Most contracts must be concluded at least six months before the beginning of the plan year because they are supposed to serve as the basis for developing the final version of the annual plan; they must take into account the economic tasks set for that year by the five-year plan. The central planning authorities formulate the ultimate annual plan by modifying individual contracts, where deemed necessary, in the light of official policies and anticipated availabilities of materials and other inputs. Correction of original contracts was reported to be essential because enterprises tended to exaggerate their true requirements as determined by official norms and standards. In 1970 initial orders exceeded available resources of materials by from 20 to 200 percent.

In 1970 and 1971 a large number of inter-enterprise contracts were not concluded on time and, despite legal provisions for financial and other sanctions, thousands of contracts were not adhered to. This entailed a disruption of supplies and production, nonfulfillment of export obligations, and insufficient deliveries to the domestic market. In an attempt to cope with the supply problem, the Ministry of Technical-Material Supply and Control of the Management of Fixed Assets was created in September 1971—yet another example of trying to solve economic problems by administrative means.

The final stage in the planning process, as in the past, continues to be the assignment to each enterprise of specific tasks bearing on all aspects of its operations. These tasks, generally known as plan indicators, spell out in minute detail such items as the production and investment program, the size of the labor force and the wage bill, costs of production, and profits. They also specify norms for the use of all materials, equipment, and labor and set goals for raising productivity. In the case of large enterprises the number of indicators runs into the thousands. The indicators are also used to evaluate the performance of enterprises in relation to the plan. The entire process has been said to represent the application of democratic centralism to planning.

The number and type of indicators to be assigned to enterprises and their associations and the nature of the system of indicators best suited to stimulate greater efficiency and technological innovation have been subjects of wide-ranging and intensive debates. No clarification of the underlying issues, however, much less a consensus on appropriate measures to be undertaken, had emerged by early 1972. Officials have ascribed the lack of any significant progress in the planning reform to general inertia, organizational confusion, bureaucratic interests, and a reluctance on the part of many enterprise directors to assume the added measure of responsibility that is inherent in a greater freedom to exercise initiative. Most of the officials are aware, nevertheless, that the basic problem lies in the absence of adequate incentives. The reconciliation of an obligatory central plan with enterprise autonomy has thus far proved elusive.

Planning in the field of collective agriculture has also been highly centralized, at least through 1971, despite measures introduced at the end of 1970 to reduce the number of plan indicators for individual farms. Detailed instructions on crop and livestock production and on the volume of farm products to be delivered to the state have been handed down to farms by higher authorities insufficiently familiar with their natural and economic conditions. This method of planning has entailed significant losses through improper use of land and other resources. The relatively minor relaxation of central controls beginning in 1971 was intended to eliminate this waste. The extent to which central controls over farming operations were retained even after the announced decentralization of agricultural planning was illustrated by the Grand National Assembly's enactment of a law toward the end of 1971 concerning correct methods of producing and using livestock fodder. Information on the method of planning for state farms was not available.

PRICE SYSTEM

As in all centrally directed economies, prices are set by the government. In 1967 the National Party Conference called for a reform of the price system on the grounds that the prevailing prices failed to ensure the desired balance in economic development or to promote greater efficiency in production and foreign trade. After four years of intensive debate, a new price law was enacted in December 1971. Preliminary information on the provisions of the law indicated that prices would continue to be fixed by the government, although the method of calculating them had been modified. In contrast to the announced policy of decentralizing economic management, the law provided for strengthening central controls over prices.

Until March 1970 there was no unified control over prices. The State Planning Committee and the Ministry of Finance administered industrial wholesale prices, and the State Committee for Prices had jurisdiction over prices of consumer goods and government procurement prices for farm products. In 1970 the reorganized State Committee for Prices was given authority to control all prices. Representation on the committee has been provided for the State Planning Committee; the ministries of finance, domestic trade, and foreign trade; the Central Statistical Bureau; and the Central Council of the General Union of Trade Unions. Participation by delegates from economic ministries and other organs is to be ensured at all sessions in which problems of interest to them are brought up for discussion.

The basic criticism leveled against the price system concerned its tendency to undermine the government's drive for economic efficiency through the failure of prices to reflect production costs, improper relationships among prices, and price inflexibility. A comprehensive, unified approach to price reform was considered beyond the capability of the authorities; a piecemeal approach of dealing separately with different types of prices was therefore decided upon. Priority in this program was given to the improvement of industrial wholesale prices.

Wholesale prices for industrial products have been based on average costs for each product in the relevant industrial branch. Prices have therefore been profitable for enterprises having below-average costs, whereas enterprises with costs above the average have had to rely upon state subsidies for continued operation. Wholesale prices were last fixed in 1963, and subsequent changes in technology and other aspects of production magnified the dissociation of prices and costs. For political reasons and because of general shortages the closing of uneconomic enterprises was not considered feasible. Maintenance of fixed prices over long periods of time has been deemed essential for purposes of planning.