Created: 12/6/1960

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Economic Intelligence Memorandum



CENTRAL INTELLIGENCE AGENCY Office of Research and Rej>orts


Economic Intelligence Memorandum



This RUterlal contains information aflccune the National Defense ol tint Unitejf States within the meaning ol the espionage laws.SC,ndor revelation of which in ?ny manner to an unauthorised person Is prohibited by law.

CENTRAL INTELLIGENCE AGENCY Office of Research and Reports



This memorandum presents on analysis of changes in the goals of the Seven Yearor an important branch of machine building in the USSR, the construction equipment industry. Theof this Industry in supplying equipment to thc construction industry will be an important determinant of thc success of the ambitious Soviet plan for industrial and residential construction during the

This memorandum has been coordinated within this Office but not with other USIB agencies.

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$umm.<iry and Conclusions

In0 tbe USSR announced the first considerableln goals of the Seven fearajor branch of the machine building sector. weeping program of changes, the construction equipment industry was given an investment stimulus in the formupplementary allocationillionndirected to increase its output substantially during theof the Seven Year Plan period. This striking announcement cane on the heelsearalf of disappointing production performance. By the middle of the second year of the Seven Year Plan, the industry apparently was (suffering from many shortcomings, among which were lock of sufficient plant capacity, insufficient capital Investment, inadequate supply of the principal components purchased from suppliers, poor industrial management procedures, and Inadequate specialization of plants.

The new plan objectives are to rectify these shortcomings, and if these objectives are achieved, the USSR probably will reach thc long-deal red goal of surpassing the US in output of construction equipment, at least for certain major items. Such an achievement also would piaco the USSRore favorable position insofar aa achievement of an increased level of labor productivity andof construction are concerned. If the quantities are In excess of the requirements of the construction industryand it is possible that they may bethe USSR also will be ln position to supplynumbers of basic types of construction equipment to thecountries in Africa and Asia. There ore, however, manyproblems for both the construction and the construction equipment industries, not the least of which la the nagging continual short supply of spare ports. Unions the volume of output of apore parts le given on emphasis corresponding to that of the equipmentthe achievement of the increased goals for the Seven Year Plan couldollow victory.

* The estimated and conclusions In this memorandum represent tbe beut Judgment of this Office as* Ruble values in this memorandum are assumed to be ln constant Soviet Seven Year Plan prices and may be converted to US dollarsate of exchangeubles to This rate does notreflect the value of rubles in terms of dollaro for theequipment industry.


- Shortcomings jg the Industry

The construction equipment industry of the USSR performed poorly during the first year of the Seven Year Plan. Production ofand motor graders, vhlch ordinarily are reliable indicators for the Industry, made only nominal increases8 levels of production. Bulldoccrs, truck cranes, and tovcr cranes alsoinsignificant rates of grovth. 0 the report onof the first half of the year singled out production ofs being belov plan. By the end of June, production had reachednits (ll.'tOO units at the annualar cry from thc estimated year-end goal0 units.* Production of motor graders increased slightly during the first halfut on an annual basis such production represents an Increase of onlyercent above productionj/

For somet baa been evident that the Industry vas Jn trouble, but the cause vuo not readily discernible. There vas no knovnvolume of model changeovers that might account for the poor shoving. In addition, the industry built several nev plants undu number of others to production of constructionnd some of the planta of the construction equipment industry vere to be extensively remodeled or expanded.

The cause of the Industry's troubles and what is to be done about these troubles have now come to light through an editorialecent issue of thc trade journalorofthnoye mashinostro-yenlye (Construction and Railroad Machiney Ihc Import of this article Is expected to have far-reaching Implications not only for this industry but also for the construction industry.

The editorial noted that the following ills were affecting the construction equipment industry:

Plants have insufficient capacity.

b. Inadequate Investment In the Industry is handicapping the growth of the industry and preventing the modernization of existing plants and construction of new For example,9 plan

This estimate' is hosed on the announced Intention lo produceercent more excavatoru0 than/ on planfor theonthslso noted thatexcavators bad failed to meet plan goals.

One construction equipment plant, the Tashkent Excavator Plant, was converted to production of tractors.

called for new capacity for productionxcavators, andcapacity forxcavators came into use. In other instances the scheduled modernization of existing plants was not completed.

are insufficient austere of research andorganizations.

from suppliersthe products or theelectrical. Instrument, and chemical industries

management and industrial specializationas reflected In tbe fact that many plants areproduction responsibility for small series and customa large variety of items, and specialization In productionand components Is lacking.

(Councils or national Economy) inare seriously hindering the growth of theindustry by inflicting on it responsibility forfor which the plants are not suited.

output of the construction equipment industry isfor the needs of the construction Industry.

The references to inadequate capacity and Insufficient capital investment are novelrifle puzzling. Several new have begun producing construction equipment, several aore are beingto production of construction equipment, and still others arc being modernized to accommodate Increased output. No previoushad been given that planned or existing capacities wereor that Insufficient investment was responsible for the poor production performance9 and the first half

The criticism that the output of the construction equipmentis not adequate for the needs of tbe construction Industry la an Interesting one. It is quite probable" that the assortment or equipment Is not as great as the construction industry desires, and certainly specific types of such equipment as pneuirntlc-tirc rollers, self-propelled scrapers, and tower cronesonon cupacity are known to be either unavailable or In short supply. Also, In recent years the ratio of basic units of construction equipment (excavators, bulldozers, mobile cranes, and scrapers)illloo rubles of basic constructloo has remained fairly constant. Because the volume of construction9 and thus far0 has been far

- I* .


greater than that provided for under the Seven Year Planwhereas the volume of output of the construction equipment industry has been increasing very slowlyit is possible that the construction Indus-try has become alarmed over the probabilityeneral shortage of construction equipment

The complaints nf lack of proper management and industrialand improper utilization of existing capacity appearair degree of frequency in the Soviet press.

2. New Program

To rectify the shortcomings that it has analyzed, thc editorial inorozhnoyc machlnoBtmyenlvr. announced thcsweeping program of changes for the construction equipmenttry of the USSR;

additional, supplementary capitalillion rubles is being allocated for constructionof plants of the construction equipment industry.

specialization of the plants of theindustry will be strengthened, and subsequent changesspecialization of these plants will be pormitted only onfrom the Councils of Ministers of the Union-RepublicsUSSR. Because such permission will be needed, no plantpartlant con be diverted to production of Items thatrelated to its area of specialization simply by an ordersovnarkhoz.

the remainder of the Seven Year Plan the goalstypes of construction equipment have beenfor example,utput of excavators willunits, of0 unito, and of motorunits. , there will be nanufactured, into the original0otor0 loaders, and many other machines.

research and development facilities andore to be established, and time limits are to be set forthat they are to go into operation.

standardization in design of ports andto be undertaken to promote interchangcabllity of ports noton equipment categoryfor example, excavatorsbutposaible throughout the entire range of products of theequipment industry.


C-Otli t

f. There will be an increase in the types and sizes ofproduced, but not at the expense of reduced volume of output for individual items. Also, wheeled roadbuilding equipment is to go into production during the.

The significance of theillion rubles incapacity for the construction equipment Industry Isto determine, for no investment figures for this industry were previously revealed. When compared with the planned investment in the entire machine building sector for the Seven Year Plan of ll8 billion rubles,illion rubles represent slightly lessercent. The amount, hovever, is believed to be sufficient tooonstruction equipment plants of small to medium size.

Thc Increased goals for production of construction equipment5 represent the first announced major increase in the Seven Year Plan for the machine building sector and Indicate the importance to the USSR of adequate quantities of the basic types of construction machinery. Because5 production goals for such key items as excavators, bulldozers, and motor graders vere given in the original goals of the Seven Year Plan, it Is impossible to determine either the percent of increase that these new goals represent aboveoriginally scheduled foror the changes in rates of growth required to meet the new goals. On the basis of other information, however, estimates have been made of the cumulative production of excavators, bulldozers, and motor graders as originally scheduled for the. 4/ Comparison of these estimates with thc revised goals shows that the cumulative production of the three commodities for the Seven Year Plan period vlll Increaseercent for excavators,ercent for bulldozers, andercent for motor graders us follows: bulldozers0OO units, and motor graders00 unite (sec tho table").

The announced intention to0otor graders In excess of tho original plan goals raises the questions of where and when the new capacity vlll come Into service. rastic Increase in production of excavators and bulldozers Is to be achievedt is unlikely that total production of these Items during theears of the plun period could amount to the Increase above the original plan that is supposed to be achieved. On the other hand, the newly5 production goal for motor graders, which Is more than three times the current level of production, combined with the comparatively

" The table follows on p. 8.


(rodent planned Increaseumulative output for thebove the original plan, suggests that sharp increases ln production of rzotor graders will not occur until the end of the plan period. It is hoped that there will be forthcoming additional information which will shed some light on these changes.

The decision to emphasize the importance or putting new research and development.facilities into operation as soon as possible, to continue to stress standardization of parts and components, and to produce increased numbers of types and sizes of equipment without

sacrificing large-volume production arcestatement of earlier programs that ore expected to have continued validity and Importance

in the production program cf the Industry.

An Interesting and unannounced clue as to the reason for the timing of the editorial inorozhnoyo mashlnoBtroyeniye is believed to be the stress placed by the construction industry onment of plan goals. The Seven Year Plan Implies an annual increaseercent In construction, whereas construction has actually been expandingate of aboutoercent during theears of the plan period. The Seven Year Plan provided for the construction labor force to remain approximately at the levelnd an increased volume of construction was to be realized almost exclusively from increased productivity of labor. owever, the labor force in construction work greworkers, anof moreercent. This Increase probably wasby on inadequate assortment of available equipaent, and the increased output of the construction industry has served only to aggravate the situation.

It Is clear, however, that if the new output goals for conotruc-tion equipment are realized, production of certain itemsill exceed that of the US. For example, the USSR will be producing more than the US in motor graders and possibly in excavators andc. Nevertheless, from the point of view of the size,and efficiency of the park of construction equipaent, the USSR is not expected to bo the equal of the US. It also is unlikely that production of spare parts will equal that of tho US. The supply of spare ports for construction equipment has never been adequate InR, and it may become critical unless some specific effort is made to increase output.

If the new goals of the Seven Year Plan are realized, the USSR should be able to supply the basic needs of Its constructionand may attempt to export substantial quantities to thecountries in Africa and Asia.


Estimated Production of Selected Types of Construction Equipment in the USSR




H.A. a/







roductionercentage8 Production









e n

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luations, follrw*ng th- classification entry and des'.gn;aveollowing significance:

Source of Information


- Documentary

Confirmed by other source



Probably true



Possibly true





usually reliable

Probably false



Cannot be judged


be Judged

Evaluations not otherwise designated are those appearing oi. cited document; those designated "RR" are by the author of this memorandum. No "RR" evaluation is given uhef thc authorith the evaluation on the cited document.

Except for CIA finished intelligence, all sources usedemorandum are eveluated RR 2.

1. US Joint Publications Tie-ieav^-h Ref-trS,


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