An Evaluation of Joint Business Ventures in the Former USSR

In 1985 Soviet economists told the former Soviet Government that they had a cure for the ailing Soviet economy. It was concise and dynamic; joint ventures. According to this plan, a Soviet partner and a foreign company could set up a firm to engage in business together. The former Soviet Government was quick to give the new idea a green light. There was a lot of hope and most forecasts were more than optimistic. Joint ventures would result in a market filled with goods and the quality of the work force would improve by using Western equipment and methods. Joint ventures soon came into existence. The count now in late 1992 is 4,000. firms involving foreign businesses. What, are the views of the people and the economists now? Most joint ventures do not sell anything they produce and some joint ventures are a convenient front for those trying to make money (preferably in hard currency) as fast as possible. A major industrial corporation still has trouble operating in Russian markets because there\u27s no raw material available in l large quantities. Virtually everything is centrally distributed. Thus far, only 20-30% of joint ventures have proved viable under the conditions that exist in the Russian economy. The ex-Soviet economy is not internationally competitive. The introduction of market mechanisms will hopefully be a means to that end. Things are not all bad. Some joint ventures are set up by firms that are not pursuing a get-rich quick scheme. Some of these are Cranload (an ex-Soviet-Swiss company) that markets self propelled cranes, Momatec (an ex-Soviet and German joint venture) and Lenvest (footwear) which employs 3,000 former Soviet people. In setting up my thesis, I believe it is important to gather insight into the following issues in regard to joint ventures: * Laws governing property rights, pricing, economic planning and labor rights in the former Soviet Union and how they compare to the West. * The practice of accounting, banking and insurance in the former USSR and how they differ from the West. * The ex-Soviet distribution system (roads, communication, power and personnel). * The political risk (possibility of a reversal of the present improving trends). * What overall approach are the former Soviets taking toward joint ventures? * What are the difficulties of getting a venture up and running? The final question that I want to address regarding joint ventures is this: will joint ventures deliver on their promise to the former Soviet Republic\u27s economies in terms of Western technology and modern management skills along with a market economy and hard currency