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On Hard Road To Capitalism, Baltics Still Need Soviet Market

October 20, 1991

VILNIUS, Lithuania (AP) _ Workers at the Venta microelectronics plant, wearing special garb to keep dust off the integrated circuit boards they make, seem light years ahead of the food shortages and disorder of the Soviet Union.

But their hopes to stay ahead hinge on two seemingly opposite goals: attracting Western investors and boosting sales to the crumbling Soviet Union to which they were unwillingly annexed for 50 years.

″We sell to Soviet concerns that make television sets, automobiles, rockets. Yes, rockets,″ said Venta’s director, Kazimieras Klimashauskas, giving a tour of the once-secret facility, Lithuania’s version of Silicon Valley.

The Kremlin recognized the independence of the three Baltic states in September, but ″the Soviet Defense Ministry is still a customer,″ Klimashauskas said. ″We still have a Soviet military representative here at the plant. We’re not really sure how that will be worked out.″

Deep economic bonds still unite the Baltics with the Soviet Union.

At Venta, about half of last year’s sales of more than 105 million rubles, or around $61 million at the commercial exchange rate, came from the Russian Federation, and most of the rest from other industrialized Soviet republics, the Ukraine and Byelorussia. Without increasing prices, sales to the Soviet market could rise by as much as 50 percent next year, Klimashauskas said.

Managers of other big factories in Lithuania, Latvia and Estonia say they will perish if they lose their traditional Soviet markets.

But they want to place their futures in the hands of Western companies that could invest, then use Baltic expertise to sell to Soviets and employ relatively inexpensive Baltic labor to produce for the West.

″We are in a period when the old system doesn’t work. But the new one doesn’t work yet, either,″ said Erik Terk, the Estonian vice minister of economics, interviewed in the Estonian capital of Tallinn.

To help leap from the centrally planned Communist past to the hoped-for bright capitalist future, the Baltic governments have signed bilateral barter agreements with the Russian Federation, other Soviet republics, and even regions and cities.

″We can barter our furniture or light manufactured goods for oil, for example,″ Terk said, describing how Baltic industries seek to keep supplied with raw materials through what promises to be several hard years.

Two major steps envisioned by the Baltic governments are printing their own currencies and ″privatizing″ - selling off big industries once controlled by the Kremlin and now mostly owned by the Baltic governments.

The governments are printing Lithuanian litas, Latvian lats and Estonian kroon, to be issued sometime early next year to replace the ruble.

Estonia has designated seven major businesses to be privatized at first as test cases, with the rest to follow.

Latvia, where politics are polarized because of a near 50-50 split between the Latvia and non-Latvian populations, has not yet passed a law to allow privatization. Raimonds Blukis, deputy head of the Latvian government office on privatization, describes the delay as potentially catastrophic.

The Lithuanian government, which in two years has leapt ahead politically, has adopted a bold solution.

The parliament set an arbitrary value of 100 billion rubles, or about $59 billion, for property taken over by the Lithuania from the Soviet government.

And the Lithuanian government has started issuing coupons to citizens to supplement their salaries. They can redeem them for scarce goods, or use them to buy shares of businesses as they are privatized, said Kaziermeras Antanavicius, chairman of the legislature’s economic committee. The workers at each business will be offered the shares first, at a slightly reduced rate.

At the Venta plant, most of the 3,500 workers are signing up for shares, which could give them and other Lithuanian citizens up to a 30 percent stake in the former Soviet enterprise by the end of the year.

Factory director Klimashauskas would like to see the remaining 70 percent bought by a Western firm that could introduce the capital and technology enabling the factory to compete in the non-Soviet market.

Paul Treier, manager of the Talleks excavator plant in Tallinn, also wants a foreign partner.

Talleks, one of the seven major Estonian firms to be sold off in the first round of privatization, exports to 51 countries, but 90 percent of its approximately $41 million in sales comes from Soviet customers.

For Treier, the collapse of the Soviet economy means trouble, for sales and supplies. Last year, Talleks bought 900 Belarus tractors from a Byelorussian firm, fitted them with excavating gear, and sold them.

″This year, it will be a problem to get even 500 tractors,″ he said. Next year, he expects sales to drop another 10 percent to 20 percent, forcing him to lay off about 200 of his 1,500 employees, and things could get worse.

Treier wants ″foreign technology, foreign management,″ to improve his product. And he said that using Western tractors and components could allow him to sell for hard currency to mineral rich Soviet regions, such as the Siberian oil fields, within five years.

″We know the Russian way of doing business,″ and could help a Western firm break into that market, he said.

That kind of cooperation is needed to bring Estonia prosperity, and show the people of the Baltics and the Soviet Union that ″political freedom brings economic benefits,″ he said.

″We don’t have 10 years. We have only one or two years″ to end shortages of basic commodities and avoid further turmoil, Treier said. ″Our independence is only on papertoday.″

″The next year will be tough, really tough,″ said Toomas Vassar, an executive at Tallinn’s newly privatized Esmar fish company, which caught 13,000 tons of the 122,387 tons of fish marketed by Estonia last year.

Traditionally, 70 percent of Esmar’s fish has gone to the Soviet Union as preserved products, but Vassar expects that figure to drop. Part of the problem lies in difficulty obtaining Soviet cans, tomato paste and vegetable oil needed for making the preserved products, he said.

But the real danger lies in losing the Soviet Union permanently as a supplier and customer, he said. Esmar is negotiating with a Swedish firm to buy modern equipment to freeze its fish and sell in the West, ″but we realize that market is saturated.″

″If the doors to the Soviet Union close, we lose our market,″ he said.

End Adv Sunday, Oct. 20

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