MOSCOW, AUG. 17 -- After decades of ideological resistance, the Kremlin leadership proposed today that foreign businesses be allowed for the first time to establish fully owned affiliates in the Soviet Union.
In recent years, laws governing the Soviet Union's centrally controlled economy have let foreign businesses open joint ventures here, but for six decades they have been prohibited from becoming sole owners of new enterprises. Because of numerous restrictions and frustration in dealing with Soviet bureaucracy and inexperience, many foreigners have given up on the Soviet Union and invested in Eastern Europe, where several former Communist states have moved in the past year toward free-market systems.
But with Soviet Premier Nikolai Ryzhkov's proposal today to remove restrictions on foreign ownership of businesses, the Kremlin leadership indicated its willingness to address the concerns of Western investors watching this nation's moves toward a modern market economy.
Ryzhkov introduced the new bill on foreign investment to the parliament, or Supreme Soviet, as part of a package of economic-reform laws that legislators will consider this fall. "One can no longer rely on joint ventures alone," he said. "It is impossible to move toward a market economy while the country remains isolated from the world economy."
Although details of the plan are not known, many Soviet legislators and economists have said the rise of foreign-owned companies is an essential component of a market economy and integration with world markets.
Many foreign businesses may be reluctant in the short run to take advantage of the Soviet offer, however, because the Soviet ruble cannot be converted to hard currency, making it impossible for Western companies to draw profits out of the country. Companies dealing in raw materials and other commodities that can be directly transferred are considered the most likely candidates for participation in the proposed program.
For more than 72 years, leaders of the ruling Communist Party have been highly suspicious of investors from capitalist countries. But Ryzhkov's introduction of the new bill is yet another sign that the government has abandoned decades of entrenched communist ideology and fear of the "foreign exploiter."
Soviet President Mikhail Gorbachev has interrupted his summer vacation to help supervise the drafting of the new economic laws that will be considered this fall. He will be working in cooperation with Boris Yeltsin, president of the Russian republic and long considered one of Gorbachev's chief political rivals.
Yeltsin has proposed a radical 500-day plan that calls for privatization of state-owned enterprises and the eventual introduction of private property. He has spoken out continually against Ryzhkov's more cautious reform package introduced last spring.
As Ryzhkov and Yeltsin draft their rival plans, Gorbachev seems to have moved toward Yeltsin's more Western-oriented notion of reform. Many leading political figures here, including some of Gorbachev's economic advisers, are convinced that Ryzhkov, a former manager of a huge industrial conglomerate in the Urals, is incapable of envisaging a genuine market economy and will eventually have to step down. When Ryzhkov last spring announced a series of price increases that set off widespread criticism and fierce hoarding of foodstuffs, Gorbachev quickly distanced himself from the prime minister and his proposals.
Yeltsin, on a recently completed tour through trouble spots in the vast Russian republic, said Ryzhkov's government enjoys no public confidence. Ryzhkov responded, "If Yeltsin turns out to be right, the government will have to resign."
Speaking in the Ukrainian city of Odessa today, Gorbachev said the reform proposals and a new treaty governing relations among the Soviet republics would be "landmark events."
He said the new reforms must "encourage the spirit of enterprise in every way. Everyone should realize that the socialist choice can only be realized through work based on people's own economic motivation. Such work will help overcome both the egalitarian mentality and parasitism, which literally weighs down society and blocks the way to a prompt recovery."
Gorbachev, who appears to be moving toward an outright endorsement of private property, said the country needs to "reform property relations across the board, without delay, through privatization and an end to monopolies."
Although Gorbachev said he endorsed new economic arrangements between the republics and Moscow, he was adamant that the republics stop trying to challenge the country's security system. The Ukraine, in its recent assertion of sovereignty, claimed the right to establish its own armed forces and called for a nuclear ban. Other republics have pronounced their people exempt from Soviet military service.
"I don't think someone should start dividing up nuclear weapons and the nuclear potential or the system of national defense management, a sophisticated complex in which everything is mutually determined and interdependent," Gorbachev said.
Gorbachev added, "If we suddenly embark on the establishment of regional structures and the division of defenses, we would not only undermine our own security, but would also damage world security."