(Autumn 1995) Repairing the economic ravages of some 70 years of Soviet communism is neither easy nor quickly done. But it is being accomplished across the CIS, and the effort is attracting more and more international attention and support.
A major part of this rehabilitation, of course, involves the massive former Soviet defense industry. By party diktat, it was so localized that some areas were almost entirely dependent on defense-related industry for employment, income and much of their social infrastructure. Turning that industry around to meet civilian needs can produce widespread economic hardship.
Now in its fourth year of economic recession since the collapse of the Soviet Union, Ukraine illustrates the problem well. The former Soviet Union concentrated much of its computer research in Ukraine, the better to serve the massive military and aerospace industries that had been there for years. Now, as those industries shrink dramatically, literally hundreds of thousands of Ukrainian computer programmers, both civilian and military, are working as accountants or taxi drivers.
The impact has been so dramatic that one Ukraine resident complained recently, "There really is no economy here." Perhaps not, but there is hope. Ukrainian computer centers like the Cybernetics Institute of Kiev are focusing their energies on making Ukraine a major provider of commercial software, and foreign countries are taking an interest.
The United Nations, for example, has begun a project to build the Internet in Ukraine, and Western companies with large computer systems are hiring Ukrainian programmers. Apple Computers is beginning a program to teach entrepreneurial skills to 2,000 programmers a year, and a few Ukrainian programmers are already selling their programs abroad -- often via the Internet.
This sort of international cooperation is not limited to the field of computers. One Western construction company has formed a joint venture with a Ukrainian naval plant to build 260 prefabricated houses for laid-off military officers. When they are built, the joint company plans to market more. Given the desperate housing shortage across the CIS, the houses should find ready buyers.
Financed by primarily Western governments and private businesses, similar joint ventures are also underway in Kazakhstan. There, a subsidiary of American Telephone and Telegraph will soon launch a joint US$16 million project with Kazinformtelecom of Almaty to convert a space-launch tracking system into part of an international telecommunications network.
The Western firm Kras Corporation is scheduled to form a US$7.7 million joint venture with the Kazakh National Nuclear Center to convert a nuclear-testing research facility into a manufacturer of printed circuit boards. And a biological warfare research plant is to become a manufacturer of vitamins and pharmaceuticals. The Kazakh firm Gidromas will form a joint venture with a U.S. firm to convert a rocket plant into a producer of pressure vessels, such as containers for liquid nitrogen.
Yet as essential as this influx of foreign cash and expertise is and will be for some time to come, the efforts of the CIS states to solve their own conversion problems offer no less reason for optimism.
In the Chelyabinsk Region, for example, the Russian federal nuclear research center has developed a program for conversion to civilian production that will involve no fewer than 92 projects, all to be completed by the year 2000. Established some 40 years ago, the center was once the heart of the Soviet Union's nuclear weapons research. Now it is developing components for fiber-optical equipment and communications systems as well as modern medical equipment. It is also developing monitors to be used in nuclear power generation and in environmental applications.
Meanwhile, the city of Perm, some 1,000 kilometers east of Moscow, set up its own conversion fund two years ago. The object is to bring together more than 40 former military-related factories that were involved in conversion to civilian production to serve as a research center and a clearinghouse for problems as they arise.
So far, some 15 programs have been designed to convert the Western Urals defense complex to civilian use, and there have been some serendipitous developments as well. One of them has involved converting the MiG-31 fighter engine to power gas pumping stations and electric power plants and will be most useful in isolated areas.
Russian oblasts (administrative subdivisions) are also proving imaginative in resolving the inevitable problems and setbacks that accompany conversion. When industrial production in Nizhniy Novgorod oblast fell 28 percent in 1994, for example, and eight enterprises were operating at a total loss, the oblast administration tried a new approach. With Moscow's approval, it is setting up "territorial production zones" at failing factories. These zones will provide tax and rent relief for a set period and on agreed-upon terms, and they will leave open the possibility that, once it is operating at a profit, the floundering firm may purchase the property on which it operates. The idea behind the effort is to preserve intact the production capabilities and technological levels of existing factories.
As analysts point out, encouraging as they are, these conversion efforts are only the beginning in a long process of converting the former Soviet military giant into successful civilian industries.