Despite Delay and Scandal, Chinese Firm Wins More Work in North Macedonia

The journey used to take about two-and-a-half hours. Then, in 2014, the Chinese contractor Sinohydro began building a highway between Kicevo and Ohrid, a distance of some 57 kilometres.

China at the time was picking up a string of major infrastructure projects in the Balkans with offers that frequently came in lower than those of its European competitors and were often coupled with financing from state banks.

Sinohydro struck a deal with the government of then Prime Minister Nikola Gruevski; two years later, Gruevski was out of office, his reputation tarnished by a plethora of corruption allegations against him and his ministers, one of which concerned the Kicevo-Ohrid highway deal.

Today, the highway is still under construction, its progress marred by repeated delays. Large sections of unfinished road have lengthened the time it takes to get from Skopje to Ohrid – North Macedonia’s No. 1 tourist destination – by around an hour.

“Conditions are getting worse with every trip,” said Ivan, who spoke on condition he was identified only by his first name. “Trucks transporting materials to the highway construction sites are damaging the asphalt and the gravel base underneath.” At one point on the road, he told BIRN, the surface is so degraded that his car rattles even when moving at less than 50 km per hour.

Sinohydro was already on the World Bank’s blacklist when it won the tender for the Kicevo-Ohrid highway.

In early 2024, then Prime Minister Dimitar Kovachevski mooted the possibility of tearing up the contract, declaring it “unacceptable” that it should take more than a decade to build 57 km of highway. But he didn’t tear it up, and in April, parliament voted to extend the deadline for completion to end-2026. 

But that’s not all Sinohydro got. The company has won two other major infrastructure projects in North Macedonia, regardless of its performance on the highway to Ohrid and allegations it paid kickbacks.

Sinohydro named in alleged kickbacks scandal

Gruevski resigned in 2016 following the release of secretly-recorded tapes that appeared to incriminate him and his closest allies in corruption and state capture, including alleged kickbacks in the deal with Sinohydro for the Kicevo-Ohrid highway.

A year later, special anti-graft prosecutors alleged that Sinohydro had won the tender with an offer of 411 million euros even though another Chinese company had offered to build it for 369 million euros. The prosecutors accused Gruevski’s government of lying about the better offer.

The case made little progress, however, as the special anti-corruption prosecution body became mired in its own corruption scandal.

Gruevski fled a prison sentence in a separate corruption case in 2018 and received political asylum in Hungary from the government of Prime Minister Viktor Orban.

By then, the Social Democrats had taken power from Gruevski’s conservative VMRO-DPMNE. 

The cost of the highway spiralled to some 600 million euros, paid for by loans from China’s Exim Bank.

In November 2023, then Social Democrat Prime Minister Kovachevski vowed to seek an audit of the project and threatened to terminate the contract.

“It is unacceptable that a highway has been under construction for over 10 years and has not yet been built,” he said. 

“This project has not been completed for 10 years for a number of reasons, from the design to the execution of the project itself. I think that we should consider terminating this contract and looking for a contractor who will do it in a quality way.”

Yet on April 1, a matter of weeks before parliamentary and presidential elections, parliament voted to extend the project deadline by three years, to December 31, 2026, having heard from an expert hired to examine the implementation. Blagoj Bochvarski, who was transport minister at the time, said the project was 83.8 per cent complete. The Social Democrats lost the elections in a landslide to VMRO-DPMNE in May.

Josif Josifovski, a professor at the Faculty of Civil Engineering at the Ss. Cyril and Methodius University, said all sides were responsible for the delays to the project, not just Sinohydro.

When construction began, it became clear that the geological structure of the ground was different to what was originally assumed, but all parties should have been aware and reacted earlier, he said.

“Hence, the responsibility for the delay in the construction of the Kicevo-Ohrid section cannot lie with one entity but it is divided among all participants in the construction,” Josifovski told BIRN.

“It was clear to both the investor and the expert supervision that more serious changes would be needed in the project. It would mean redesigning the cuts with much gentler slopes. It would lead to more expropriation of private land and thus extending the deadlines.”

And that’s not all, he said. Project implementation began without foreseeing the construction of parallel roads for alternative traffic and landfills, which inevitably required more time and more money.

Neither Sinohydro nor its state-owned parent company PowerChina responded to requests for comment for this story.

Government statements fail to mention company 

That the highway had run into problems, and that Sinohydro had been accused of paying kickbacks, was common knowledge by 2020.

Yet that did not stop Bochvarski’s ministry from selecting the Chinese firm that year to build a small section of a longer road between the towns of Gradsko and Prilep. Worth 39.5 million euros, construction began in June 2021 with a completion deadline of March 2023. The road is still being built and, according to Bochvarski’s last remarks on the issue, should be finished sometime this year.

Perhaps mindful of the company’s reputation, government statements [link1, link2, link3] on the road project frequently omitted to mention the contractor by name, nor could BIRN locate the tender documents on the country’s official procurement portal. 

BIRN’s reporter eventually got hold of the documents from the Public Enterprise for State Roads.

In 2019, Sinohydro also won an international tender for the second phase of the express road Stip-Kocani. The 17.9 million-euro project, with an initial completion deadline of April 2021, faced delays primarily due to unresolved land expropriation issues and slower-than-expected progress. The express road was completed only days before the expiry of the last deadline at the end of 2022 after multiple extensions.

Both projects, in 2019 and 2020, were funded with loans from the European Bank for Reconstruction and Development, EBRD. 

The EBRD told BIRN that in both cases “the selection process for the contractors was undertaken in accordance with the Bank’s Procurement Policies (PPR) and Rules”, as well as so-called Open Tendering procedures by which all interested parties are given an equal opportunity to participate.

“Prior to providing its no-objection to contract award, the Bank satisfied itself that the respective procurement processes were undertaken in accordance with the Bank’s PPR and that Sinohydro was eligible for contract award in accordance with the eligibility requirements contained in the Bank’s PPR.”

North Macedonia’s Ministry of Transport and Communications did not respond to a request for comment.