Approaching convertibility in Eastern Europe and the Soviet Union.
The most important event in Europe, perhaps in
the world since World War II is what is happening
in Eastern Europe, which is unravelling
before our very eyes.
Francois Mitterrand October 24, 1989
Eastern Europe and the Soviet Union have been in the headlines of American newspapers, magazines, and scholarly journals almost without cease since the beginning of the 1980s. The year 1989 will be remembered as the time when one Communist regime after another fell from power in a dramatic "people's revolution." What do the economic and political reforms occurring in Eastern Europe and the Soviet Union mean for U.S. business people? What do the prospects for convertibility of Eastern European and Soviet currencies mean for U.S. exporters and multinational corporations? In particular, they mean: (1) a de-emphasis on counter-trade, a form of bartering to exchange product for product and (2) an assurance that letters of credit will be paid upon submittal without having to be subjected to unusual delays.
Problems associated with black market currency transactions would be eliminated through the eventual full convertibility of Eastern European and Soviet currencies. The devaluation of these currencies to real market levels most likely will make U.S. exports to these countries more expensive in the short term until the convertibility situation stabilizes and the currencies reach their unsubsidized market level.
Joint ventures may be a means superior to direct exports to penetrate the markets of Eastern Europe and the Soviet Union. United States firms simply are not successful in competing for their fair share in these markets, dominated by Austria, Switzerland, the United Kingdom, and West Germany. In fact, West Germany, with its exceptionally strong deutsche mark, its reunification and currency union with East Germany, and its historical and commercial ties in the East, may benefit the most from the long term economic potential in Eastern Europe.
Hungary has been at the forefront of economic reforms in Eastern Europe since the early 1970s. Since the arrival of Mikhail Gorbachev on the scene in 1985, the Hungarians have increased their economic overtures by encouraging private entrepreneurs and a small but energetic stock market. For a truly dynamic indication of the willingness of the Hungarians to reform their system, one had to look only at the faces of 18,000 East Germans who used Hungary as a conduit to freedom in the West during one week in September 1989, when Hungary dismantled its Iron Curtain bordering Austria. Also in 1989, the Hungarian Communist Party became the Hungarian Socialist Party; Hungary was declared a republic; and the Hungarian parliament authorized the formation of independent political parties that competed in parliamentary elections in March 1990. However, Hungary's foreign indebtedness of $20 billion is the highest per capita in Eastern Europe, and this debt could act as a long term, negative drag on Hungary's economic reforms.
The principal aims of the Hungarian economic reforms are the creation of additional performance incentives, the adaptation of domestic prices to world market conditions, and a greater decentralization of economic decision making. At the beginning of 1987, Hungary reformed her banking system. The National Bank of Hungary is now to concentrate on central banking, having previously combined these functions with commercial operations. It has at its disposal the monetary instruments used in Western countries, including powers of refinancing, the setting of interest rates, minimum reserve ratios, and open market operations. It also remains responsible for controlling foreign exchange movements.
Since January 1988, all economic enterprises in Hungary have been permitted to carry out foreign trade in convertible currencies after having registered with the Ministry of Trade. This registration is virtually automatic once a company states that certain organizational and personnel requirements have been met. Once the legal requirements are met, the Ministry has no right to reject the application, and it must be processed within 30 days .
Effective January 1, 1989, commercial banks have been authorized to quote forward rates on the basis of forward quotations of the National Bank of Hungary. It is important that these forward rates are quoted according to international methods, i.e., daily official rates and swap differentials between the Hungarian forint and other currencies.
In 1989, Hungary received $140 million from the World Bank to provide credit facilities for the restructuring of exporting enterprises, for small businesses, and for other entrepreneurial development. The total World Bank cost for industrial restructuring was $342.8 million . Yet, in spite of these loans and joint ventures with Western firms, Hungary conducts around 55 percent of her trade with other COMECON countries -- the major trading partner being the Soviet Union with one-third of total transactions. It is estimated that Hungary conducts 15 to 20 percent of her trade with the COMECON countries in convertible currency. U.S. exports in 1988 to Hungary were only $77.5 million, little more than one-quarter of U.S. imports from Hungary of $294 million .
Moreover, despite the significant reforms of the Hungarian banking system, there is little indication that Hungary intends to make the Hungarian forint fully convertible on foreign exchange markets. The exchange rate of the forint versus convertible currencies is based on a weighted average of the currencies of ten trading partners (Austria, Belgium, West Germany, France, Italy, Netherlands, U.K., Sweden, Switzerland, and the U.S.) in proportion to Hungary's foreign trade turnover with these countries. This is somewhat perplexing, but the answer may lie in the fact that Hungary's ruble-dominated trade surplus with the Soviets would turn overnight into a $1.5 billion deficit if it had to pay for oil and gas with hard currency rather than through COMECON's system of transfer rubles .
With the economy in ruins, foreign debt at $40 billion, and the population near revolt because of the sagging economy, the Communist leadership shifted at the beginning of 1989 from an authoritarian regime and central planning to a new vision of political pluralism and a European-style market economy. Talks between Solidarity and the government were initiated, culminating in the historic "Round Table" Understanding signed on April 5, 1989. This agreement inaugurated unprecedented political reform, setting the stage for the other Eastern European countries to follow in exhilarating fashion during the balance of 1989.
Under the agreement, parliamentary elections in June 1989 transformed Poland's political landscape. Solidarity candidates routed the Communists for the seats it was legally entitled to contest, winning 99 of 100 seats in the newly created Senate and 38 percent of the seats in the lower house, the Sejm. The government's defeat opened the prospect for power sharing between the Communist Party and the Solidarity-led opposition in the parliament. General Wojciech Jaruzelski, a member of the Communist Party, was elected to serve to a six year term as president. On August 17, 1989, Jaruzelski selected Solidarity attorney Tadeusz Mazowiecki to form the first non-Communist government in the Soviet bloc. Significant economic reforms, specified in the "Round Table" Understandings, have ensued.
In order to achieve the government's desire for full convertibility of the Polish zloty by the end of 1991, the Mazowiecki government raised prices for sugar, gasoline, cigarettes, vodka, gas, and electricity as well as apartments rents in January 1990 in an attempt to bring the zloty to its market level through the elimination of subsidies. These are the kind of price increases that sent Polish workers into the streets in 1970, 1976, and 1980, bringing down two Communist leaders in the process, Wladyslaw Gomulka in 1970 and Edward Gierek in 1980. Until March, inflation was running at an annual rate of 900 percent, and the Polish living standard declined with increasing levels of unemployment, poverty, homelessness, and hunger . Since March, the Polish inflation has subsided to five percent, and the market price and the black market rate are the same at 9,500 zlotys per dollar, effectively eliminating the black market in Poland. The Polish government achieved in 1990 its goal of internal convertibility of the zloty. The market economy has begun to function well, as the stores are full of goods, including kiwi fruit! Full convertibility of the zloty is expected in 1991.
Poland desires full convertibility in order to promote increased trading and joint venture opportunities with the West as stated in the "Round Table" Understandings . Prior to January, Polish residents could hold foreign exchange in the form of currency, stocks, bonds, and certificates; the currency accounts available were: (1) convertible currency accounts "A", (2) foreign exchange retention accounts "ROD", (3) Polish Savings Bank (PKO) S.A. deposit certificates, and (4) socialist currency accounts "S". What is important is that Poles did not have to declare the sources of the foreign funds nor were the uses of these accounts restricted to purchases in the Polish hard currency stores (Pewex), which must take Polish currency as legal tender after the end of 1990.
Possibly by the end of 1991, the Polish zloty should be convertible on foreign exchange markets, which would lead to improvement in Polish economic performance and increased trading and joint venture possibilities for U.S. firms in Poland. On January 1, 1990, a foreign currency law took effect, eliminating the requirement to pre-exchange convertible Western currencies for Polish zlotys in order to obtain a visa. The elimination of this nuisance requirement already has increased Western tourism and expanded business contacts with Poland. The developing situation in Poland requires close observation.
The Soviet Union
Since becoming General Secretary in 1985, Mikhail Gorbachev has initiated sweeping changes in many aspects of Soviet society. In 1986, a campaign for greater openness ("glasnost") was introduced in an effort to reduce the excesses of the state. In early 1987, proposals were put forward to restructure the economy ("perestroika") through devolution of economic decision making away from central government agencies. Relations with the West have improved considerably, as evidenced by significant progress on the issues of arms control, Soviet forces in Eastern Europe, and the withdrawal from Afghanistan. In December 1989, Gorbachev and President Bush met at Malta to declare in essence that the Cold War was over.
Elements of Perestroika. Gorbachev introduced his economic restructuring, called "perestroika", to revitalize the foundering Soviet economy, which has been stagnant since 1978. Elements of "perestroika" include the following:
* More active participant in world trade through
the decentralization of decision making in
foreign trade matters * New possibilities for a higher level of business
relations on the Western model * An improvement in U.S.-Soviet relations to lead
to more joint ventures between U.S. companies
and Soviet enterprises * Business-to-business international trade training
programs (One has already been conducted at
the Higher Commercial Management School for
the Soviet Ministry of Foreign Affairs by Carla
Stone, co-author of this article.)
A basic dilemma of "perestroika" is that many reforms are not all that welcomed by some workers. The coal miners' strikes in July 1989 are indicative of this dissatisfaction. Housewives, who have to stand in line for increasingly more expensive and difficult to obtain foodstuffs, are also disenchanted.
Since the introduction of "perestroika" in 1987, the ruble has fallen in value on the black market exchange, once a fifth of the official rate, now a fifteenth, and still falling. Rubles are one of the few things not in short supply in the Soviet Union. At the end of 1988, based on Soviet estimates, Russians had some 300 billion rubles in savings banks and a further 90 billion stashed under mattresses. All this hoarded cash - equivalent to more than a year's turnover in retail trade - would not matter if Russians were saving voluntarily to buy a car or to go on vacation. But much of the savings are forced on them because there are not enough products to purchase with all the rubles available. A convertible ruble would initiate a meaningful incentive toward market effeciency.
In late October 1989, the Soviet goverment introduced a new exchange rate for tourists that values the dollar at 6.26 rubles, a ten-fold devaluation. On November 3, 1989, in a first ever official auction for foreign currency, Soviet enterprises bid between 13 rubles and 15 rubles per dollar - 22 times the official rate . The foreign currency auction was an initial attempt to remove price controls in the Soviet Union and to enter into the world of market-oriented currency trading.
On January 1, 1990, the ruble was devalued by 50 percent against foreign currencies for trade purposes. Since August, Soviet citizens have been allowed to spend and to save convertible currencies without having to state the source of their income. Soviet citizens also are permitted to convert rubles into foreign currencies and to travel with those currencies. The ruble will be all but formally convertible on January 1, 1991, when Soviet citizens will be permitted to convert rubles to hard currencies at market rates on the domestic market.
The two devaluations of the ruble were not only a recognition by Soviet authorities that the ruble had been greatly overvalued, but they also represented a challenge to Soviet black marketeers. The Soviet black market, as throughout Eastern Europe, operates in virtually every tourist hotel and in free markets in almost every city. Currency speculation sometimes can be 20 times the official ruble rate of exchange, diverting valuable hard currency away from the goverment into the pockets of speculators. The currency auction in November 1989 was another significant step forward price reform, without which freer markets cannot work. Until the issue of ruble convertability is resolved. Soviet trade with the West will remain contingent on countertrade, a form of bartering of product for product. Increasingly, however, American business interests are dissatisfied with countertrade, desiring in its place the translation of ruble profits into use in other COMECON countries.
Far more important than any internal economic changes may be the changes resulting from the Soviet Union becoming a member of the IMF and the World Bank. Such a step would, through the allocation of Special Drawing Rights (SDRs) and the weighted valuation of same in terms of the IMF currency market basket, result in the assingment of a relatively realistic measurement to the ruble, also placing the Soviet Union under IMF surveillance.
Because of the ruble's importance as a trading currency throughout the Eastern bloc, the currency would in effect become convertible for trading purposes outside COMECON. In addition, membership in the IMF and the World Bank would permit the Soviet Union freer access to capital markets, and result in more equitable valuation of hard assets such as diamonds, oil, and other real commodities. In turn, the Soviet Union would become eligible for credits and technical assistance, and such development funds could be used to pay Western firms unwilling to engage in countertrade.
In November 1989, Todor Zhivkov, Bulgaria's leader for 35 years, was replaced by Peter Mladenov, the Foreign Minister, who in turn resigned because of opposition pressure. On August 2, 1990, the Bulgarian parliment elected Zhelyu Zhelev as Bulgaria's first non-communist leader since the end of World War II.
Bulgaria's economic reforms began in April 1986 with the dissolution of the industry related ministries and the establishment of the "Economic Council" as the highest policy making authority. At the same time, enterprises began grouping into new, self-administrative economic associations. In 1989, Bulgaria enacted the most liberal foreign investment laws in Eastern Europe. Repatriation of profits. percentage of foreign ownership, and choice of currency payments for exports are all part of these laws . Central to the economic reform program is a plan to introduce productivity related wages and to reform the tax system.
In 1987 in preparation for and in conjunction with the new "Economic Council," the Bulgarian goverment reorganized the entire banking system to parallel the changes in the industrial sector. Each financial entity has been structed as a commercial bank with responsibilities for "self-managing economic organizations on credits related to investment activities in local or foreign currency." While the banks are organized according to industrial or financial activity, their main objective is to improve the effeciency and growth of the economy, and they are expected to be profitable . Full convertability of the leva is a long term goal.
There are no difficulties with payments for exports to Bulgaria, although transactions are subject to official approval by the appropriate ministry or trade organization. Bulgaria may become a model for economic partnerships between East and West due to her small size and eagerness for joint venture arrangements.
Prior to the massive demonstrations throughout Czechoslovakia in 1989, Czechoslovakia had experienced underground dissent for human rights and some economic reforms. However, there was general fear and resignation among the population after the 1968 Soviet-led invasion, and the hard line, neo-Stanlinist government kept Czechoslovakia relatively quiet throughout the 1980s. Milos Jakes introduced limited economic reforms, but there was little progress to "prestavba" (Czech for "perestroika"). The highlight of the Jakes reforms was to seek new approaches to economic mechanisms, including structural changes in the range of commodities to be produced, exported, and imported. Joint ventures were encouraged by the State Enterprise Act of 1988 and new laws on joint ventures and pricing .
Czechoslovakia's trade with the U.S. has not been significant, and the vast majority of the country's foreign trade is within COMECON . However, the United States and Czechoslovakia in April 1990 granted each other most favored nation status, so trade levels should increase considerable. In 1989, Czechoslovakia concluded several branch agreements with the European Economic Community. It will be necessary to solve the question of relations between the West European and ruble zones and the currencies of COMECON member countries in order not to continue to hamper trade. Nonetheless, there are no difficulties with payments for exports to Czechoslovakia.
Since the 1989 return to power of the liberals, this highly industrialized and sophisticated country has become an ardent economic reformer. Vaclau Klaus, the new Czechoslovak Finance Minister, demanded at the January COMECON conference in Sofia that intra-COMECON barter deals and trade agreements be shifted to open trade and market conditions. Klaus wants COMECON to evolve into a loose, free trade zone. The changes have to be "dramatic and radical," Klaus declared at Sofia . Klaus also devalued in January the Czechoslovak crown from eight to 38 per dollar to commerce the process toward convertability. (As of July, the crown had appreciated in value to 25 per dollar.) Since May, Czechoslovakia no longer requires a visa for U.S. or Canadian citizens nor a pre-exchange of currency. Tourism to Czechoslovakia is up 85 percent since the end of 1989.
Czechoslovakia, which had resisted the type of widespread economic and political reforms now prevalent in Hungary and Poland, should be among the first COMECON member countries to have a fully convertible currency on international monetary markets. The crown is already freely convertible in Austria . Prague plans convertability of the crown on January 1, 1991 for current account transactions (except repatriation of profits) and full convertibility by 1992. Czechoslovakia's industrial infrastructure is antiquated and needs improvement, but the country's standard of living is among the highest in Europe as a whole. In addition, Czechoslovakia, both in absolute terms and in relation to convertible currency export earnings, is one of the least indebted COMECON countries. As a result, the Czechoslovak crown is a relatively strong currency by Eastern European standards and a logical candidate for full convertibility by 1992.
German Democratic Republic
During the summer of 1989, pressure for economic and political reforms increased in the German Democratic Republic, as nearly 100,000 East Germans left for West Germany via Hungary. As summer turned to autumn, the East German goverment halted travel to Hungary, so would-be emigrants poured into Czechoslovakia to take refuge in the West German Embassy there. Then in October, freedom marches began in Leipzig, as hundreds of thousands of people demonstrated peacefully in the streets. The demonstrations spread throughout the country. On October 7, 1989 while visiting East Berlin, Gorbachev cautioned Erich Honecker, the country's hard line and ailing Communist boss, not to count on Soviet support if he used force. Eleven days later, Honecker was forced out and replaced by Egon Krenz, who opened the GDR's borders on November 9, 1989, which led to the dismantling of the Berlin Wall. Since the election of a democratic goverment in East Germany in March, the process toward reunification with West Germany has proceeded with remarkable rapidity. Full political reunification is expected by the end of 1990.
On July first, the West German goverment commenced its generous plan to merge the two German economies. The cornerstone of the economic union was the conversion of East Germany's nearly worthless ost marks into West German deutsche marks. East German wages, salaries, and pensions have been converted to West German marks at a one-to-one exchange up to 4,000 marks ($2,373) with a maximum of 6,000 marks ($3,600) for those over 60. All other money in accounts was exchanged at two-to-one. The East Germans, many of whom did not have bank accounts because of a reluctance to inform the East German authorities of their monetary holdings, were forced to open bank accounts prior to July first in participate in the deutsche mark swap. In the first week of July, no East German could withdraw more than 2,000 West German marks in oder to control any inflationary pressures. The currency union appears to have succeeded, as most East Germans delayed withdrawals to guard against price increases and potential joblessness in a market economy. Through instantaneous convertability now in the soon-to-be extinct German Democratic Republic, American companies interested in trade with this newly opened market of 16 million consumers should proceed with their plans.
In 1974, Romania became the first country in Eastern Europe to permit western joint ventures. For several years, academicians, consultants, and businessmen trooped to Bucharest to initiate discussions, to participate in academic exchanges, or to attempt business ventures. Up until the violent overthrow and execution of dictator Nicolae Ceaucescu and his wife on Christmas Day 1989, time seemed to move backward to the point where Romania stood far behind her COMECON neighbors in terms of economic reform and political liberalization. The retreat to central planning and rationing, and away from joint ventures left Romania few options for increasing foreign trade or moving towards convertability.
Ceaucesu's two most controversial programs - elimination of Romania's debt through wholesale export of Romanian products and foodstuffs which impoverished the population and revitalization of the agricultural sector by razing towns and villages - eventually became factors leading to the violent Romanian civil war of December 1989 and Ceaucescu's execution. Ironically, one positive legacy of Ceaucescu is that Romania has no external debt, so there may be some long term potential for a revitalized Romanian economy and increased trade with the West during the 1990s.
The situation in Romania, however, remains delicate. Until political stability comes to the country, significant economic progress and convertibility of the leu will not be possible. There are still delays in payments for exports to Romania, and the authorities can be expected to press for countertrade arrangements.
The Yugoslav government (Yugoslavia is not a COMECON member), under revolving leadership since Tito's death, attempted during the 1980s to pursue a new economic course and introduced various reforms. However, the strengthening of market forces and more open economic policies originally envisaged was countermanded by repeated administrative intervention. The stagnation in economic growth and decline in real wages caused considerable social tension and contributed to a resurgence of nationalist tendencies. Until the end of 1989, little success had been achieved, and the economic reform program had encountered considerable hostility.
A focal point of liberalization was the deregulation of the foreign exchange market, which was integrated into the banking sector in May 1988. Although importers still had to give reasons for their foreign exchange requirements, the former foreign exchange allotment system was dismantled. New laws on foreign investment, promulgated under a June 1988 standby agreement with the IMF, permit repatriation of profits and invested funds by foreign owners of joint ventures.
The Central Bank since May 1988 has pursued a policy of devaluing the dinar in real terms with the aim of balancing supply and demand in the foreign exchange market. On January 1, 1990, the Yugoslav dina became fully convertible on foreign exchange markets, becoming the first Eastern European country to have a fully convertible currency . In order to calm an inflation projected at 13 percent for 1990, the Yugoslav government froze prices and wages and tied the dinar's exchange rate to the West German deutsche mark at seven dinars per mark. There are now no restrictions on the buying and selling of foreign currency in Yugoslavia.
Full convertibility of the Yugoslav dinar has had a positive impact on Yugoslavia's foreign currency reserves. Prior to January first, Yugoslavia held $6.2 billion in foreign currency reserves, holdings necessary to proceed to full convertibility of the dinar. Since the dinar was made convertible at the beginning of 1990, Yugoslavs have gone to their banks to sell their private foreign currency holdings for dinars, sending Yugoslavia's foreign currency reserves to $6.6 billion in only one week in January. Yugoslavs earned around 23 percent in early 1990 on the inflation plagued dinars in Yugoslav bank accounts, but the inflation rate since has declined as the convertible dinar stabilized. The fully convertible dinar also should augment the prospects for foreign investment attraction from the West, as countertrade measures no longer will be required. Unfortunately, however, Yugoslavia's aggravated ethnic strife could counterbalance the positive impact of a convertible dinar.
Mikhail Gorbachev has been the catalyst of a new economic reality, encouraging each Eastern European country to follow its own path to economic and political development. The dramatic fall of one neo-Stalinist regime after another in 1989 is indicative of his influence. The rejection of the "leading role" of the Communist Party in these countries and the free elections in 1990 will make for a significantly different Eastern Europe throughout the balance of this decade.
Hungary has led the way with innovative economic reforms since the 1970s, but there is no clear indication that the government there intends to make the Hungarian forint fully convertible. Fears of potentially sharp rises in imported Soviet oil prices, resulting from convertibility or hard currency payments, could be the principal reason for hesitation. The Hungarian reforms may be faltering.
Poland is committed to full convertibility of the zloty by the end of 1991, and the country's plunge to a market economy has been impressive to date. Czechoslovakians, until November 1989 only modest reformers, now are demanding "radical" reforms of COMECON and a free market in intra-COMECON trade. The relatively strong Czechoslovak crown is the best candidate for full convertibility among COMECON currencies.
Bulgaria has pursued moderate economic reforms, and its foreign investment laws are the most liberal in Eastern Europe. However, convertibility of the leva is a long term goal. The GDR already has substituted the West German deutsche mark for the ost mark as it prepares for reunification with West Germany. Yugoslavia quietly adopted full convertibility of the dinar on January first, becoming the first Eastern European country to make the transition to convertibility. Post-Ceaucescu Romania may offer trading potential because of the lack of any external debt, but the situation there is still too unstable to make for any viable, long term predictions.
The three most serious problems facing Eastern Europe and the Soviet Union are: (1) the existence of a black market, (2) poor economic performance, and (3) the replacement or renovation of an entrenched "nomenklatura" in many of these countries. These problems stem from enormous external indebtedness, repressed inflation, and the inefficiency of enterprises. They cannot be cured without bringing down military outlays, introducing a free price system, achieving convertible currencies, and reducing the role of bureaucrats. In the Soviet Union, the ruble devaluations in October 1989 and January 1990, the international currency auction in November 1989, and the move toward effective ruble convertibility on January 1, 1991 are all a challenge to black market currency speculation and an indication that Soviet officials are serious about price reform which will lead to the full convertibility of the ruble.
More critical to the question of convertibility is the role of subsidization in the Eastern European economies. As long as these governments continue to set low prices for housing, transportation, food, medical care, and education, the value of their currencies is artificial. However, market clearing prices for these and other consumer goods and services have been inimical to the economic and political systems. Until the leaders and citizens of Eastern Europe make sacrifices entailed by converting to a free market system, their currencies will continue to be artificially valued and of little use in international trade.
The downside of the elimination of subsidies is initial hyperinflation and increased levels of poverty, homelessness, unemployment, and hunger - the latter being the negative aspects of a purely capitalist system without a social welfare net. It is well worth noting that the new Polish Solidarity-led government has taken advantage of its current popularity to instill harsh sacrifices. Other governments in the Eastern bloc and the Soviet Union, as well as in the West, are watching to see how the Poles weather the rapid transition to a market economy. The longer the Eastern bloc governments take to introduce convertibility through the elimination of subsidies, the more difficult the process will be down the road.
Finally, it is most definitely in the interest of the United States to continue to encourage political and economic reforms in Eastern Europe and the Soviet Union to bring these countries completely into the world community of nations. Full convertibility of currencies would not only give the people of Eastern Europe and the Soviet Union the incentive to work harder, increasing market efficiency, but it also would eliminate the impediments to East-West trade as well as the black markets that are so unpopular with the U.S. companies doing business in the Eastern bloc.
In the short term, American exports to these countries will be more expensive. In the long term, profitable opportunities for U.S. companies, be they small or multinational, via direct export or more likely joint ventures or direct investment, can be enhanced only through full convertibility of East bloc currencies.
[1.] "Baby It'll Be Cold Outside Comecon." Business Week, January 22, 1990, p. 41.
[2.] Carrington, T. "Minority in Comecon Prefers Its Demise, Viewing Reform Notions as Inffectual." Wall Street Journal, January 11, 1990, p. A1.
[3.] Creditanstalt Bankverein, Vienna.
[4.] Czechoslovak Foreign Trade. Prague, January 1989, p. 2.
[5.] "Decree No. 33 on Economic Activity." State Gazette, No. 46, June 16, 1987, p. 1.
[6.] "Decree No. 56 on Economic Activity." State Gazette (Sofia), No. 4, January 13, 1989, p. 1.
[7.] "Exchange Arrangements and Exchange Restrictions." IMF Annual Report 1989, June 19, 1989, p. 211.
[8.] Facts on Czechoslovakia's Foreign Trade. Prague, 1988.
[9.] McKinnon, R.I. "Can the Soviet Economy Be Saved?" Wall Street Journal, December 7, 1989, p. A14. Also "Now It's More Like Real Money." Time, November 6, 1989, p. 52.
[10.] Milojevic-Borovcanin, Ljiljana, Interview, Economic Section, The Embassy of Yugoslavia, Washington, D.C.
[11.] "`Round Table' Understandings." Zycie Warszawy, April 7, 1989, pp. 3-5. Also Sachs, J. and D. Lipton. "Poland's Economic Reform." Foreign Affairs, Vol. 69, Summer 1990, pp. 47-66.
[12.] Suminski, W. "Smuga cienia" (Shadow line). Perspektywy (Warsaw), No. 43, November 10, 1989, pp. 15-16.
[13.] "Summaries of Projects Approved." The World Bank Annual Report 1989, August 3, 1989, p. 148.
[14.] Ware, K. "Hungary: Continued Reforms Improve American Export Prospects." Business America, Vol. 110, April 10, 1989, p. 16.
Stephen E. Medvec is Manager, Research/Planning, Philadelphia Industrial Development Corporation; Carla S. Stone is President of Business & Policy Associates, East-West Trade Consultants, and teaches international business at the University of Delaware.
|Printer friendly Cite/link Email Feedback|
|Title Annotation:||East European and Soviet Union currency convertibility|
|Author:||Medvec, Stephen E.; Stone, Carla S.|
|Publication:||Review of Business|
|Date:||Dec 22, 1990|
|Previous Article:||When worlds collide: failed LBOs and the Bankruptcy Code.|
|Next Article:||The effects of cognitive style on the design of expert systems.|