[Marxism] Foreign investment in the USSR

[Anthony Boynton]

Here is a useful chapter of a useful document on
foreign investment in the USSR before the onset of the
Third Period. The document is from 1928, from the
Soviet Information agency, and can be found at 

http://www.marxists.org/history/ussr/government/1928/sufds/ch14.htm

Foreign investment was limited to concessions, which
were basically leases and short term joint ventures,
usually on very good terms for the investor. The aims
of the USSR were usually technology transfer, and
development of domestic production - either industrial
or raw material.

Not noted in this document, but worth noting, is that
most concessions were with major corporations,
especially interesting is the predecessor of
Occidental Petroleum, but also worht noting are Ford,
GE, and RCA.

Anthony

Soviet Union Information Bureau 
________________________________________
CONCESSIONS
________________________________________
THE vast undeveloped resources of the Soviet Union and
the lack of facilities for full development in certain
industrial and constructive lines afford a broad field
for the foreign concessionary. The concession policy
is being carefully worked out. 
Concessions may be secured by responsible foreign
interests from the Chief Concessions Committee (18
Malaya Dmitrovka, Moscow), attached to the Council of
People's Commissars. As a rule the concessions run for
a limited period of years. The concessionary furnishes
the capital for development and the "know how." The
Government, in addition to the valid lease, usually
affords special facilities for transport and for the
importation of equipment and materials. Some
concessions are in the form of mixed companies, in
which the Soviet Government has a participating
interest. Some concessions take the form of engaging
foreign engineering firms for technical assistance.
Concession agreements, which are drawn up jointly by
the Chief Concessions Committee and the applicant,
must be ratified by the Soviet Government. 
For the convenience of firms and individuals
interested in obtaining concessions in the U.S.S.R.
the Chief Concessions Committee has representatives in
the principal European cities (Berlin, London, Paris)
who are empowered to conduct preliminary negotiations.

The Amtorg Trading Corporation is the representative
of the Chief Concessions Committee in the United
States and is empowered to negotiate concession
agreements. The Amtorg is in close touch with the
Soviet Chief Concessions Committee and has detailed
data in regard to a number of concession prospects in
the U.S.S.R. 
The Amtorg is in a position to supply American
business men with complete information in regard to
concessions in the U.S.S.R. and has copies of standard
concession agreements which will enable prospective
concessionnaires to acquaint themselves with the basic
provisions of agreements covering various types of
concessions in the U.S.S.R. 
After the basic conditions have been determined as a
result of preliminary negotiations conducted in this
country, the final form of the contract is drawn up in
Moscow in agreement with the Chief Concessions
Committee which in turn presents it for ratification
by the Council of People's Commissars. 
During the five years ending November 1, 1927, the
Committee received a total of 2,211 applications for
concessions, of which 35 per cent came from Germany,
10 per cent from British concerns and 954 per cent
from American firms. 
During the same period 163 concessions were granted,
of which 113 are at present in operation. 
On June 1, 1928, there were 97 concessions in
operation, distributed as follows: 
Operating Concessions
(as of June 1, 1928)
Number of Concessionaries from: 	Concessions
United States 	14
Germany 	31
England 	10
Japan 	17
Poland 	5
Sweden 	5
France 	6
Austria 	5
Norway 	3
Others 	11
Total 	97
Of the total number of concessions 40 were for mining
and manufacturing, 28 for technical services, and 8
were trading concessions. 
The capital invested, as of July 1, 1927, in 39 of the
total number of concessions (including 5 mining, 20
manufacturing, timber and agricultural and 3 building
concessions) is estimated at $30,000,000, amounting to
slightly less than one per cent of all capital
invested in these industries in the U.S.S.R. The
number of workers employed in 27 concession
enterprises (including 7 mining and 20 manufacturing
concessions) was, on the same date, 19,658. 
On October 1, 1927, the balance sheets of seventeen
manufacturing enterprises operated through the fiscal
year showed net profits of 4,752,000 rubles
($2,447,280), or 35 per cent, on a total invested
capital of 13,484,000 rubles ($6,944,000). 
RULEs GOVERNING CONCESSlONs.- Concessions may be
granted for the construction and operation of
factories, mills and mines, for the building of houses
and roads, and for the development of forest, mineral
and other of the natural resources of the Union. The
concessionary may supply the entire capital necessary
for the project or may enter into a "mixed" company in
conjunction with a Soviet state organization or, in
the case of technical advisers, may not be required to
invest any capital at all. 
Concessionaries engaged in production are usually
permitted to dispose freely of their product on the
Soviet market and also to export a certain specified
proportion. In cases where the concession enterprise
produces commodities for which there is a large demand
in the U.S.S.R., the concession agreement usually
contains a provision giving an option to Soviet
organizations for a part or the whole of the output on
conditions specified in the agreement. 
The concessionary is permitted to export from the
country the entire net profit of the enterprise, the
transfer of money to be effected through the State
Bank of the U.S.S.R. or any other bank in the country.

The policy and the practice of the Soviet Government
has been to especially favor concession enterprises
which can obtain the needed raw materials and
semi-manufactured products within the country. In the
event, however, that the required materials are not
available in the U.S.S.R., the concessionary is
granted the right to import such materials, the
quantity and procedure of importing being specified in
the concession agreement. In these cases imports are
allowed until such time as the production of the
required materials is begun in the country. Imports of
equipment are usually exempt from customs duties for a
specified length of time after the granting of the
concession. 
In regard to the payment of taxes and duties the
concessionary is placed in the same category as
similar Soviet enterprises. Exess profits are usually
taxed according to a scale specified in the agreement.

One of the principal provisions of concession
agreements is that the enterprise employ the most
modern production methods. 
The life of the concession, depending upon the nature
of the industry and the amount of capital invested, is
sufficiently long to allow the concessionary to
utilize fully the imported equipment and to receive an
adequate return on the invested capital. Upon the
expiration of the term of the concession, all the
concession properties are turned over to the
Government without compensation. 
Concession agreements, upon ratification by the
U.S.S.R., have the power of a special law. The
provisions of such agreements cannot be changed by any
decrees or rulings of central or local government
organs. 
In accordance with the existing laws the Government of
the U.S.S.R. guarantees that the properties of the
concessionary invested in the enterprise are not
subject to nationalization, requisition or
confiscation. The concessionary is allowed to hire the
necessary working staff on the basis of the provisions
0f the Soviet Labor Code and of the collective
agreements made with trade unions. The experience of a
number of years shows that concessionaries have had no
difficulties in hiring and employing labor in the
U.S.S.R. The concessionaries are permitted with
certain limitations, to bring in foreign skilled
workers and higher administrative and technical
personnel. The proportion of foreign workers to the
total number of workers is set forth in the agreement.

CONCESSION POSSIBILITIES.- In September, 1928, the
Soviet Government announced a program of extension and
liberalization of the policy of granting concessions
to foreigners. The new policy included the importation
of construction materials duty free and the
simplification of the taxing scheme. In most cases the
concessionaries may sell their products on the
domestic market on their own terms and may export
subject to the laws existing for external trade. The
concessionaries may remit their profits abroad at
current rates of exchange prevailing in Moscow. 
A list of available concessions was submitted, drawn
up by Gosplan to fit in with the five-year plan of
industrial development. The list included the
following: 
Eleven concessions for land development, for the
growing of cotton, sugar beets, grain and other
agricultural products. 
Five concessions for the building of railways, some
with collateral oil and forest exploitation rights;
three for the building of waterways. 
Four large concessions for the exploitation of black
metals in the Krivoi Rog, Magnetic Mountain, Telbess
and Dnieprostroy districts. Sixteen other
metallurgical concessions. 
Concessions for foreign capital and technical
assistance in the construction of a number of
industrial plants, including: A tractor works, lathe
construction works, tool-making plant, automobile and
auto-truck works (xo,000 to 100,000 units per annum),
wagon works, aeroengine construction works,
agricultural implement plant, shipyard for river
tonnage, steam boiler factory, printing machine
construction plant, watch and clock factory,
typewriter and adding machine plant, factory for
dental and surgical instruments, factory for heat and
pressure gauges, plant for sugar and distilling
machinery, plant for machinery for the silicate
industry, another for machinery for the leather
industry, another for sawmill equipment, another for
machinery for the match industry, plant for making
elevators, conveyors, etc., a bicycle factory, plant
for roadmaking machinery, plant for railway rolling
stock repairs. 
Five concessions for production of cement and one for
cement machinery. 
Three concessions for cellulose, one for rayon silk,
one for treatment of flax for the market. 
One tannery concession and a multiple concession for
production of vegetable extracts used in tanning. 
Four concessions for window and bottle glass, two for
pharmaceutical and domestic glass. 
Concessions in the mining and fuel industries as
follows: iron ore (5), copper (5), lead and zinc (4),
gold (3), nickel (1), graphite (1), coal (2), oil (5),
asbestos (2). 
Nineteen forest concessions. 
Eight concessions in the electrical industry. 
Eleven concessions for the construction of electric
power plants, including a hydroelectric plant of
80,000 kw. on the river Svir, and a steam plant of
60,000 kw. near Cheliabinsk in the Urals. 
Concessions for housing in crowded urban centers. 
Public service concessions in over sixty cities and
towns, including tramways, gas works, electric plants,
waterworks, sewers, slaughter houses, etc. The
aggregate investment involved is over 2OO,000,oco. The
cities in the list include Moscow, Leningrad, Odessa,
Kharkov, Tiflis, Kiev, Tashkent, Vladivostok,
Novosibirsk, Sverdlovsk and Rostov-on-Don. 
Full description of each concession in the above list,
with capital required and approximate production, may
be obtained from the Amtorg Trading Corporation, 165
Broadway, New York City. 



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