Czechoslovakia: Confronting a Tankless Task

By JAMES L. GRAFF/MARTIN

Trick question: What country is the world's leading arms manufacturer -- in per capita terms? Hint: it's not any of the big five in the arms business (the U.S., the Soviet Union, France, Britain and China). The answer: Czechoslovakia.

With 111 factories churning out weaponry ranging from AK-47s to L-39 Albatros jet trainers, Czechoslovakia has been producing more than $800 annually per citizen, vs. $700 for the U.S. But with a dissident playwright as President and a mandate to undo the past, Czechoslovakia's postcommunist government is determined to dismantle the country's arms industry. President Vaclav Havel has ruefully noted that Czechoslovakia sent Libya enough Semtex plastic explosives in the '70s and early '80s to keep the world's terrorists supplied for the next 150 years. Just two months after the November 1989 revolution, Foreign Minister Jiri Dienstbier announced that Prague would "simply end its trade in arms," without regard to economic consequences.

But now that the economy is going through the painful transition from communism to capitalism, Czechoslovakia is learning how hard it is to shut down such an important industry. As many as 80,000 jobs, the bulk of them in the restive and depressed region of Slovakia, depend on it. The federal government has pledged to cut output to 25% of 1988 levels by 1993, but already Slovak politicians have slowed down that timetable to stave off mass unemployment. Last month federal Prime Minister Marian Calfa took a scolding from his Israeli counterpart, Yitzhak Shamir, over a still pending agreement to sell 100 T-72 tanks to Syria in a deal worth $200 million. "Czechoslovakia is not interested in producing tanks," countered Calfa. "But we don't want to break the economy of a region."

In the early days of the cold war, central Slovakia became the heartland of the heavy-arms industry. The sleepy little town of Martin, 145 miles north of Bratislava, was the site of a tank factory that employed 11,000; nearby Dubnica churned out armored personnel carriers; down the road, Povazska Bystrica produced jet engines.

The biggest loss for Slovakia's arms plants has been in exports to Warsaw Pact countries. Sales to the Soviet Union, Czechoslovakia's biggest customer, plummeted by 40% last year, and are falling off even more steeply this year.

The drop in East bloc sales makes the industry more dependent on exports to the Third World, but political and economic developments are cutting off those markets as well. U.S. officials have joined Israel in condemning the sale to Syria. The deal also set off a fierce struggle within Czechoslovakia between government officials who want to bolster the nation's international reputation and others who think the agreement could help bridge the gap until the industry retools for nonmilitary production. Says Slovak Prime Minister Jan Carnogursky: "We've asked the federal government to clear the matter up and persuade complaining governments that the deal is harmless."

The arms merchants are looking for government help in getting out of the business, but in view of all the country's economic troubles, they are not hopeful. The ZTS Martin tank factory had to borrow $86 million to pay for tank production equipment that the communist government foisted on it, and director Jan Segla now wants Prague to forgive the debt. He also wants more financial / assistance to liquidate production lines designed to manufacture tanks. "The heritage of special production is why our factory is in such bad economic shape today," he says. "It's the labor of Sisyphus to keep this plant working, and we need the government's help."

The company's harried managers hope to expand nonmilitary production under a three-year-old agreement with the German firm Hanomag to manufacture earthmoving equipment. ZTS Martin has also begun working under license from the Italian manufacturer Lombardini to produce tractor engines and other machinery. The company eventually plans to make 40,000 engines annually, but this year it will turn out fewer than 900. "In the first phase, new products don't bring profits," say Segla. "What we need are partners who have money and are willing to invest."

Western investors, though, have been slow to come forward. "We're sick of people coming here to organize colloquiums on plant conversion as a social phenomenon," says Josef Fucik, a department head in the federal Ministry of Economics in Prague. "We're in severe need of help, not meditations on philosophical problems."

Slovak leaders universally acknowledge the need to decrease their economy's dependence on military production. But many think the federal government is moving too fast and is sacrificing Slovak jobs without providing credible alternatives. "The federal government understood conversion as a gesture of cooperation toward the West," says Vladimir Meciar, the combative former Slovak Prime Minister who railed against federal policy and flirted with separatism until his ouster in late April. "They hoped there'd be a payoff, but they're still waiting." Unemployed factory workers, though, may become restless waiting for new jobs.