EAST GERMANY ANNOUNCES ECONOMIC REFORM PLANS
East Germany plans to devolve more
responsibility to factories and boost profitability under a law
obliging plants to generate their own funds for investments in
new machinery, repairs or expansion, the Berliner Zeitung
newspaper said.
    The state would no longer finance projects under five mln
marks under the law which took effect on January 1.
    The paper also hinted at further, more ambitious changes if
this experiment proved successful.
    Soviet leader Mikhail Gorbachev has cited East Germany's
cautious industrial decentralisation as an alternative to the
Hungarian model based on Western-style market economics.
    The law stresses that East Germany remains committed to the
centralised state-planned economic system with no market
experiments.
    "This new regulation is part of our general investment
policy," Berliner Zeitung said, citing the growing importance of
robots and high technology rather than the large-scale plant
construction of the 1950s and 1960s.
    "This step could be the start of even greater changes in GDR
investment policy. We must wait and see," it added.
    Factory investment funds would be drawn from profits above
certain minimum returns pledged to the state under annual plans
and from amortisation -- funds the factory is allowed to keep
to compensate for depreciation in the cost of machinery.
    Amortisation costs and all profits currently go back to the
state, which provides all investment capital in return.
    This centralisation has hindered management's response to
changes in world markets vital for the East German economy,
economists said.
 REUTER
