and industrial control equipment.

Tbe production of machine tools overfulfilled tbe plan andto growate comparable to that of the recent past. The output of metalforming machine tools, to vhlch growing attention is being paid,ercent. The increaseercent inof metalcuttlng machine toola brought2 production, compared withroduced ln the US. Tbe Soviet park of metalcuttlng machine toolsillion Inhe US park is currently estimated to numberillion.

In the Soviet production mix, special-purpose and precision metal-cutting machine tools continue to be given priority. The silence of Soviet journals about output of automatic lines may Indicatesid not meet the plan. In addition, many complaints about the reliability of nev lines vere noted.

Many important lines of equipmentoor shovingither not fulfilling the production plan orower rate of grovth than the average during theears. Of the deficient lines, the moot Important failures were registered in production of chemical equipment and rolling mills.

The increase in production of chemical equipment waa only 9instead of the plannedercent, following the substantial underfulfillment Shortfalls vere extensive in many lines of equipment, and shortages of supply have been noted for corrosion-resistant vessels, tire vulcanization equipment, compreoaora, separators plastics extrusion equipment, mixers, and equipment for spinning fibers. Chemical plants frequently complained2 that much newly received equipment vaa defective and required costly repairs. For reasons not yet apparent,2 capital resources allocated to the construction of chemical equipment plants vere partly diverted, while at tbe seme time modernization of many major facilities fell behind schedule. The increase in outputercent vas markedly lover than the annual average ofercent achieved6 Nevertheless, lt is still considered possible that thc

roduction targetalue of outputillionrubles* may be achieved, but total deliveries of equipmentrobably will be less than called for under tbe Seven Year Plan Further, plans for production of many types of equipment required In processes for the manufacture of fertilizer, synthetic materials, and petrochemicals are not likely to be fulfilled. The USSR will remain in the market for Imports of chemical equipment from Free World countries.

Although the USSRetricf metallurgical equipmentercent more than the precedingt is believed that this amount fell far abort of the plan. Production of rolling mill equipment, usually someoercent of the total tonnage output of metallurgical equipment, was also underruinlied.I,one of rolling mill equipment were built, ccn-pared with the planone for that year. It la estimated that production of rolling mill equipment2 waa lessonsthat is, less than the amount called for in1 Although important new facilities for manufacturing rolling mill equipment have been Installed at the Uralnaah Plant, newat the Alma-Ata Heavy Machine Building Plant haa been lagging, and no new construction baa been noted at the Elektrostal' Plant, which la to manufacture most of the new Soviet pipe mills, according to the planning-

* Ruble values in thia report are given In new rubles established by the Soviet currency reformominal rate of exchange based on the gold content of the respective currencies0 ruble to Thia rate, however, should not be interpreted as an estimate of the equivalent dollar value of machinery produced ln the US.

** Tonnages are given in metric tons throughout this The total increase in production of all types of metallurgical equipment was0 tons If all of the Increase was in the form of rolling mill equipment, output of this product would haveons

As has been well publicised, the USSR has continued to encounter problems in the domestic production of large-diameter pipe mills to produce pipe for oil end goo transport. TheilllBieter pipe-welding mill was built and Installed at the Kovo Moakovak Tube Works lateut equipment defects and other problems were reported to have caused lengthy delays ln obtaining designed levels of output and efficiency. ork was rushed on newbut was not completed. Work Is continuing on these additional mills, acme of which arc being adapted from existing facilities that produce smaller diameter pipe. Present plans call for these additional lines to be in operation by the end3 at the Chelyabinsk Tube

Hill, the Il'yich Steel Plant at 2jdanov, and the Khartsyzok Tube Plant.

Another major problem In production of metallurgical equipment is the delay encountered ln developing and setting up production of oxygen convertero, although2on converters were manufactured at thc South Ural Heavy Machine Building Plant.

Production of petroleum refining equipment increasedercent rather than the plannedercent. Total productionowever,ons, orercent greater than production Thus, although output probably is not adequate to meet present requirements for refinery equipment, the availability of refining equipment has increased significantly. Soviet efforts to obtain modem refinery equipment from the Pree World have beendirected toward types of equipment for processes not yet in wide use In the USSR, such as catalytic reforming of gasoline, hydro-fining, and the production of additives and various catalysts.

During recenthe production of motor vehicles haa increased gradually by an averageercent per year,2 vas do exception. Continuation of this modest growth rate vould not permit attainment of the5 goal for the productiOD ofotor vehicles of all types.owever, four major plants vere being enlarged, and plana vere virtually completed for beginning the enlargementignificant potential for enlarged output Is being developed, vith results likely to be evidentear or two. In addition, the USSR during the course2 organized several plants an specialized parts producers. In this2ransitional year during vhlch the previous form of production, that of vertically integrated automotive plants, vas being altered Into another form more similar to that of the US industry, vith assembly plants being supplied bycomponents plants.* During this transition the serialof Dew models originally scheduled2 vas postponedonthsear, but following theignificant increase in production may be expected.

* Tbe impact of this transition ln delaying the introduction of nev models vas more marked2 than inreceding years.

A similar transition in the nature of production is underway in the tractor industry. esult,ercent grovth in output2 was low In comparison vith the grovth rate necessary to achieve the5 target0 tractors, but the rate lo expected to increase once the transition period is completedear or two.evelopment vork continued preliminary to the production

of large wheeled treetore in-oraepower range. Every plant in the industry waa In the process of expansion or modification. The new Kishinev Tractor Assembly Plant began productionight tractor Several plants were converted, to specialized produc-tion of parte or components, and some plants began to abandon former lines of production. Problems developed during the year aa plants under expansion failed to receive equipment on schedule. Interfering with their own production schedules.

In statistics currently published on Soviet machine building, therearge hiatus covering the activities of those enterprisesmilitary machinery. It is estimated by this Office, however, that the production of military hardware roseore rapid pace thanof producers machinery9 throughand that thiseparture from the relationshipo existing5he relative performance in the production of producers machinery waa not any worse2 thanI, but the production of military items2 continued to grow more rapidly than production of producers machinery.

In spite of the underfulfiUmcnt during12 in the production of major linee of producers machinery,2 plan for capital expenditure for producers machinery waa announced as being Real expenditures for producers machineryn comparison with anercent increase ln domestic production of auch machinery In part, the meeting of the capital investment goal for machinery purchase was made possible by an increase in the import of machinery. 3 plan for capitalfor producers machinery callspercent Increase over the level2 and la unlikely to be met unless more resources are allocated to production of producers machinery than would now seem to be intended or unless imports of such machinery3 can be increased enough to fill the gap likely to be left unfilled by domestic production.

III. Contribution of Imports

9hen tbe domestic production of producers machinery was growing less rapidly than6oviet imports of such machinery Increased until2 the level was more thanercent greater than8 (aee The picture was quite different for exports. Although Soviet exports of machineryalmostercent8 andtotal exports declinedercent0 During the latter period the sharp

See.bove. ** ollows on


fl II I T

reduction in exports of machinery to Communist China was partly made up by an Increase in exports to non-Bloc underdeveloped countries and to the European Satellites. It is estimated on the basis ofdata that2 Soviet exports of machinery rose as much asercent above1 level.

Table 3

Net Imports of Producers Machinery in the USSB

Million Nev Rubles

Import balance

are from statistical yearbooks,. normally, import valuations do notdomestic value of imports because they arcto the arbitrary official exchange rate. is suchaluation ln foreign trade rublesthan the appropriate valuation in domestic rubles.

t Ira ted.

Although the trade returns2 are not yet available inas to flovs by commodity and by country, preliminary evidence indicates that Soviet Imports from thc industrial WeBt andigh level as deliveries were made on contracts concluded earlier. Purchase orders concluded2 are indicative of current Soviet interests and of deliveries to be expected in the near future. An increase haa been noted in the purchase of equipment for theIndustry. Fifteen hundred dlesel engines vere purchased from the UK for the Volga automobile. Contracts vere signed for theof components for five to seven chemical plants, with particular interest evidenced for Kostern equipment for tbe production of plastics, manmade fibers, and fertilizers. Negotiations vere concluded with an Austrian firm for the purchase of an oxygen converter installation for

the steel Industry. Purchases of fishing boats and equipment for food and light industry have been extensive. Prom tho European Satellites the USSR continued to receive extensive shipments of machine toola, transportation equipment, and electrical machinery.

The trend02 has been for imports of machinery to increaae relative to exports, but there ls some prospect that this trend will be interrupted, perhaps as early In support of trade snd aid commitments madeoviet exports ofmachineryespecially to the European Satellitesmay grow more rapidly35 than0n the import aide, in consequenceip ln the volume of new Soviet orders of auch machinery from the Free World that occurred duringI androwth in the volume of imports3 may fall below the growth rate achieved The volume of new orders increased once more duringowever.

IV. Plana for Kultishift Operation of Plants to Increaae Output

If feasible, the additionhift in the operation of Soviet machine building plants would Increase output and result in the more efficient uae of plant and equipment. Plans to this effect are now being worked out, especially ln those major urban machine building centers where the labor supply is relatively plentiful. Planning and implementation of this project did not advance sufficiently2 to bear much fruit, however.

According to Soviet aeasurenent, expressed aa the inverse of the ratio of workers in the first shift to the total nvnnbcr of workers in all shifts, the average number of shifts worked in Soviet machine building plantst the beginning In other worda,ercent of the workers in Soviet machine building plants worked the first ahlft. Roughly thc same ratio held innd, indeed, back in

* In present Soviet planning, three-shift operation means three weekly shifts ofhours each (suchours eachaysours on the sixth) and does not necessarily imply continuous around-the-clock operation.

** Estimated on the basis of data in

- ia -


Of the workers ln the first shift, soae are ln shops working only one shift, others are in two-shift shops, and yet others in three-shirt shops.* Thus,hen conditions are estimated to have been the same as at the beginninghe distribution of first-shift workers was as follows**:


Percent of Total Workers ln Machine Building and Metalwcrnlng

Total in first

In one-shift

In two-shift

In three-shift

The proportion of the nuaber of employees to the number of shifts scheduled for their shopsseful labor force measure of theof use of machine building plants. Representative of the situntion at the beginning2 are the following dataewly released jj:

Percent of Total Workers in Machine_ Building and Metalvorking






The need to add shifts in Soviet machine building plants was an immediate consequence of the reduction In the workweek and thereduction in the hours of utilization of equipment. This fact was brought to the attention ofarty Congress by Kosygin onl. 8/ Inhrushchev noted with approval the initiative of various Leningrad plants in planning to adopt two-shift and three-shift schedules, g/ Later onhere were many press announcements that various planning officials and plant managers had begun to work out plans to add an additional shiftut there is no evidence that any large number of planta actually did put on additional shirts

any plants werewo-shift basis, but most of them had been onasis for many years. Most tractor plant assembly lines are running two shifts, as are many of the majorplants. The Gor'kiy Motor Vehicle Plant is on two shifts. Byost of thc machine building plants in the majorcenter of Gor'kiy were operating two Reportedly, the chemical equipment plants of Gor'kiy and Leningrad are running two ablfta. Uj

Many plants appear to have plana for additional shifts in various stages of development. Thus the Gor'kiy Motor Vehicle Plant has been noted as planning to puthird shift. The Khar'kov Tractor Plant consideredhird shift, but the managementocal shortage of labor. Inisitors toajor centerwitchover to two-shift and three-shiftviewed machine building plants where there was no evidenceampaign to increase thc number of ahlfts, although the plants were notull two-ehift basis. The visitors did have thc impression that there were labor shortages in Because not long ago Leningrad hadabor-surplus center, the exletence of such shortages may indicate increased staffing of types of plants not open to visitors, such as the major electronics and military components plants located ln the city.

Until Soviot plans have been worked out in greater detail and until there is some evidence as to the policies that will be followed in implementation, involving questions of scheduling, labor force movement, wage incentives, supply, and the solution of bottlenecksauch as tbe fact that some types of machinery are already being used in three shiftsany estimate of the progress to be expected is extremely provisional.

Tbe main brunt of the program to add shirts will be borne by tbe major urban machine building centers, such aa Moscow, Leningrad, Sverdlovsk, Gor'kiy, Penza, Orenburg, and/ These centers have tbe population and the supply of skilled labor essential to any implementation of the program.

Seme limited progress in adding shifts may be expected during theears. Output gains will be limited, however, by problems associated with recruiting the necessary labor force; obtaining worker cooperation; eliminating bottlenecks imposed by certain scarce types of equipment already being used at full capacity; and assuring the neceooary supply of basic materials, especially of castings. In the near future the greatest progress ls to be expected in converting single-shift plants to two-shift operation, as this does not create as many problems of scheduling and Incentives for night work as tin-conversion from two shifts to three shifts. Already tbe enthusiasm of Soviet planning for three-shift operation appears to be waning. Officials in Leningradthe bellwether of thc movementhave quietly abandoned the original plan to implement three-shift operation of machine building plants5 and recently have beenlan to implement two-shift/

V. Plant Specialization Under Central Control Tor Future Increases

Although technical progress in machine building ls closely related to efforts to Improve specialisation, many large machine building enterprises in tbe USSR have attempted toide gamut of production requirements within their own shops. Even though their own production may not be thc most efficient, at least tbey are assured tbat their own requirements for the items produced will be met under their own control. The Soviet system now offers only limited incentives for greater specialization in production, however desirable it mayand therefore Soviet officials are forced to rely onmethods to speed the pace. ome greaterof production was achieved ln tractor and motor vehicle plantsesult of planned changes in production assignments.

Plans published2 propose some important changea in the production assignments of tractor and motor vehicle planta. It la intended, for example, that kO percent of the production of automotive engines5 will be ln specialized engine plants rather than in the large Integrated auto planta, whereas0ercent of the engines were soimilar change is planned to occur in the tractor industry. Some steps have been taken towardof these plans. or example, the Volgograd Tractor Plant began to reduce Its own production of tractor engines whileenginespecialized engine plant in Khar'kov; this change was onlyl, however, aa the latter plant waa havingwith its new automatic linen.*

Although some success has been achieved in implementing changes in production assignments under close supervision from central planning authorities for selected Industries, the administrative approach to specialization has not been very successful when applied to largeof industry. ate is likely for tbe new plan toa higher degree of specialization Into all of machine building as announced in2 by Koatousov, Chairman of the State Committee for Automation and Machine

* For further details on progress ln specialization, see II, pp.bove.

** In3 tbls state committee was etripped of much of its authority and renamed the State Committee for Machine Building,one of aeven state committees concerned with civilian machine building.

Plana for progress In specialization continue to Loom large in Soviet long-term planning, but there is little basis to expect Immediate gains ln output. Slow progress in specialization2 evoked expressions of concern from Khrushchev and other In

the hope of speeding the pace, centralized direction will be provided by the newly formed Supreme Economic Council and other central

VI. Little StresB on Capital Investment in Machine Building

The capital investment program in machine building in recent years haa not gone well: 1 the planned increase in annualercent, but the actual increase was onlyercent. The planned increase2 was lU percent, but the actual increaseercent. Thc construction periods have been stretched litordinately for many plants, and shortages of equipment have taken their toll. Major plants In machine building scheduled for completion1 received In that year only hO percent of the requisite metalcuttlng machine tools,ercent of the needed forge-press equipment, andercent of the materials handlingg/ Corresponding data2 are not available, but It Is unlikely that there vas any marked Improvement.

In recent years, more thanercent of the capital Investment In machine building has gono Into the modernization and expansion ofplants, and of this amount an increasing share has been linked with the establishment of large-scale specialized production. For the most part, the construction of nev plants has been associated vith relatively nev product lines requiring specialized production, such as plants for the production of chemical equipment and electronic items.

Some infonnation has been published about the relative priorities of the subcategories of machine building in the capital investment programs of recent years. pecial priority was attached to capital invesuneot projects ln new or existing plants producing equipment for the power, metallurgy, chemicals, oil, light, and foodriority was attached to the same industries vith theof agricultural equipment, tractors. Instruments, and equipment for industrialriority Is to beto various projects related to tractors, nets!cutting machine tools, chemical equipment, and electronic

" The usual Soviet criterionmajor project" is one involving an Investment of moreillion rubles.

The modest plan for capital investment in machine buildingalling forercent Increase, provides testimony that the decision has been made not to soften the strains onassive investment effort. It is to be questioned whether thc alternativesImports, more intensive use of equipment, andorganization of production processes and interplant relations vill succeed in providing the requisite immediate gains In output In support of present programs stressing both military buildup and economic development.






delivers speech on need for multlHhift operation and

Supreme Soviet instructs planners to speed up construction of nev plants for instruments and equipment for automation.

Plenum on agriculture assignsresources for production of tractors and agricultural machinery.

Maohlno3troitel' editorializes on the necessity for specialization of output to0 targets.

Academicians write that incentives are not encouraging thoof nev technology properly and need revamping.

Plant director states that "all plants are gradually changing over to tvo-shlftomplains that shortages of skilled labor and lack of vegeare handicap to

Marshal Kalinovskiy lists types of Industry that primarily servedevelopment but that can also be "completely converted toof modern types ofheae Include: special metallurgy; precision instrument building;controls; atomic, missilend electronic Industries; aircraft and ship construction.

Party Congress


Soviet press








speaka to railroad workers Soviet press stressing the need to convert to two-shift operation In machine building.

Kostousov, Chairman of the State Com- Pravda mittee for Automation and Machine Building, announces comprehensive plan for increasing specialization in machine building.

Supreme Soviet la informed thatspeech

there willertain strain in press in the economy's supply of rolled steel sections, oil-line pipe, diesel fuel, and several types of equipment" and that "there lsno control over thc huge outlays on superfluous equipment."



Soviet notes laggingof spare parto for most types of equipment.

Budget Canalsslon Chairman notes that specialization in machine building is inadequate and that in part thia ls due to incorrect planning; greater centralized control of planning foris seen as required.

speech in press

Yasnov speech in press



delegate to the

Soviet states that Leningrad will conclude conversion to two-shift operation

Khrushchev at exhibit instructs plan- Pravda ning officials to find practical solutions for "pressing problems involved in productionand the introduction of new technology in the various branches of the national economy."



article in the Party Journal of Journal the armed forces Justifiesyeor program in terms of providing the basis for future qualitative change in military equipment;lag in implementation of plant specialization as chief cause of lagging program for upgradingtechnology.

Khrushchev admits the burden of arma- Press Dents and implies that the consumers must wait.




admits the existence of short- Pravda ages of equipment that mightthe planned grovth of particular producta; cites plans to Increase the number of shifts operatedeans to obtain additional output.

The creation of the Supreme Economic Pravda Council is linked, among other things, to the need for centralized direction of specialization and the introduction of nev technology.

Chairman of the Leningrad Council of Pravda Rational Economy praisesas enabling measures ofthat could not beby individual local councils alone.


Various statements, and particularly section II, have not been given source refcrencea but are supported by written projectthat are available in the files of this Office.

PlBJiovuyc khozyayntvo. U.

CIA. CIA/RRrenda in the Soviet,

S. 3- Ibid. k. Ibid.

5- CIA. RAndex of Producers Equipment for the- S.

6. . Ocherki po voprosam ekoncplchcskoy

effektlvnostl (Esaays on the Problem of Economic. U.

7- Ibid.

8. Communist Party of the USSR. XXII S'yezd Kommunlctichcskoy Partii Sovctukogo Soyuza, torn I; stenugrafichcsklyd Party Congress of the CPSU,. U.

9< Pravda, Ll U.

State, Moscow. , S.

EkonomichcHkaya U.

State, Moscow. OFF

KocrajQlst,. U.

Izvcstiya, U.

15- ihiooatroyeniya, no- U-

Pravda, U.

U. Izvestiya, 0.

Kcomunist vooruzliennykh sil, no U.

19- . nauchno-tekhnichesklyeriod

stroltel'styaProgress In tbe Period of the Construction ofer III, Economics, no U.

FBIS, Dally Report (USSR and East,


Stroitel'naya gazeta,ec 6l,> U.

. 1. 0.

Original document.