Chinese CRBC among top tax debtors in Montenegro

The Chinese company China Road and Bridge Corporation (CRBC), which constructed the first section of the Bar-Boljare highway, is the second largest tax debtor in Montenegro.

According to the Montenegro Tax Administration's list of the 200 largest debtors, its debt at the end of last year was approximately 11.2 million euros.

Nevertheless, they are still interested in continuing the construction of this highway.

CRBC and the Montenegro Tax Administration did not respond to Radio Free Europe's inquiry about the tax debt.

For the construction of the highway, where 41 kilometers cost around one billion euros, this company enjoyed special tax and customs benefits.

According to data from the Ministry of Finance, approximately 836 million euros were disbursed from the state treasury to CRBC and subcontractors for these works, as stated by the non-governmental organization Action for Social Justice.

"Ines Mrdović, director of the NGO ASP, assessed for RSE, 'If you have brought a foreign partner to build the largest infrastructure project in Montenegro and paid them so much money from the state treasury, then it is unacceptable for them to have any debt to the state.'

Mrdović emphasizes that the state has mechanisms to collect tax debts.

'This is not a company that has nothing here. On the contrary, it has certain assets and financial resources.'"

CRBC wants other sections as well. The company spent seven years building the first 41-kilometer section of the highway connecting the outskirts of Podgorica to Kolašin in northern Montenegro, with construction delays occurring five times.

The section was finally opened to traffic on July 13, 2022, Montenegro's Statehood Day.
This section is just a quarter of the planned route, which is approximately 170 km long and will connect Bar in the south to Boljare on the border with Serbia.

CRBC is interested in constructing other sections as well. Last year, they presented to the Montenegrin Government "detailed plans, a commercial study, and framework conditions" for continuing the project.

They propose that the sections be implemented through a public-private partnership model.

Meanwhile, the state-owned company Monteput has already announced a tender worth around five million euros on January 31st for the development of the conceptual design for the second section, from Andrijevica via Berane to the border with Serbia. Mrdović believes that the construction of the first section does not recommend CRBC for further cooperation.

"The entire series of problems that occurred during construction has shown... I think the Government should turn to companies with a better reputation regarding the implementation of major infrastructure projects."

In addition to a three-year delay, CRBC has been accused of causing environmental damage.

The company was fined by a court for damaging fish and other wildlife in the Tara River during highway construction. The verdict was overturned, and a new trial is ongoing.

Tax-exempt, CRBC in the red

During the construction of the first section, special rules applied to the Chinese company, including tax and customs exemptions.

Mrdović highlights that, according to their data, CRBC and subcontractors saved at least 250 million euros through tax and customs exemptions.

The Montenegro Tax Administration did not respond to RSE regarding the total amount of tax exemptions granted to the Chinese company.

Despite these exemptions, financial reports show that CRBC ended the year 2022 with a deficit of nearly 40 million euros, while the report for 2023 is not yet available.

Montenegro financed the first section of the highway with a loan of nearly one billion dollars from the Chinese Exim Bank.

To protect against currency risk due to fluctuations in the euro-dollar exchange rate, authorities entered into hedging arrangements with several Western banks, reducing loan costs by over 27 million euros.

The Ministry of Finance informed RSE that six loan installments totaling around 290 million dollars have been paid to the Chinese bank so far.

Montenegro is expected to repay the loan for the first section by January 2035.

CRBC is also active in other Balkan countries.

CRBC has projects in other countries in the region as well. One such project, with the Serbian government, is valued at 3.2 billion euros.

CRBC also constructed the Pelješac Bridge, which connects the southernmost part of Croatia with the rest of the country. It was opened in July 2022, the same month the first section of the Montenegrin highway was opened to traffic.

According to the Digital Forensic Center, the value of Chinese projects in five Western Balkan countries that are not members of the European Union exceeds 13 billion euros.

CRBC is not the only foreign debtor

CRBC is not the only foreign company among the largest tax debtors in Montenegro. Two other foreign companies are also among the top five.

The largest debt, totaling around 11.5 million euros, belongs to a company headquartered in Hong Kong - Spic Ronghe International Limited, which was involved in the construction of the Možura wind farm on the Montenegrin coast.

Next is a Chinese company with approximately 11.2 million euros in debt, followed by an Italian company, Blacke-Durr Energy Solutions, with debts totaling 6.5 million euros. This company is engaged in the construction of electrical and telecommunication lines.

The total tax debt of the top 200 largest tax debtors amounts to 170 million euros.

CONCLUSION

Data from the Montenegro Tax Administration about the largest debtors, among which the Chinese company CBRC ranks highly in second place, responsible for constructing the first section of the Bar – Boljare highway, is yet another proof of the unlawful and non-transparent business practices of Chinese companies in the Western Balkans. The tax debt of the Chinese company at the end of last year amounted to 11.2 million euros, despite the construction of the first highway section costing around one billion euros. Montenegro, due to the inability to pay off the Chinese loan installment, was pushed to the brink of bankruptcy and debt slavery. There is no information from the Montenegrin authorities and relevant institutions on how they intend to recover CBRC's tax debt, nor whether the company will be barred from participating in tenders for the construction of the next section of the Bar-Boljare highway due to its tax arrears, especially since CBRC has expressed interest in participating in the construction of subsequent highway sections.

Additionally, as reported by the media, this company enjoyed customs and tax benefits, but there is no public information about the specifics of these customs and tax benefits, nor has CBRC informed the Montenegrin public about them. On one hand, this reflects the (common) trend of unlawful and non-transparent business practices of Chinese companies in the Western Balkans, but more alarmingly, it underscores the concerning fact that authorities in Western Balkan countries hardly react to such blatant violations of the law by Chinese companies.