Page:NATIONAL INTELLIGENCE SURVEY 18; CZECHOSLOVAKIA; THE ECONOMY CIA-RDP01-00707R000200110014-8.pdf/36

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

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Moreover, among the East European countries, Czechoslovakia has the largest assistance program for the less-developed countries and generally is willing to take raw materials not in wide demand on the world market as repayment for credits. Nevertheless, Czechoslovakia has begun having difficulty marketing its products in these countries and even in the other Communist countries. These countries have been broadening their own range of products and also prefer, when they can afford it, to buy superior Western products.

The Czechoslovaks, in fact, have done less than most East European countries to try to sharpen their competitive position in the West. They have lagged in cooperative ventures, licenses, and even outright purchases of advanced plant and equipment. And they have not tried to restore the old traditional export industries—such as glassware—that still might have considerable appeal in the West. Plans for 1974 include a sharp increase in trade with West perhaps indicating that Prague is beginning to come out of the shell.

e. Balance of payments (S)

In all but 5 years of Communist rule, Czechoslovakia has had a generally sizable export surplus. Czechoslovakia's hard currency trade account, however, has accumulated a deficit of about US$850 million during 1960-72. The growth of hard currency indebtedness was temporarily curtailed in 1967-69 by a decline in imports in 1967 and good export gains in 1969. The Czechoslovaks were forced into emergency short-term borrowing when exports to the West fell in August 1968 as a result of the Soviet occupation. A deficit for this year as a whole, however, was forestalled by an unusually large surplus in Czechoslovakia's small hard currency trade with less-developed countries. Small hard currency deficits were recorded in 1970-72, but high-priced agricultural purchases created a record deficit in 1973.

Czechoslovakia has maintained one of the lowest debt servicing burdens relative to hard currency exports in Eastern Europe (about 25%). Hard currency deficits have been financed largely by medium- and short-term credits; the leaders, including Husak so far, have generally shied away from large long-term credits from the West. Indeed, as of the end of 1973, the last major credit from non-Communist sources as a $40 million line extended by Japan. Czechoslovakia also has received at least two small gold loans from the U.S.S.R.—one for $25 million in 1948 and another for 13.5 million in 1957.

In its trade with other Communist countries, Czechoslovakia customarily runs a surplus, accumulating an estimated balance in 1970-72 roughly equivalent to $500 million. This surplus does not include credits granted to the U.S.S.R., Poland, and East Germany—valued at over $1.5 billion—for development of raw materials in those countries. These credits included $556 million to the U.S.S.R. in 1966 for investment in the Soviet petroleum industry, a credit to Poland in 1967 for the development of the copper industry, and another $44 million to the U.S.S.R. in September 1968 for the construction of a natural gas pipeline on Soviet territory. In return, Czechoslovakia has been guaranteed long-term supplies of the related commodities.

In its bilateral clearing trade with less-developed countries, Czechoslovakia continues to accumulate a clearing surplus—in excess of US $800 million during 1960-1972. As in the past, the Czechoslovaks probably will find it necessary to offer long-term, low-rate credits to facilitate sales of its machinery and equipment to these clearing customers.

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