The Global Emerging Market in Transition: Articles, Forecasts, and Studies

The Global Emerging Market in Transition: Articles, Forecasts, and Studies

Vladimir L. Kvint
Copyright Date: 2004
Published by: Fordham University Press
Pages: 699
https://www.jstor.org/stable/j.ctt13wzws5
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  • Book Info
    The Global Emerging Market in Transition: Articles, Forecasts, and Studies
    Book Description:

    A compendium of the work of Vladimir L. Kvint, Global Emerging Market in Transition: Articles, Forecasts, and Studies is an essential guide to understanding the intricacies behind global trends and emerging markets. Starting with the explanations and definitions of global trends, classifications of different perspectives of emerging markets, and the general understanding of the nature of modern global emerging markets, Professor Kvint moves the reader through the current emerging markets in Europe, Central Asia, and Latin America, providing analyses and forecasts. He then presents an in-depth analysis of today's largest emerging market-Russia. Professor Kvint stresses the importance of Russia's move from a communist command system to a free-market economy, and how this will affect the business community politically, socially, and economically.

    eISBN: 978-0-8232-4793-6
    Subjects: Marketing & Advertising

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-xii)
  3. PREFACE
    (pp. xiii-xiv)
    Vladimir Kvint
  4. BECOMING A STRATEGIST: AN INTRODUCTION TO THE SECOND EDITION
    (pp. xv-xxiv)

    As a boy of 16, I was a simple metalworker whose main responsibility was to make hammers. One late evening, my boss, the team leader, called me and said, “Vladimir, in any case, you are not a good metal worker; better you should give me your advice and figure out how we can beat this latest steel shortage and get more orders.” Shortage is a key word for understanding Soviet everyday life and business. People were constantly struggling to obtain one thing or another (from laundry detergent to cars), be it through barter, graft, or standing in long lines for...

  5. INTRODUCTION: THE FUTURE BEGINS TODAY
    (pp. 1-16)

    The business world of the 21st century and the new millennium will not arise out of nowhere; it will inherit the characteristics, from the last 15 years of the 20th century, of the world’s business map. Specifically, there is no one event in the history of business at the end of 20th century that better predicts the business world of the next century than the birth of the Global Emerging Market.

    Today, when only days remain before the new millennium, anyone who writes about the future will find it very difficult to convince his readers that his forecasts and predictions...

  6. PART I UNDERSTANDING THE GLOBAL EMERGING MARKET
    • Classification of Emerging Markets
      • INCORPORATING GLOBAL RISK MANAGEMENT IN THE STRATEGIC DECISION MAKING PROCESS
        (pp. 21-33)

        Ten years ago, the global business world was totally different from what it is today. While this is not surprising, the scope of the changes is virtually unprecedented. In 1986, the world was divided into 18 Developed Countries and 125 Developing Countries; 98% of all international transactions were between the 18 developed countries, while only 2% were with the 125 developing countries.

        Since 1987, approximately 40 of the developing countries have become Emerging Market Countries. Currently, these Emerging Market Countries account for approximately 70% of the world population, 15% of all international transactions, and 25% of the global GDP, which...

      • EMERGING OR DEVELOPED, WHAT’S THE DIFFERENCE?
        (pp. 34-36)

        Securities Operations Letter: You have developed three approaches to identifying emerging markets. Why did you develop these approaches, and what are they?

        Vladimir Kvint: They were needed because there is no general agreement on the definition of an emerging market among market participants, academics, and economists. The three approaches to developing a definition are the financial approach, the political approach, and the business approach. The financial approach was actually created by IFC, the International Finance Corporation.

        Q: What is the financial approach?

        Kvint: It says that countries with average per capita income of $8,625 are considered developed countries. Countries below...

      • A DIFFERENT PERSPECTIVE ON EMERGING MARKETS
        (pp. 37-44)

        It is no surprise that the Fourth World Economic Development Congress, which took place in October in Washington, D.C., had “emerging markets” at the top of its agenda. It is the single most important issue for the world business community. As an investment class, its status is on the agenda of international business executives and entrepreneurs alike. Emerging markets play an integral role in the international financial markets, in particular derivative instruments, pension reform, pension, mutual funds, and currency markets.

        A new world order is emerging. The collapse of communism is almost complete, and with it a whole global economy...

      • HOW EMERGING IS EMERGING?
        (pp. 45-46)

        One question to consider in preparation for what lies ahead is how to define what an emerging market really is? How many institutional investment funds use a written policy to determine which countries qualify as emerging markets? How familiar are plan sponsors with their managers’ definition of the term? The World Bank’s International Finance Corporation defines emerging markets to be those with a GDP per capita below $8,625, but it does not indicate a minimum GDP per capita, points out Vladimir L. Kvint, Director, Emerging Markets, at Arthur Andersen Economic Consulting, New York, and Professor of Management Systems and International...

    • Investing in the Emerging Markets
      • GAUGING THE RISK: FOREIGN DIRECT INVESTMENT IN EMERGING MARKET COUNTRIES
        (pp. 49-63)

        In the last two decades of the twentieth century, watershed political changes rocked five continents and, as a result, broke open scores of countries that never before had been an integral part of the global market. The historic demise of the Soviet Union, the collapse of apartheid in South Africa, and the dismantling of military and personal dictatorships in Latin America, Pacific Asia, and the Indian subcontinent meant that the global business world was five times what it had been prior to the 1980s.

        This is the second time in the last 500 years that geopolitical events had remapped so...

      • INTERNATIONAL MONETARY FUND AND THE WORLD BANK: THE ADVANTAGES AND SHORTCOMINGS
        (pp. 64-67)

        In 1944, the Soviet Union had the opportunity to become a founding member of the IMF and World Bank. Joseph Stalin sent representatives (including the father of Victor Gerashenko, the current head of the Central Bank) to several meetings. Stalin ultimately decided that these institutions were too imperialistic for USSR participation. So, for the next 48 years, the Soviet Union remained outside the circle of legal, international, economic, and financial institutions. But when the Soviet Union was near collapse, the Soviet and then Russian leaders rediscovered the IMF and World Bank. They saw them as two of the major sources...

      • DON’T GIVE UP ON RUSSIA
        (pp. 68-81)

        The Russians love their dictators, I’ve heard American say. I suppose one could argue the point. But Westerners who think Russians are hostile to a free economy are just plain wrong. The 25% of the population that voted for the nationalists in the last parliamentary election were not voting against capitalism; they were protesting the hardship caused by “shock therapy,” the ill-conceived economic policy that resulted in skyrocketing inflation, high unemployment, a fuel shortage, and a decrease in food consumption, all of which have left 90% of Russians living below the poverty level. Still, if the 1991 coup plotters—the...

      • THE RUSSIAN INVESTMENT DILEMMA
        (pp. 82-96)

        Do the risks of starting joint ventures in Russia outweigh the benefits?

        Some experts are counseling U.S. companies to move slowly as they develop joint ventures in Russia. In “Don’t Give Up on Russia,” Siberian-born Vladimir Kvint advises Americans to invest early and move fast. Despite sky-rocketing inflation and other economic hardships, the climate for international joint ventures has never been better, he argues. Russia has a cheap and highly educated workforce, inexpensive land, and abundant natural resources. According to a study Kvint conducted of joint ventures attempted, between 35% and 38% of those consummated are already profitable or well...

      • RUSSIA IS CREATING A SYSTEM TO ENSURE FOREIGN INVESTMENT: $1.5 BILLION COLLATERAL FUND ESTABLISHED TO SAFEGUARD FOREIGN VENTURES
        (pp. 97-100)

        The recent political fights should be taken in their proper context. After 70 years of communism, the road to democracy is anything but straight. What is clear is that there is no longer any turning back; nothing can strangle democracy in Russia.

        As sure as there is political infighting now, there will also be fights between President Yeltsin and the new parliament a year from now; it is an unavoidable part of their mentality. In spite of these political struggles, Russia is moving quickly to a free market economy. The business climate remains stable.

        To pursue this burgeoning marketplace, it...

      • THE NATURE OF INTERNATIONAL JOINT VENTURES AND THEIR ROLE IN GLOBAL BUSINESS
        (pp. 101-129)

        International politics during the 1980s were marked by the collapse of communism; the end of the ColdWar; the breakdown of dictatorships in Latin America, Pacific Asia, and the Indian Subcontinent; and the end of apartheid in South Africa. These changes and those from the technological revolution, especially in telecommunications, have enhanced the globalization of business. The increase in the gross domestic product of leading countries during the 1980s and 1990s was largely the result of the globalization of business (more than 50 percent of industrial products in developed countries are the result of international cooperation with each other and especially...

      • DEVELOPMENT OF INTERNATIONAL JOINT VENTURES IN RUSSIA: RISKS AND OPPORTUNITIES
        (pp. 130-146)

        For 74 years of Soviet history, foreign economic activity was a monopoly of the state. Even state enterprises and industrial ministers were not authorized to have direct business relationships with foreigners. All foreign trade and foreign business cooperation belonged exclusively to two state executive bodies, the Ministry of Foreign Trade and the State Committee for Foreign Economic Ties. The former was responsible for all export and import activities, while the State Committee was responsible for Soviet investment abroad, such as construction of a cement plant in Iraq, a ferrous metallurgical facility in India, and a nickel plant in Cuba. The...

      • “TO CAPITAL MARKETS, WITH LOVE,” SAYS RUSSIA
        (pp. 147-148)

        With a carrying cost of roughly 65% on the latest auction of its outstanding government debt, Russia is keen on opening its government bond markets to the world’s yield-hungry investors. Up to now, the country’s treasury bill market has been dominated by Russian banks. However, one of the steps necessary to attract investors made wary by past sins (i.e., revoking the visa of an outspoken American investor) is restructuring past-due Soviet-era notes into more liquid bonds, which the government managed to do this summer.

        It’s a given that the Russian government needs to increase the flow of foreign capital. ‘‘Russia...

      • RUSSIA IS LOSING THE BATTLE FOR FOREIGN INVESTMENT
        (pp. 149-151)

        Although the present worldwide shortage of capital diminishes the interest of Western investors in Russia, in the future, this country is seen as an emerging capitalist market.

        A year or two ago, Russia was placed high on investors’ priority lists. The government established the foundations of main capitalist institutions; however Russian bureaucracy strictly regimented their rights. The old control mechanisms of the Central Committee of the Communist Party and of the Control Commission vanished without any effective replacement, thus allowing rampant corruption and crime to emerge.

        Russian government must realize that the competition for capital among emerging markets is extremely...

      • DESPITE ROUGH WATERS, MARKET ECONOMY CRUISES AHEAD: OPPORTUNITIES ABOUND IN NIS FOR INTREPID INVESTORS
        (pp. 152-155)

        Recent political events in Moscow and their coverage in the media have been misleading about the situation in Russia. The battles of October have had no real impact on the development of a free market economy. As practically all Russian leaders (except a few stupid Fascists) understand, without the cooperation of the West it will be impossible to revive Russia and the other countries of the Newly Independent States (NIS). Even the recently dissolved Russian parliament was not opposed to foreign investment; rather, it was, in its own time and manner, enacting legislation necessary to create a favorable business environment...

      • KVINT’S FORECAST: BEYOND THE POLITICAL FOG, THE BUSINESS HORIZON LOOKS CLEAR
        (pp. 156-160)

        What has happened in the former Soviet Union in the past three years has no analogy in history. The world’s biggest and last empire has collapsed. When I wrote inThe New York Timeson October 28, 1990, that by 1992 there would no longer be a Soviet Union, very few people shared this idea. Now it is an historical fact.

        Sometimes, the business community acts as if the collapse occurred a decade ago; in fact, it was not even two years ago. Now, Russia, Ukraine, Kazakstan, and other former Soviet republics hold the attention of the world’s investors and...

  7. PART II THE TOP EMERGING MARKETS OF EUROPE, CENTRAL ASIA, AND LATIN AMERICA
    • WE FORGIVE YOU A solution to poverty and unemployment in emerging market countries.
      (pp. 163-165)

      The movement of foreign capital to emerging markets is usually as relentless as the eastward flow of the mighty, murky Danube. Capital seems inevitably attracted to the lower expense bases of developing countries, with their weaker regulatory regimes, tireless work forces, and six-day work weeks. And investment flows usually mean gradually rising levels of net wealth, health, and education for the target markets.

      Paradoxically, though, one category of emerging markets finds itself consistently capital-poor—and getting poorer. These are the emerging markets where corruption and xenophobia rule—such as Ukraine, Bulgaria, Romania, and Albania. Foreign investment rarely occurs here, and...

    • EUROPE’S SIX TOP EMERGING MARKETS
      (pp. 166-177)

      In the early 1990s, the global business world changed entirely, due to the ascendancy of the emerging market countries. In comparison with the previous decade, emerging market nations as a group increased in land mass, population, and industrial production. Due to a complete lack of local capital and investment, these developing nations needed foreign assistance, although they still tried to maintain some elements of centrally planned, inefficient economic structures. They soon realized that they needed to attract foreign investment by reforming market policies. The processes of privatization, demonopolization, and demilitarization of the economies of these states in transition and countries...

    • BALKANS: EMERGING MARKET FOR INTERNATIONAL BUSINESS
      (pp. 178-181)

      The fall of the BerlinWall and the disintegration of the Soviet Union created not one but several new markets for the international investment community. Serious investors must view each market separately, both in terms of development opportunities and in terms of their level of readiness for working with international business. I believe that in 1995 former Soviet-bloc countries in the Balkans will become the new focus of activity.

      Some Eastern European markets, such as the Czech Republic, Hungary, and Poland, after experiencing tumultuous economic, social, and political upheaval, have emerged with a high level of opportunity. Due to Russia’s huge...

    • BALKAN REFUGEES IN THE EUROPEAN UNION AND THE UNITED STATES: STRATEGIC ECONOMIC SOLUTIONS FOR MIGRATION
      (pp. 182-189)

      Migrants and refugees suffer from a number of social ills that compromise their human rights no matter where they live. They have limited access to social and health services and their plight is hardly the primary concern of governments and public administrations. This is despite the fact that migration is more of a symptom than a causal condition. Academic studies on the topic view migrants as the source of many problems. Chronic unemployment, low standards of living, and indifferent governments are the reasons that these people become refugees in the first place. Consequently, the view of the refugee as the...

    • BULGARIA LAGS BEHIND DANGEROUSLY
      (pp. 190-192)

      Every yearThe Wall Street Journal, in collaboration with the Heritage Foundation (an independent organization), publishes an index on the degree of economic freedom. The major business circles in the world are defined by these data. The analyses and evaluations are based on ten basic indicators: market freedom, freedom of fiscal policy, degree of government intervention in the business sector, monetary policy, foreign investments, banking and finance activities, wages and prices, the rights of property and regulations of the state, and the black market.

      Estonia has the highest index for economic freedom among the countries from the ex-Soviet block. The...

    • AMNESTY FOR CAPITAL EXPORTED ABROAD: ITALY DID IT, WHICH MEANS BULGARIA CAN DO IT TOO
      (pp. 193-194)

      At the end of January the European Commission approved the special Italian law regarding the nationalization of capital exported abroad. This means that Italy is the first country from the euro zone to announce that illegally exported capital will be nationalized. A major part of this capital is located in offshore zones or in secret bank accounts in Switzerland. In doing so, the Italian government opens the door for this money to be returned until February 28, 2002. All businessmen and private companies from the bottom up have the right to take back an unrestricted amount of money to the...

    • BULGARIA AS THE LAST KLONDIKE IN EASTERN EUROPE
      (pp. 195-198)

      During the four-year revolution of President Boris Yeltsin, Russia has sold, for almost nothing, about 75% of its economy. Most of the Eastern European countries have finished their process of mass privatization. Only one stable country has not yet begun a large-scale privatization program: Bulgaria. Two years from now in Bulgaria there will be little to buy. But for now, it is a country of great adventure for entrepreneurs who want to make a fortune. That was the reason for my recent visit to Bulgaria.

      Not only is Bulgaria across the Atlantic Ocean, it is also in the United States...

    • BUILDING CAPITALISM IN BULGARIA BY DECREE
      (pp. 199-201)

      Q: Mr. Kvint, what are your impressions from your contacts with the Bulgarian Government?

      A: The first thing that I noticed is that Bulgaria is steadily going toward a market economy. However, Bulgaria lags behind the rest of the former communist countries with respect to privatization. On the one hand, this is good because Bulgaria has not yet sold its plants and assets below value. The bad side, however, is that the people responsible for the privatization program do not know much about privatization. They still estimate the value of the plants on the basis of the historical cost principle....

    • UKRAINE: LIVING IN RUSSIA’S SHADOW
      (pp. 202-204)

      Living in the shadow of the neighboring Russia, Ukraine, Europe’s largest emerging country, but one of the least known, is making considerable strides in reforming its economy and attracting foreign investment.

      Some of its effort is showing results. Ukraine now offers just as many investment opportunities as Russia does. It is attracting attention particularly in the United States, which, without much media attention, has become Ukraine’s largest foreign investor.

      With hardly anyone taking notice, earlier this month, Ukraine, once among the five strongest nuclear powers in the world, voluntarily gave up the last of its nuclear warheads.

      Although invisible on...

    • KAZAKSTAN: RICH IN HISTORY AND RESOURCES
      (pp. 205-211)

      Kazakstan is a very young nation and one of the ten largest countries, by territory, in the world. The first is Russia. The territory of Kazakstan equals approximately all the territory in Europe. Anyone who tries to conduct business in the former Soviet bloc knows Kazakstan. But very few know the opportunities that lie in this stable and rich environment.

      Kazakstan became independent for the first time in its history in 1991. Its land mass occupies roughly 12% of all former Soviet Union territory. Because of its size, the country has the lowest population density of all the former Soviet...

    • BRAZIL: SOCIAL DEVELOPMENT AND TELECOMMUNICATIONS MARKET ANALYSIS
      (pp. 212-226)

      In the contemporary world, a strong connection exists between the development of the telecommunication (telecom) system and the social and economic progress of the country. This relationship is multi-directional. On the one hand, a country whose telecom system is well developed can benefit from social progress and an increase in economic achievement. On the other, the telecom sector is strongly influenced by that country’s cultural traditions and political factors, as well as its business and economic environments. Based on this point of view, in order to properly evaluate the market’s full potential, we need to give priority not to the...

    • CLIMB TO THE TOP
      (pp. 227-228)

      My friend Lori Minard was born 51 years ago at the foot of Mount Rainier on theWest Coast of the USA. He dared to climb to the top, as he had promised to himself. On August 2, 2001, at 4.4 kilometers up, he told his 16-year-old daughter he was choking. He sat down and unbuttoned his collar. In two minutes Lori was gone.

      At the end of the 1980s I was attempting to publish an article about the inevitable decay of the USSR by the year 1992. Austria, Switzerland, Bosnia, Holland—everywhere I tried was in vain. I spoke to...

  8. PART III THE EMERGING MARKET OF RUSSIA
    • Transition to a Free Market
      • PUTIN’S WAR ON THREE FRONTS
        (pp. 233-234)

        In “Watch Out, Kleptocrats,” I predicted that Vladimir Putin would be elected president of Russia in March and that he would declare war on corruption. But what I didn’t foresee was the decisiveness with which Putin would prosecute this campaign, by waging war on two fronts—against the oligarchs, such as Boris Berezovsky, who control the commanding heights of the economy and the provincial governors who have financially benefited from their business links. That makes three fronts, if you include the guerrilla war in Chechnya.

        Taking action on one front would be hard enough; battling against three sets of enemies...

      • WATCH OUT, KLEPTOCRATS
        (pp. 235-237)

        In “The Last Days of Boris Yeltsin,” published in the September 7, 1998, edition ofForbes Global, I wrote: “[Boris] Yeltsin might strike a deal to step down (he is not a well man) before the next elections, which are set for June 2000.” On New Year’s Eve, 1999, Yeltsin announced his resignation. Thank you, Boris, for making me look good.

        This is not the end of Yeltsin, however. Believe it or not, he has hand-picked almost all of the candidates available to the Russian electorate in the presidential campaign of 2000. Vladimir Putin, Yevgeny Primakov, Sergei Kiriyenko—all of...

      • THE LAST DAYS OF BORIS YELTSIN
        (pp. 238-244)

        In February 1990, Forbes published an article by Vladimir Kvint predicting that the Soviet empire would fall apart and Russia would go it alone. Most of the experts scoffed: It couldn’t happen. The accepted view was that the KGB, the Communist Party, and the Red Army would hold the empire together. They didn’t. Two years later the USSR expired more or less peacefully into 15 republics. Again putting his neck out, Kvint predicts that the Yeltsin government will soon fall and be replaced by a much more authoritarian regime.

        Eighty-one years ago this autumn, the October Revolution swept from power...

      • FIXING RUSSIA
        (pp. 245-246)

        In his speech announcing his nomination of Viktor Chernomyrdin as prime minister, President Boris Yeltsin stated that no one could have expected the Russian financial crisis. Soldiers and workers aren’t getting paid, export earnings end up in Swiss bank accounts, and no one could have foreseen a crisis? The man is clueless.

        The crisis cannot be ended by IMF loans or half-hearted reforms. It can end only when the crooked privatizations of the early 1990s are reversed, some controls reestablished, and the crooks who stole the proceeds from Russia’s exports forced to disgorge their foreign bank accounts. This Yeltsin cannot...

      • YEAREND—BULL RUN IN RUSSIA, EAST EUROPE MAY SLOW
        (pp. 247-248)

        New York, Dec. 12 (Reuters)—More players, more issues but lower returns are expected for the fixed income markets in Russia and East Europe in 1997, U.S. experts said.

        Investors expect 1997 to be less bountiful than 1996, which so far has seen Russian debt double in value while Poland has risen 35% and Bulgaria 28%, they said.

        This year’s heady ride, of course, followed the 1995 liquidity crunch brought by rising U.S. interest rates, while next year’s performance will be compared to the much stronger baseline levels of 1996.

        Vladimir Kvint, senior consultant at Arthur Andersen Economic Consulting, said...

      • WATCHING RUSSIAN BUSINESS VENTURES
        (pp. 249-251)

        While the world waited for the first stage of Russia’s presidential elections, Vladimir Kvint was watching commercial activity more closely than the balloting. Kvint had predicted the breakup of the Soviet Union two years before it disintegrated in 1991, and he expected Boris Yeltsin to be elected president. What he cannot forecast is when the new Russia will realize its promise as a global economic power.

        Kvint is a professor at Fordham University and an emerging markets expert at Arthur Andersen & Co., S.C., in New York. His analysis of events in Russia starts with a basic point: No country this...

      • RUSSIA’S IMBALANCE OF POWER
        (pp. 252-254)

        On June 16, Russia will hold its most important election of this century as its people vote to retain or replace President Boris N. Yeltsin. But this political puzzle, like all puzzles, has a clear, finished picture: No matter who is elected, Mr. Yeltsin will remain in power. The only question is what title he will hold—or give himself.

        I will not predict the mechanism by which Mr. Yeltsin will keep his power in the framework of the Russian constitution and political struggle. I can only draw analogies. In China, there is a president, a prime minister, even a...

      • ELECTION RESULTS IN THE RUSSIAN DUMA
        (pp. 255-258)

        As usual, the American mass media is overestimating political changes in Russia and their implication for business. The conventional wisdom about the election results in Russia is that the communists have come back to parliament. The communists won approximately 22% of the vote, the party of the opportunist Vladimir V. Zhirinovsky won about 11%, and less than 9.5% was won by Viktor Chernomyrdin’s party called “Our Home Is Russia.”

        According to Western popular opinion, Chernomyrdin’s party is the one hope to protect freedom and the market economy in Russia. Don’t be misled. Remember December 1992 and January 1993 when Yegor...

      • PRIVILEGES OF THE DUMA AND BORIS YELTSIN’S POWER
        (pp. 259-262)

        On December 17 there will be a new political spectacle in Russia: election to the parliament. Some believe that this is an important election, one that will have an impact on business, or be a prognosticator for the presidential election on June 16, 1996. This election, however, is of no real importance. The parliament has no influence on business or the power structure in Russia.

        Recently, at a business lunch with a very prominent Wall Street analyst, we discussed the upcoming parliamentary election. I gave my rational for saying that the parliament has no influence whatsoever on what happens in...

      • RUSSIA’S CRUMBLING INFRASTRUCTURE
        (pp. 263-265)

        Russia needs investment in modern technology and more financial experience from the West if it hopes to make a difficult transition from socialism to capitalism. But Russia will have a hard time attracting foreign investment without a transportation system.

        Certainly, the big international lending institutions, which are providing aid to Russia, are paying a great deal of attention to its economy. Yet they have given practically no thought to its woefully underdeveloped transportation infrastructure, especially to ground transportation. A modern transportation system is crucial to Russia’s growth, to developing its vast stores of natural resources, and to playing a larger...

      • RUSSIA’S CAPITALIST INSTITUTIONS
        (pp. 266-268)

        There is no single Russia; there are many, and they are intertwined. There is the Russia of great opportunity, the Russia of political upheaval, the Russia of crime and bribery, and the Russia of entrepreneurs and executives trying to conduct business despite uncertainty. These differing faces confuse foreigners who want to invest in this emerging market. Considering the Western media’s preoccupation with bad news from Russia, a sensible business executive would reasonably hold back. Still, there have been enormous changes for the better in Russia, and many of those changes specifically benefit investors.

        Among the typical misconceptions about Russia is...

      • CRIMINAL ACTIVITY IN RUSSIA: FACT AND FICTION
        (pp. 269-275)

        The notion that criminal activity in Russia is rampant is quickly making the rounds of potential investors. Whether it is real or imagined, the issue of crime and the power of the “Russian Mafia” is taking a front seat in strategic decisions on investment, trade, operations, and capital markets. President Yeltsin issued a decree at the end of 1993 initiating a campaign against organized crime. But this new problem continues to be a topic in the newspapers and on TV programs. What is the reality? And what are the genuine risks for foreigners?

        The answers to these questions are inextricably...

      • NEW RUBLE ZONE DOOMED, EXPERTS ON RUSSIA SAY
        (pp. 276-276)

        “Russian economic and financial policies are not stable or honest. Why should anybody want to follow Moscow’s lead?”

        The pact signed this month by Russia and five former Soviet republics to form a new ruble zone is doomed, Russian specialists and economists said.

        The agreement to create an economic and monetary union with the ruble as a common currency would require the republics to bow to Russian demands on fiscal and monetary policy, they said.

        “Russian economic and financial policies are not stable or honest,” said Vladimir Kvint, Russia specialist, economist, and professor of management systems and international business at...

      • RUSSIAN EXPERT ADDRESSES COMMUNITY GROUP AND FACULTY: PROFESSOR, CONSULTANT, AND AUTHOR VLADIMIR KVINT ON CAMPUS
        (pp. 277-278)

        Vladimir Kvint is an internationally recognized specialist on the economy and natural resources of Russia and other former Soviet Republics. A professor at Fordham University and a senior consultant at Arthur Andersen Economic Consulting, Kvint spoke before the California–Russia Trade Association at Whittier Law School September 21, and addressed Whittier Law School faculty on September 22.

        Kvint was on tour to support his new book,The Barefoot Shoemaker: Capitalizing on the New Russia, a contemporary examination of the Russian economy and the social, geographical, and historical forces that drive it.

        Vladimir Kvint was the keynote speaker at Whittier’s International...

      • RUSSIAN DIAMONDS
        (pp. 279-281)

        Boris Yeltsin does not consider himself bound to deals made by Mikhail Gorbachev—as Harry Oppenheimer and De Beers are learning.

        Harry Oppenheimer and his son Nicholas were in Moscow early last September. The Oppenheimers control De Beers Consolidated Mines Ltd. and were there for the opening of De Beers’s firstMoscow office.

        De Beers, South Africa’s giant mining company and marketer of diamonds, is the world’s largest producer of diamonds. Through its Central Selling Organization cartel, De Beers has long controlled the prices and supply of raw diamonds to cutters and polishers around the world. Russia, the world’s second-largest producer...

      • A HEALTHY REALISM FOR THE RUSSIANS
        (pp. 282-283)

        For 40 years I lived in Russia, where communist propaganda bombarded people with images of the United States as the enemy. But this was largely ineffective, since most Russians distrusted such information. Only now that I am in the United States do I understand just how effective media propaganda can be.

        A case in point: After Yegor T. Gaidar was replaced as Russian prime minister last year by Viktor S. Chernomyrdin, the American media routinely used negative labels like “former apparatchik” in referring to Mr. Chernomyrdin, while asserting that under Mr. Gaidar’s leadership, a revolutionary shift to capitalism was taking...

      • WHY YELTSIN IS STYMIED
        (pp. 284-284)

        When President Boris N. Yeltsin of Russia failed to get his congress to approve his economic plan along with his choice for prime minister, Yegor Gaidar, he accused the legislative body of seeking to return the country to the dark days of communism. Then Mr. Yeltsin proposed holding a national referendum next month to determine who is the country’s boss—the president or the congress. But not everyone agrees that congress is against reform; some say it’s just Mr. Yeltsin’s current plans. “Who gave Yeltsin special powers to conduct his economic reform? Congress,” said Vladimir Kvint, a professor of international...

      • GORBY TAKES THE FIFTH
        (pp. 285-286)

        Is Yeltsin persecuting Gorbachev? Or could it be that the deposed Soviet leader can’t get used to a system where even the highest are accountable to the law?

        Recently Mikhail Gorbachev has been complaining bitterly toWestern correspondents that the Russian militia, acting on orders from the Russian government, seized not only the building housing his Gorbachev Foundation but his limousine as well. Poor Gorby. Is this any way to treat the man who brought about the end of Soviet tyranny?

        The story, however, is not quite so simple as the Western media has made it out. The huge building has...

      • DOWN THE RATHOLE
        (pp. 287-289)

        Doesn’t anyone remember what happened to the loans to Latin America or to Mikhail Gorbachev’s regime?

        The recent political summit in Munich ended with only one concrete result. The leaders of the industrialized countries agreed to give the Russian government $1 billion through the International Monetary Fund. This amount will likely be followed by another $6 billion stabilization fund to support the ruble by year’s end, with many more billions to follow. But anyone who thinks this money will improve the situation in Russia is in for a big disappointment. It will be money down a rathole, as people from...

      • OPPORTUNITY IN A SHATTERED LAND
        (pp. 290-291)

        The business map of the future is being drawn in the old Soviet Union and in Eastern Europe. Most of the attention is going to the disintegration—the splitting apart—of the world we knew. But another process is at work, too, which could be significant for Western business. A reintegration—the creation of new alliances—is beginning.

        The entities forming in the wake of the Soviet Union’s breakup will develop nontraditional economic ties with each other, and there will be new opportunities for Western investors to profit. There are risks—risks that the new nations will develop protectionist stances...

      • COPYING THE COMMUNITY
        (pp. 292-292)

        While Western Europe was unifying, the Soviet Union was becoming unglued. Last week Russia’s President, Boris N. Yeltsin, and the leaders of Ukraine and Byelorussia, replaced the union with a new commonwealth. The republics will use the ruble as their common currency, defend themselves jointly, and harmonize their economies. Five Asian republics joined the commonwealth last week. That leaves the Soviet President, Mikhail S. Gorbachev, “a king without a country,” said Vladimir Kvint, a lecturer at Babson College. In the new commonwealth, “the relationships between the republics will be like the relationship between countries in the European Community,” he said....

      • POLITICAL, ECONOMIC, AND LEGAL REFORM IN THE SOVIET UNION
        (pp. 293-296)

        The development of Soviet-American relations has received much attention in the United States. Clearly, the development of such a relationship facilitates peace; for those who trade do not start wars with one another. Currently, the Soviet Union is undergoing the process of social revolution. Public forces are becoming polarized. This process has its own dynamics and logic.

        When perestroika began in 1985, economic tasks were considered the most important. Prior attempts at economic reform were made, but they always occurred without a corresponding change in the political sphere. Political leaders of the USSR failed to understand that economic and political...

      • THE NEW MAP OF EASTERN EUROPE
        (pp. 297-297)

        Vladimir Kvint, a Russian-born economist, has contributed forwardlooking coverage forForbeson the collapse of socialism. In “Russia as Cinderella” (February 1, 1990) he was perhaps the first writer to predict that the Soviet Union would come unglued. Now, he looks beyond the dissolution and sketches out the new economic and political groups he is convinced will emerge....

      • SIBERIA: A WARM PLACE FOR INVESTORS
        (pp. 298-301)

        The breakup of the Soviet Union presents great opportunities for U.S. investors and business people. But to grasp them they will have to recognize that there no longer is a Soviet Union.

        Shortly before the failed coup took place, this joke came out of the Soviet Union: Mikhail Gorbachev sits in his office, musing on a huge portrait of himself. “Soon, my friend, the people will take us down,” murmurs Gorbachev. “You are a fool,” the portrait responds. “The people will unhang me. They will hang you.” The joke was close to the mark. Leaders of the coup had counted...

      • GENNADI YANAYEV, OVERACHIEVER
        (pp. 302-302)

        The rise of a mediocre man like Gennadi Yanayev demonstrates how weak and desperate the Soviet Communist Party has become. Neither a smart reactionary nor a talented technocrat, he is gray, cynical, and pragmatic just like the party machine itself. As an economist, he is nonexistent.

        I first met him in 1970 and since then I have watched his rise in the communist power structure. At the time, I was head of a students’ construction unit and knew him when he was a mini-boss of the Komsomol, the young communists’ organization that is a breeding ground for party bosses. Obedient...

      • THE COUP’S AFTERMATH: WILL GORBACHEV BE THE LOSER?
        (pp. 303-303)

        The coup last week in the Soviet Union failed before most people outside of Russia could learn how to pronounce the plotters’ names. But it demonstrated powerfully how deeply the Soviet Union has committed itself to reform. “Even the heads of the KGB and the military could not succeed with a coup,” said Vladimir Kvint, a lecturer at Fordham University. “That means political risk has diminished. Investment in the Soviet Union is safe.” But the Soviet Union still is likely to undergo more wrenching change. Boris N. Yeltsin’s heroic stand elevated his status even more. He will no doubt use...

      • DEAD SOULS
        (pp. 304-308)

        Workers in the Soviet Union seem lazy and thieving, but the Soviet people are fundamentally honest and capable of hard work. It is the system that has made them bad—and the system is dying.

        All the economic news from the Soviet Union is bad these days. But underneath the turmoil, and with unemployment heading for 30 million, change for the better takes hold slowly but irresistibly.

        Under new laws Soviet citizens can work for foreign companies in the USSR and abroad, not as runaway serfs but legally. This is a tremendous step toward freedom. And foreigners, who have always...

      • UNITED WE FALL
        (pp. 309-309)

        I would immediately abolish the Union treaty and offer all the republics absolute independence and the opportunity to consider entering a new union on mutually beneficial terms. This actually should have been done two or more years ago, because the desire to keep the Soviet Union together is a surrealistic task, one could even say an unrealistic task.

        My forecast is that by the end of 1991 or in 1992, the union will cease to exist. Gorbachev’s desire to keep the union in its present shape using his police measures will unfortunately only lead the Soviet Union to a bloody...

      • CZAR GORBACHEV?
        (pp. 310-310)

        Vladimir Kvint’s articles inForbeson events in the Soviet Union have been close to prophetic: A year ago, when few thought the Soviet empire could ever break up, Kvint predicted and advocated the withdrawal of the Russian Republic from the USSR (February 19, 1990). Then, last June, he warned that the uncritical Western support for Mikhail Gorbachev would create the unintended consequence of strengthening the reactionary wing of the Communist Party. The bloody Soviet repression in Lithuania in January confirmed that prediction. What now?...

      • THE MYTH OF GOOD CZAR GORBACHEV
        (pp. 311-313)

        The U.S. and Western Europe tried to help the cause of Soviet reform by pandering to Gorbachev’s government. As the repression in the Baltics shows, the cause would have been better served had we been tougher with the Kremlin.

        In failing to press Gorbachev on behalf of Lithuanian freedom, the “Western governments … unwittingly brought to a halt the further progress of perestroika. President Bush and his allies … have strengthened the hands of those in the Soviet Union who are trying to stop the movement of progress.”

        So wrote Vladimir Kvint in an almost propheticForbesarticle. “The Best...

      • HARSH LOOK AT SOVIET PROSPECTS
        (pp. 314-316)

        A top Soviet economist now lecturing and consulting in the U.S. believes the Soviet Union will begin to break up over the next year, that a significant portion is likely to fall into civil war, and that by November the country will be swept by a food crisis of severe proportions.

        Nonetheless, Vladimir L. Kvint, who lectured last week at Northwestern University’s J. L. Kellogg Graduate School of Management, said now is the time for American and other Western businesses to invest in areas of the Soviet Union that can be identified as having a low risk of unrest and...

      • THE SOVIET UNION ON THE WAY TO THE MARKET: ONE STEP FORWARD, THEN TWO [STEPS BACKWARD]
        (pp. 317-317)

        Not only will the Soviets’ way to a free market economy be long and hard for Gorbachev, but the population must also have some painful experiences. The past year is proof. Inflation and unemployment have increased markedly. According to my evaluations, in 1990 the rate of inflation was at 18%, the unemployment rate at about 3%, but on a trend to increase as 50 to 60 million people are still working in positions that are not actually productive.

        The civil wars in the republics are bringing economic losses on the general order of 10% to 12%. Additionally, the concurrently uncertain...

      • OPPORTUNITIES IN SOVIET DISINTEGRATION
        (pp. 318-319)

        Despite the Soviet parliament’s approval of President Mikhail S. Gorbachev’s plan to create a market economy, the Soviet Union will not live to celebrate its 70-year anniversary in 1992. The Soviet Union’s political and economic crises are intensifying, and if the forces of disintegration continue—as I expect they will—the Union will come apart. By 1992, there will be no country called the Soviet Union.

        In place of the old Soviet Union, new states will appear. These states will welcome foreign investment. For Europe and the United States, these resource-rich republics could become the new Klondike. But to take...

      • WHO’S IN CHARGE AROUND HERE?
        (pp. 320-324)

        In Russia, Boris Yeltsin, not Mikhail Gorbachev, is in charge. Bad news for the communist elite and for Saddam Hussein, Fidel Castro, and other scroungers. Good news for world oil supplies.

        The fight for power between Mikhail Gorbachev and Boris Yeltsin is almost over. Yeltsin and his team will define the future of Russia. Gorbachev will end up in a largely ceremonial role.

        Americans have been slow to understand this. They tend still to think of Boris Yeltsin, chairman of the Russian parliament, as simply the opposition to the Communist Party. No. Mikhail Gorbachev is president of the USSR, but...

      • COLD WAR ON OIL MELTING WITH CHANGES IN RUSSIA
        (pp. 325-327)

        Iraq’s invasion of Kuwait could be a blessing in disguise for theWest, and for the Russians, whose firm support for sanctions against Baghdad reflects the new, still unfamiliar, face of Soviet politics.

        The increasing assertiveness of the Russian Federation under Boris Yeltsin, its radical president, also promises to speed up the unlocking of untold energy riches in Siberia to Western oil companies.

        This favorable scenario for both sides of the diminishing East–West divide is endorsed by Professor Vladimir Kvint, one of the young Siberian economists who are striding boldly toward a Soviet market economy. Currently lecturing at Fordham University...

      • RESHUFFLING THE SOVIET DECK
        (pp. 328-328)

        Some people thought we sounded pretty farfetched when our cover story February 19 predicted Russia would quit the present Soviet Union, which would then re-form as a looser federation. That has partly come to pass. Boris Yeltsin proclaimed the sovereignty of Russia’s laws over the Union’s; the Ukraine and Uzbekistan have made similar moves. Our article was written by Vladimir Kvint, 41, a Siberian economist who is currently lecturing at Fordham University in New York and doing consulting work. What does Kvint see now? “The most influential figure is not Gorbachev but Yeltsin,” he says, and adds, “American companies must...

      • THE BEST WAY TO HELP GORBACHEV IS TO MAKE LIFE DIFFICULT FOR HIM
        (pp. 329-333)

        Reagan, Thatcher and Kohl pushed Gorbachev toward democracy. Until Americans understand this, they cannot deal intelligently with the Soviet Union.

        In failing to press Gorbachev on behalf of Lithuanian freedom, the Western governments may have unwittingly brought to a halt the further progress of perestroika. President Bush and his allies wanted to avoid pushing Gorbachev into a corner. Instead they have strengthened the hands of those in the Soviet Union who are trying to stop the movement of progress.

        The general attitude in the U.S. seems to be the following: Gorbachev has liberated the USSR and Eastern Europe, now he...

      • FREE THE RUBLE!
        (pp. 334-338)

        Lacking an international currency, the people of the Soviet Union cannot speak the only language the free, international economy understands: money. So let currencies compete.

        Vladimir Kvint is a member of the “Siberian School” of Soviet economists and an associate of economists Leonid Abalkin and Abel Aganbegyan, the godfathers of perestroika. Below, he rejects the idea of a gold standard for his country but urges that the ruble soon be made convertible into foreign currencies. He urges that the ruble be allowed to float by permitting foreign currencies to circulate freely in the Soviet Union, thus setting a natural exchange...

      • LENIN’S LEGACY
        (pp. 339-339)

        Whoever attempts to guide the Soviet Union over the coming years, he or she must confront the centuries-old nationalities problem. It is a daunting challenge. Lenin declared that Ukrainians, Balts, and other ethnic groups would, under communism, have the right to secede from the Soviet Union. Under Stalin and his successors, it was a meaningless right. But the Bolshevik promise has returned to haunt the Soviet Union’s rulers in this time of glasnost and perestroika.

        The author of our cover story argues that, economically, many of the Soviet Union’s most independence-minded republics are better off inside the Soviet Union than...

      • RUSSIA AS CINDERELLA
        (pp. 340-345)

        Instead of waiting for the outlying republics to secede, Russia itself should break away from the Soviet Union. So argues this influential Soviet economist.

        Will the Baltic republics actually separate from the Soviet Union or not? If yes, will Moscow’s response be military intervention, as it was in 1968 in Czechoslovakia? These are the questions that have been worrying many people for a long time. In the meanwhile, mutual reproaches within the Soviet Union are growing into real quarrels and may come to a dead end.

        Is there no way out? Maybe a drastically new approach to this problem is...

      • “WE ARE BOGGED DOWN”
        (pp. 346-348)

        The Soviet Union is burdened with an energy crisis, tight food supplies, and poverty. Vladimir L. Kvint, economist in Moscow, is now looking for solutions in the West.

        Soviet economists want to learn from the West to overcome the crisis at home. Professor Vladimir L. Kvint, 40, a staff member at the Institute of Economics of the Academy of Sciences in Moscow, serves on the consulting staff of the Head of State and Party Chairman Mikhail Gorbachev. Recently he visited the Federal Republic of Germany.

        Quick: Professor Kvint, the Soviet Union is experiencing a harsh winter. Have supply shortages already...

      • CRISIS AND RECOVERY IN SOVIET ECONOMY
        (pp. 349-352)

        The Soviet Union is only just beginning to understand the sheer scale of its economic problems, according to Professor Vladimir Kvint, a young Kremlin economic expert. In Kvint’s view, the USSR will scarcely have enough time to fully introduce the perestroika process this century and it could soon face serious inter-regional economic competition, a threatening energy shortage, and soaring raw material costs. Despite the difficulties he feels sure that the way to a foreign trade boom has already been opened up and that the introduction of market elements in the economy cannot now be avoided. Professor Kvint, 40, a member...

      • AUSTRIAN MACHINES FOR THE SOVIET UNION: IN 1990 THE ECONOMIC CRISIS WILL WORSEN
        (pp. 353-355)

        Professor Vladimir Lwowitsch Kvint was born in 1949 in Krasnoyarsk (Siberia). At 28 he became the Vice-General Director of the Unification of Companies of Nonferrous Metallurgy of Siberia. In 1978 the economic expert Abel Aganbegjan appointed him to the Siberian Division of the Academy of Sciences of the U.S.S.R. in Krasnojarsk. With the beginning of perestroika, he moved to Moscow with Aganbegjan, who is the economic adviser to Party leader Mikhail Gorbachev. In Moscow Kvint worked in the Academy of Sciences. He is the representative of the USSR Academy of Sciences on two common consulting projects that function as joint...

      • RUSSIA CHARTS NEW ISLAND OF CAPITALISM
        (pp. 356-357)

        Murmansk brings to mind wartime arctic convoys, but a free economic zone the Russians are planning for the region could provide a major opportunity for injecting dynamism into Anglo-Soviet trade.

        This is the view of Professor Vladimir Kvint, vice chairman of the Soviet Export Association and one of the fast-moving, market-oriented Siberian economists who have risen to prominence during the Gorbachev era.

        Though one of the experts advising the Kremlin on how to put perestroika into practice, this leading economic researcher at the Soviet Academy of Sciences, made clear toThe Timesthat he is far from convinced that the...

      • BEST LAID PLANS
        (pp. 358-358)

        There may be a different sort of crisis coming up, according to one of the Soviet Union’s top economists. Professor Vladimir Kvint, one of the small brood of free marketers who followed Mr. Gorbachev’s adviser Abel Aganbegjan back from Siberia to top policy positions, is now adviser to the Soviet Prime Minister, Mr. Nikolai Ryzhkov.

        In a conversation withThe Guardian, he said that the 28% fall in industrial investment in the Soviet Union this year is a sign that matters are coming to a head. Next year, he expects a showdown over the future of central planning, conducted by...

      • DOING BUSINESS IN MOSCOW
        (pp. 359-360)

        Perestroika’s financial face is trying to make the Soviet Union more accessible to foreign investment. But at this tentative stage it is a moot point whether greater accessibility is more than a modification of autarky. Foreign trade is a very modest part of the Soviet gross national product, and the logic and effectiveness of applying a diluted International Monetary Fund regime to the currency is questionable.

        The aim seems to be to narrow the Soviet Union’s $25 billion balance-of-payments deficit and exploit Soviet technological advances commercially. Professor Vladimir Kvint, vice chairman of the Soviet Export Association and a member of...

      • POWER TO PERESTROIKA
        (pp. 361-365)

        Strikes, local civil wars, growing dissatisfaction in the population in the Soviet Union. The great rebuilding of the economy is only stumbling along. The politicians have had their circus, according to the citizens; now we want bread.Cash flowasked the Soviet managers, economists, and strategists how they want to stop the growing threat of the bankruptcy ofperestroika.

        The uproar in the little store in Moscow’s Kalinin Prospekt is overwhelming: The foreigners are coming to fill their traveling cash boxes through the sale of jeans, radios, and sport shoes; then come the Moscow inhabitants, to snap up the much-desired...

      • THE EXPERIMENT OF GORBACHEV: THE FREE-TRADE ZONES FOR THE RELEASE OF THE ECONOMY
        (pp. 366-368)

        Moscow—In the Soviet Laboratory, a new experiment is growing: the creation of free economic zones, true and proper areas of development, and accelerated industrialization, that, at the sign of deregulation and de-taxation, should attract foreign capital and render more agile and profound the intervention of the National Enterprises. The circulation of goods and services in these zones, both from and to the USSR, will be free of duties. Foreign exchange will have free rates of exchange. The doors will be open for anyone, to the Soviets first of all, in the quest for a small “El Dorado,” to come...

    • Regionalization of the Russian Economy
      • RESTORING THE ROMANOVS
        (pp. 371-375)

        Boris Yeltsin yearns for powers that his constitution denies him. Don’t be surprised if he solves the problem with a typically Russian move.

        Nearly five years ago Vladimir Kvint, a former Soviet economist, predicted in Forbes (February 19, 1990) that the old Soviet Union would break apart. At the time most people scoffed. But come apart it did. Now a professor at Fordham University’s Graduate School of Business and a consultant on emerging markets at Arthur Andersen LLP, New York, Kvint makes another contrarian prediction.

        This will be very hard for a non-Russian to understand, but do not be surprised...

      • RUSSIAN HISTORY SHAPES TODAY’S BUSINESS LEADERS
        (pp. 376-379)

        For Americans to successfully do business in Russia they need to understand the complex relationship between the country and its leaders. This article provides an introduction to a topic that could fill volumes. It is excerpted from Dr. Kvint’s upcoming bookManagement Strategy of International Business in Russia and Central Eurasia.

        Russia boasts a huge expanse of land, abundant natural resources, and an educated workforce. These objective political and economic factors make Russia into a world power. Despite this, Russia has an inefficient economy and underdeveloped business capabilities. One reason for this is that subjective factors also play a major...

      • RUSSIAN PACIFIC COAST: EXCITING OPPORTUNITY
        (pp. 380-383)

        When Americans think of the territory east of the Ural Mountains they tend to think only of Siberia. In reality, the region in the Pacific Coast is vast, both in terms of size and in terms of opportunity. The 6.2 million-square-kilometer region, abundant in natural resources and only 50 sea miles from Alaska, now has the independence and power to establish international relationships. Today, dollars are more important to the region than rubles. Rush hour has just begun.

        The key to this shift in policy lies in the continuing decentralization of Russia, and the strengthening political muscle of local governments....

      • GO EAST, YOUNG MAN
        (pp. 384-389)

        American businessmen and journalists by the planeload are landing in Moscow. If they are interested in profitable opportunities in Russia’s future, they should be landing nine time zones away, in Magadan.

        America was discovered because Columbus and his backers were looking for new business opportunities. With similar motives, American businessmen are now pouring into Moscow. But Moscow is not the only place where the Russian action is. For the real opportunities, Americans must look east of Moscow—and east of the Lena River—to the Soviet Far East. There they and other Westerners can make attractive investments with the fewest...

      • FAR EAST: A LOOK INTO THE FUTURE
        (pp. 390-391)

        The Far Eastern economic region takes up more than a quarter of the USSR territory or more than four percent of all the land on earth. It has five time zones; the pole of cold of the Northern Hemisphere; the Pacific coast; such great rivers as the Amur, Lena, Kolyma, and Indigirka; volcanoes; geysers; nonferrous, rare, and precious metals; diamonds; carbohydrates; forests; tundra; an ocean of wealth; and a sea of problems.

        Correspondent: A large group of prominent scientists, who are obviously rather busy, spent a month and a half working on the expedition. You spent nearly half that time...

      • SIBERIA: EXPERIMENT WITHOUT COUNTERPART
        (pp. 392-396)

        History knows quite a few cases of barren expanses being transformed into blooming oases. However, the tremendous scale on which this is being done today in Siberia is awesome.

        While on a tour of Siberia in 1913, the Norwegian explorer Fridtjof Nansen observed: “The day will come when Siberia will awaken, display its natural potential, and say its word.” In those days, with the exception of a narrow strip running alongside the Trans-Siberian Railway in the south, the entire boundless territory, with incalculable natural wealth, was literally a blank spot on the economic map of Russia.

        The great Norwegian made...

      • SIBERIA SAYS NO TO CASTRO
        (pp. 397-397)

        Russian economist Vladimir Kvint visited Siberian coal mines some years ago. He and his associates were questioned by coal miners annoyed that their government was lavishing money on foreign adventures when its own people lacked essentials. “Who needs that hairy fellow, Fidel?” was the way one miner put it. Now that the authorities in Russia are starting to listen to ordinary folk, we’d say Fidel Castro’s days are numbered.

        Who would have thought that a Soviet economist would be a contributor to The Capitalist Tool?...

      • EASTERN SIBERIA COULD BECOME ANOTHER SAUDI ARABIA
        (pp. 398-403)

        Those who interpreted invasion of Kuwait as the start of a new era of high oil prices weren’t paying attention to events in Russia.

        When Saddam Hussein brutally annexed Kuwait, the price of oil took off. Here was an Arab ruler who was threatening to hold the industrial world hostage for its oil. It was not so much Saddam Hussein’s tanks and his missiles and poison gas that frightened theWest as his possible use of the oil weapon.

        In fact, the Kuwait invasion was a sign of weakness on Saddam’s part, not strength. Saddam could not finance his imperial ambitions...

      • THE ARCTIC COMES NEXT
        (pp. 404-409)

        With every year the “accent” on Siberia is being felt with increasing strength in the Soviet Union’s economy.

        The realization in Siberia of programs of nationwide importance have led to the establishment of its first economic belt, which has taken shape in the south, along the Trans-Siberian Railway. It accounts for the major share of the industrial output and more than 90% of the area’s population.

        At the end of the 11th five-year period (1981–1985) the lines will open on the Balkal-Amur Railway, which will pass across the Near North territory. The area of the BAM reclamation zone is...

      • “THE POLAR STAR ABOVE US”
        (pp. 410-419)

        Mankind is meant to attempt to solve the secrets and puzzles of the Unknown.

        There were, and always will be, explorers and prospectors whose deeds, at first, seem reckless, but then make the whole world admire them.

        Journeys to unknown countries have always been believed to be dangerous. Therefore, it was the destiny of a few courageous people to paint over the white spots on the pictures with new colors; and the pictures of distant countries came out as if from a brush of a painter.

        One of these courageous people was William Barents, who made three journeys on the...

      • THE ROLE OF THE BUDGET IN THE INTENSIFICATION OF THE ECONOMY OF THE AUTONOMOUS REPUBLIC
        (pp. 420-429)

        The major changes under way, including the transition of the economy toward large-scale, intensive production, can hardly be conceived without a radical and general democratization of management and an enhanced role for and involvement of Soviet agencies in economic districts, republics, territories and regions.

        The study of the methods and means to accelerate socioeconomic development in any region (whether an economic area, Union or Autonomous Republic, territory, region, or big city) must be based on a general analysis and estimate of the initial and achieved level of economic development. Regional programs, among them “Siberia,” “Far East,” “Donbass,” and the like,...

      • DAGHESTAN–MANGYSHLAK: THE EFFECTIVENESS OF INTERREGIONAL COLLABORATION
        (pp. 430-436)

        The Caspian Sea has a substantial ecological and economic impact on the social and economic development of the Northern Caucasus and western regions of Kazakstan. This is due to the mineral resources in the pre-Caspian zone which are of countrywide significance. Suffice it to say that the oil and gas deposits in Mangyshlak, and the development of the mineral resources in the pre-Caspian mining areas in Zhetybai and Uzen in Kazakstan, the greater part of which is already under way, and others will be industrially mined. This zone supplies most of the country’s needs for sulfate sodium, potassium, magnesium, table...

      • REGION AND INDUSTRY: MODES OF INTERACTION
        (pp. 437-440)

        The electrotechnical complex in Minusinsk, Siberia, is growing rapidly. One of its plants produces automatic lathes for the plasma cutting of metal as well as components for warehouse technologies. Both automatic lathes and warehouse components are labor-saving. The costs of manufacturing this equipment are higher in this region than they would be, for example, in Ukraine. But there is a consumer is nearby, namely, a Siberian manufacturing plant. Nonetheless, most of the product is being shipped to the European parts of the country because industrial concerns prevail over economic reasoning.

        In the current period of qualitative changes in the country’s...

      • REGIONALISM AS THE KEY TREND IN SCIENTIFIC AND TECHNOLOGICAL PROGRESS
        (pp. 441-461)

        The scientific and technological revolution of our time has led to radical structural shifts in the world economy and its industrialization, and to a growth of GNP in individual countries and groups of countries that could not be provided for by the available raw material and power resources in those parts of the developed world that were already at a high level of economic maturity. The radically new economic and technological level of development of the production forces called for a new territorial division of social labor. There began a large-scale transfer of natural resources from areas undergoing industrialization, leading...

      • KEY TO THE REGION: COMPLEX PROGRAMS
        (pp. 462-466)

        Regional technical and R & D programs were first launched in the USSR during the Tenth 5-year Plan (1976–1980). Among those programs were two well-known projects, “Siberia” and “Far East.” These projects aimed at studying problems of the complex use of natural resources and the socioeconomic development in those regions. The following are just a few examples proving the efficiency of these programs.

        “Siberia” aimed at the possibility of mining brown coal in the Kansko-Achinsky basin by open mining on a large scale was demonstrated. The productivity of labor in the open mines in the Kansko-Achinsky basin could exceed 25...

    • Privatization and Industrial Development in Russia
      • PRIVATIZATION IN RUSSIA
        (pp. 469-471)

        Privatization in the former Soviet-bloc countries is the most important step toward social, political, and economic changes. Once privatization has taken place, the move to a market economy is irrevocable.

        The reasons for this are quite simple. The process of privatization is destroying the economic base of dictatorship. In the past, the former so-called “property of the people” was the property of the ruling communist party. Everything from giant industrial companies to small dry cleaning establishments was in the hands of the state. Individuals were powerless.

        The process of privatization has given people an understanding of their value as they...

      • PRIVATIZATION IN RUSSIA ENTERS PHASE TWO
        (pp. 472-477)

        Before making an economic forecast, one must first look at the past. Economists call this extrapolation. To view the progress and prospects for the privatization process in Russia, it is neither necessary, nor possible, to look before 1991. At that time, only a few initial steps had been made under the very indecisive leadership of Gorbachev. The USSR did not even have regulations for privatization.

        Much has changed since then. Statistics on the Russian economy in 1994 show that 62% of the GDP was produced by privately held companies. In 1990, this figure was only 4%. In my mind, this...

      • HOW TO ACCESS BUSINESS INFORMATION IN RUSSIA: INFORMATION AND DEMOCRACY GO HAND-IN-HAND
        (pp. 478-481)

        It is impossible for foreigners, operating in a new business environment, to make any business-related decision without access to accurate information. Currently, access to information is one of the major barriers to the development of markets in the former Soviet countries. It is extremely difficult to obtain quality business and economic information for decision-making purposes. As in all things Russian, an historical perspective is useful in understanding the current situation. The lack of democracy is the root cause of Russia’s information problems.

        For a tyrant to give accurate information to society is tantamount to relinquishing his grasp of power. This...

      • TELECOMMUNICATIONS A BOOMING BUSINESS: EVEN SIBERIA IS WITHIN REACH
        (pp. 482-486)

        Before the fall of communism, the Soviet Union was cut off from the world community, not just politically and economically, but also through vital communications links. Telephone connections with the world were the privilege of very few organizations and people. Through 1988, the Soviet Union had only 15 telephone channels available for international use. Furthermore, all operated through one international telephone station in Moscow, built in 1980 before the Olympic Games.

        Telecommunications companies wanting to do business in Russia have an ongoing problem: a lack of information about the country’s development in this area. This is a residual effect of...

      • WRECK THE INFORMATION FLOW AND THE ECONOMY COLLAPSES
        (pp. 487-488)

        “It is easier to break the Berlin Wall than the wall of mistrust between people.”

        Leading Soviet economist Vladimir Kvint believes that the economic effects of all government decisions must be considered by politicians— apparently a radical concept in the Soviet Union.

        “Economic evaluation of all political decisions must, in the future, be absolutely necessary. Otherwise the politicians are not responsible,” he said.

        Siberian-born Kvint is one of the reform-minded economists who have emerged during the glasnost period and are intimately connected with the development of perestroika.

        A professor of economics, Kvint is vice chairman of the Academy of Sciences...

      • RED MILITARY TIME MACHINE WORKS FOR CAPITALISM: SECRET DOORS OPEN ONTO PRIVATIZATION OF THE RUSSIAN MILITARY
        (pp. 489-492)

        For 70 years, the largest country in the world spent almost all of its resources on its military industries. Ostensibly, these expenditures were to protect the Soviet Union’s communist achievements. In fact, they funded the most potentially dangerous aggression in the history of mankind.

        When the military prevailed, the Soviet Union was a country of secrets. Everything was a secret—even the size of cemeteries and the number of military trucks. Road signs were, and still are, frequently misleading to guard this secret world against the intrusion of foreigners.

        The Soviet Union’s huge, technologically advanced military-industrial complex was known worldwide...

      • INTERNATIONALIZATION OF RUSSIA’S METALLURGY INDUSTRY
        (pp. 493-496)

        The Soviet Union was, and Russia continues to be, the world’s largest producer of iron, steel, almost all major heavy nonferrous metals, and platinum, and one of the leading producers of gold. In former days, the entire metallurgy industry, including the black and nonferrous metals, was given special priority because it was a basic necessity of the military industrial complex.

        The Soviet Union’s totalitarian economic mechanism, however, was not oriented toward the implementation of both scientific and technical advancements even in the lucrative metals area. During the 1980s, industrial technology in the Soviet Union fell far behind modern levels in...

      • WILL RUSSIA BE THE CHIEF OIL SOURCE OF THE FUTURE?
        (pp. 497-498)

        The northern and eastern regions of Russia contain enormous reserves of oil and gas. And they are much closer to the U.S. than the Middle East is.

        The Persian Gulf war demonstrated forcefully how dangerous it is for the rest of the world to depend on Middle Eastern oil. But there exists another huge untapped oil reserve that has largely eluded the attention of the West: Siberia produces more oil than Saudi Arabia, Kuwait, and Iraq combined.

        Siberia is a treasure trove of resources: gas, coal, nonferrous metals, timber, and hydroenergy resources abound in Siberia and far eastern Russia. Production...

      • PROBLEMS IN THE DEVELOPMENT OF THE NONFERROUS METAL INDUSTRY IN SIBERIA
        (pp. 499-511)

        Siberia has vast raw material resources. In addition to huge resources of timber, oil, natural gas, nonferrous metals, and other minerals, 85% of the country’s (the USSR) coal deposits, and 60% of all its water resources are concentrated here.

        Developing these resources is a key strategic goal of the state’s economic policy. In the 10th five-year period alone, Siberia’s industrial output is to go up 1.5-fold.

        Siberia’s development on such a large scale has become possible because of the country’s powerful material and technological base, which is capable of ensuring high rates of industrial growth and increased labor productivity.

        Area...

      • ROLE OF AUTOMATION IN DEVELOPING NONFERROUS METALLURGY IN SIBERIA
        (pp. 512-532)

        A considerable share of the country’s reserves of nonferrous metals—among them nickel, cobalt, platinum metals, lead, zinc, copper, molybdenum, gold, and aluminum—are located in Siberia, with its rigorous climate and exceptionally diverse natural features, which impede the development of its resources. Here, one feels sharply the shortage of manpower in most industries but especially in nonferrous metallurgy, inasmuch as its enterprises, mainly mines and dressing mills, are located in remote, sparsely populated areas with poorly developed industrial and social infrastructures. Workers are often placed in arduous and harmful conditions, and even such a large enterprise as the Krasnoyarsk...

      • IT IS NECESSARY TO INCREASE FOOD PRODUCTION IN THE YENISEY NORTH
        (pp. 533-535)

        In the 1950s, I had to sail regularly from Krasnoyarsk to Dudinka. Such Turukhansk piers as Lebed, Vorogovo, and Alinskoye were eagerly awaited by all passengers, both children and adults. At those piers local women sold fresh berries, potatoes, and pickles. Vorogovo was especially famous for sour cream and cottage and farmer’s cheese.

        Invoices of the 1950s give us a similar picture: these areas supplied beef and vegetables to the North, to Norilsk, and to the South, to Yeniseisk.

        In the summer of 1979 I visited those areas again. My ship was greeted by local people, but this time not...

      • FOOD FOR PEACE? OR FOR CIVIL WAR?
        (pp. 536-540)

        If we are not careful, the food we send to feed hungry Soviets will serve merely to strengthen the socialist hard-liners against the democratic forces.

        Why is the Soviet Union hungry? Why does the biggest and potentially the richest country in the world have empty shelves in the stores?

        The hunger is real. In the United States people consume more than 53 pounds of meat per capita per year; in the USSR, if you count the bone and gristle, just 26 pounds. Okay, maybe Americans eat too much meat. But what about fruit? Americans eat three times more fruit than...

  9. PART IV MANAGEMENT SYSTEMS AND SCIENTIFIC TECHNICAL PROGRESS
    • BOARD OF DIRECTOR MOTIVATION IN RUSSIA AND THE COMMONWEALTH OF INDEPENDENT STATES
      (pp. 543-546)

      A Western-style corporate board of directors is a very new concept in Russia and the Commonwealth of Independent States (CIS). The events of the last eight years have influenced and altered the motivation or incentive for company directors to become members of these boards. To understand the current motivation of members of boards of directors, one must first consider the previous corporate governance structures in the Soviet Union and the way the present structure has developed.

      Before the break-up of the Soviet Union in December 1991, the government structure included approximately 100 ministries, each of which had a “collegium” of...

    • CONFRONTING THE SOVIET MANAGEMENT STRUCTURE: BUREAUCRATIC, BUT WORKABLE
      (pp. 547-552)

      The Soviet process of making managerial decisions is unusual for a Western executive to comprehend, because authority often rests in different hands. Consequently, foreign business people often knock on the wrong doors, overestimate the influence of ministries, underestimate the strength of enterprises, and cannot find an appropriate partner for joint ventures.

      Now, after the signing of the trade agreement between the United States and the USSR, and in view of the democratization movement in the USSR, it is especially important for executives who would like to do business there to acquaint themselves with the large and complex Soviet management structure....

    • MOSCOW LEARNS THE LANGUAGE OF BUSINESS
      (pp. 553-559)

      Integrating a government-run economy into the global marketplace takes more than exchangeable currency, stock markets, and commercial banks. Much more.

      Five years ago, Soviet President Mikhail Gorbachev set in motion the gears of perestroika, the restructuring initiative aimed at increasing Soviet productivity. In September he backed a proposal by Republic of Russia President Boris Yeltsin to implement a free-enterprise economy within 500 days. One of its goals is to integrate the Soviet economy into the global marketplace by adjusting Soviet business practices to mesh with those of the free market. The USSR has made certain strides toward establishing the systems...

    • THE RELATIONSHIP BETWEEN INCREASES IN CAPITAL INVESTMENT AND THE REDUCTION IN THE DURATION OF THE IMPLEMENTATION PHASE
      (pp. 560-564)

      The length of time required to put new technological processes and systems into use can be significantly affected by the application of the latest scientific and technical research. This application will impact both the costs of the new technology and a company’s overall expenditures. For this reason, when calculating the effectiveness and annual economic benefit of the new technology (NT), all aspects of the implementation phase should appear as part of the total costs associated with its development and introduction. However, by its nature, the character of these costs is not one-sided. Expenses for NT development appear as expenses in...

    • THE PROCESS OF FORMING A REGIONAL POLICY ON SCIENCE AND TECHNOLOGY
      (pp. 565-580)

      Paramount among the goals of a regional policy on science and technology is the creation of conditions, through advances in research and technology, for bolstering the health of current and future populations. By nature, it is a social goal; its success will be manifested in the sphere of economic policy and measured by the increased efficiency of regional work groups. This goal corresponds with the ultimate goal of socialist production and is perceived, at the regionalcomplex level, as a subsystem of the overall economic system.

      In my opinion, analysis, based on scientific and technological progress, of the ultimate goal of...

    • UNIFIED SCIENTIFIC AND TECHNICAL POLICY: WHAT AND WHY
      (pp. 581-586)

      The main aim of the scientific and technical policy is to select the most promising directions and priorities in developing science and technology and apply their achievements to production, both on a large scale and effectively, so as to secure its accelerated progress in order to reach our social goals as soon as possible.

      These goals are no secret; they are to satisfy to the greatest extent the Soviet people’s material and cultural requirements and achieve the harmonious development of the individual personality.

      However, it is much easier to state in general the task facing the scientific and technical policy...

    • TO ACCURATELY DETERMINE A COURSE OF ACTION: AN ECONOMIST ANALYZES THE RESULTS OF KRASNOYARSK’S PAST DECADE
      (pp. 587-593)

      An extrapolation method that is popular among economists requires taking several steps backward in order to have a better perspective. For example, if you want to understand trends for the next 20 years, analyze the past 20 years first.

      By the 1970s, the Krasnoyarsk Territory, the largest in the USSR (covering one-fifth of the earth), had lived through sharp and dramatic changes. The new policy of the Soviet leadership, which was aimed at the accelerated development of the country’s East, made us realize that until now we have been quite shy in mastering our vast resources. It is not easy...

    • THE INTERMEDIARY ROLE OF SCIENTIFIC/TECHNOLOGICAL COMPANIES: FROM THE EXPERIENCE OF “SIBTSVETMETAVTOMATIKA”
      (pp. 594-597)

      The intensive development of new regions in Siberia, with its mineral wealth, forest, water, and power resources, calls for the largescale introduction of technology adapted to the conditions of the region, a constant quest for forms and methods that will enhance the connections between science and industry. Among the more progressive forms of this kind are scientific-production associations (SPA).

      Having first appeared only a short time ago there are now some 150 SPAs operating in all the branches of the national economy. Like any other organizational form, these associations are going through a development period. Work is still in progress...

    • PREPARATION FOR PRODUCTION: A KEY STAGE IN IMPLEMENTING TECHNOLOGICAL POLICY
      (pp. 598-615)

      “Preparation for production” (PP) comprises a system of measures aimed at applying the latest scientific and technical research to industry. It is the final stage of technical development and incorporates a number of diverse operations calling for systematization, general purposeful management, and planning. Having created new possibilities for the practical implementation of scientific discoveries which earlier lacked technical solutions, scientific and technological research has set the technology departments of companies the task either of applying new equipment and new, more economical and more effective technological processes, or of automating the systems already in operation. This way companies will be able...

    • UNIFORM SYSTEM FOR THE TECHNICAL PREPARATION OF PRODUCTION
      (pp. 616-626)

      Standardization is key to the acceleration of scientific and technological progress. Today, the objects of standardization are not only quality of production, documentation, and terms, but also the designing of systems and the organization and management of production. This calls for complex standardization, that is, the purposeful and planned defining and implementation of a system of interlocked requirements, with the objective of comprehensive standardization as a whole and of its basic elements with the aim of providing for the optimal solution of a specific problem. This approach to standardization calls for the implementation of large-scale statewide systems of standardization.

      The...

  10. BIBLIOGRAPHY
    (pp. 627-686)
  11. ABOUT THE AUTHOR
    (pp. 687-699)
    Jacqueline Gallus