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supply, to increase sorely needed local services and to provide services for the rapidly rising number of tourists.

The basic production unit within the socialized sector is the enterprise, which consists of one or more plants producing related products. In April 1958 many enterprises were merged into larger units called "productive economic units" (Vyrobni hospadarske jednotky, or v.h.j.'s); Branch Directorates governed the v.h.j.'s along the lines of a board of directors. The new units were assigned some of the planning functions formerly exercised by the ministries, allowing the ministries to devote more time to long-range developmental problems. Two types of v.h.j.'s were established, one along vertical lines, involving stages of production ranging from the raw material to the finished product, as in the steel industry, and the second along horizontal lines. Those along horizontal lines were established when an industrial branch consisted of many small producers scattered over the country. In 1965 the v.h.j.'s were enlarged, their number was reduced from about 250 to 100, and their managerial functions were expanded. Under Dubcek, enterprises that preferred to operate on their own could separate from the v.h.j.'s, a policy that has weakened the authority of the remaining v.h.j.'s. After the Soviet intervention in August 1968 put an end to such experimentation, the autonomy of the enterprise was curtailed; decisionmaking power was centralized in the Branch Directorate.

D. Trade

1. Domestic (U/OU)

Improving the living standard has been a top priority of the Dubcek and Husak regimes, a sharp reversal of the consumer's low priority during the Novotny years. Among the many shortcomings of the system have been the following: The monopolistic position of the supplier and the resulting poor quality and assortment of consumer goods, the low level of investment in consumer goods production and trade, the relatively small number of employees in trade and their low wages, insufficient room for entrepreneurship, and strict controls on imports of consumer goods. Reformers under the Dubcek regime proposed using the "market mechanism" to make producers more responsive to demand, with increased reliance on economic incentives for managers and workers. They also wanted to give the trade organizations more freedom to import goods as a means of inducing domestic producers to become more competitive. The Husak formula has been to combine a fairly low investment priority for domestic trade with a conspicuous increase both in imports of consumer goods and in domestic procurement of meat to improve the diet.

Domestic trade is planned and controlled by the state; no private retail outlets have been licensed by the state since 1960. The free market—where products are sold to the population by farmers and by private craftsmen and enterprises—is small. Private and cooperative peasants are permitted to sell on the free farmers' market only the produce that remains after all obligations for deliveries to the state have been met. Because of the tight controls exerted over procurement of agricultural products, the role of the farmers' market remains insignificant.

Producer goods are distributed to industrial enterprises partly by the wholesale trading enterprises of the various economic ministries and partly by producing ministries. Products of the local and cooperative economy are distributed under the supervision of national committees. Consumer goods are distributed through the socialized wholesale and retail trade networks operated by the Czech and Slovak Ministries of Trade and the Central Union of Consumer Cooperatives. With the territorial reorganization of 1960, certain wholesale and retail enterprises were merged into larger units at the regional level, and the role of national committees in administering domestic retail trade was increased. Most state retail shops are controlled by the Czech and Slovak Ministries of Trade through Regional Trade Associations. The cooperative sales outlets—which operate primarily in rural areas—are under the Regional Unions of Consumer Cooperatives, which in turn are responsible to the Central Union of Consumer Cooperatives. Procurement of agricultural products is centrally planned by the Czech and Slovak Ministries of Agriculture and Food and coordinated by the Federal Ministry of Agriculture and Food. The authority for procurement is widely distributed among a number of ministries and other organizations, such as the Ministries of Internal Trade, the consumer cooperatives, national committees.

The retail trade network still is inadequate, although there has been substantial modernization, accompanied by a decline of about one-third since 1950 in the number of retail trade outlets. The number of department stores has been growing rapidly, but most stores are small and fairly specialized. At the end of 1971 there were 67,798 retail outlets employing

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APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110014-8