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relatively little responsibility for planning and direct administration of production. The associations perform the main tasks of assigning goals and issuing directives to enterprises and allocating investment funds within individual branches of industry. In many cases, they also perform marketing and research functions.

Another level of control was set up by an October 1969 decree which authorized the establishment of combines — groupings of enterprises engaged in the production of parts and components for a specific final product. A combine is supposedly responsible for all its constituent units and is expected to organize research and development, draft plans for the purchase of licenses, and conduct market research. It may be directly responsible to a ministry, or it may remain under the authority of an industrial association.

Economic plans are worked out by the State Planning Commission (attached to the Council of Ministers), partly on the basis of projections of capacity made by the enterprises, combines, associations, and ministries. General goals are established by the Commission for the various branches of industry. These are generally routed through the ministries to the appropriate industrial associations, which then allocate their share of investment funds, materials, and labor, and assign various goals among the member enterprises. Each association and enterprise makes up its own economic plans on the basis of the goals and directives handed down from above. The enterprises and associations have considerable freedom of action within the limitations imposed by these goals and directives.

3. Finance

Before Gomulka's accession to power, all investments in the postwar Polish economy, except some private investments in agriculture, had been made by the state. The bulk of state investment was allocated directly through the state budget, and self-financing by enterprises was small. State enterprises paid most of their earnings into the state budget. After 1957, enterprises were allowed to retain a small portion of their earnings in the form of enterprise funds and development funds, as a bonus for fulfilling goals and increasing their profits. These funds were to be used primarily for worker housing and recreational facilities rather than for reinvestment in production. The use of bank credit by enterprises was limited to working capital and to certain small loans for investments that promised a fast return. The major role of banks in the investment process was to disburse budgetary funds as allocated by the economic and financial plans and to oversee enterprise use of these funds.

Since 1965, the use of retained earnings and interest-bearing bank credit to finance enterprise investment has increased, thereby reducing the amount of time spent by enterprises in obtaining investment funds as compared with the previous system. The use of retained earnings and bank credit also made enterprise management conscious of capital costs. All large investment projects, however, are still financed directly through the state budget.

Slightly less than one-third of planned budget expenditures in FY73 are allocated to finance production, transportation, and trade under the category of financing "enterprises and other units of the socialized economy." Other budgetary expenditures include 19% for social and cultural services, about 6% for social insurance payments, 8% for national defense, and 5% for administration.

The largest part of budget revenue — 77% of that planned in 1973 — has come from socialized enterprises in the form of turnover (sales) taxes on most consumer goods and many producer goods, and from transfers of a large part of the profits of producing and trading enterprises. About 6% of budget revenues in 1972 are to come from social insurance collections, 7% from taxes on wages and salaries, and 2% from taxes on private property, of which the largest component is the land tax in agriculture. Most of the residual revenues originate in state borrowing, including lotteries.

The Polish banking system, under the Ministry of Finance, includes a number of banks, all of which have branches throughout the country. On 1 January 1970, this system underwent its first major reform in more than two decades. The key reform provided for the amalgamation of the Polish National Bank and the now defunct Investment Bank. As before, the National Bank performs the traditional functions of central banks in the non-Communist countries and controls the current operations of industrial enterprises. It has also assumed a major new role in investment financing, previously accorded to the Investment Bank. The Polish National Bank administers all nonagricultural investment funds provided for in the state budget and controls the operations of construction enterprises. By creating a single authority with overall responsibility for initial investment decisions, working capital, and investment refinancing, the Polish planners evidently hope to curtail the widespread practice of exorbitant cost overruns.

The reform also enlarged considerably the responsibilities of the General Savings Bank (Powszechna Kasa Oszczednosci — PKO), which, until

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APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200070030-5