Is Bosnia and Herzegovina entering the network of debts and political influence of official Beijing?

The question of whether Bosnia and Herzegovina is entering the network of debts and political influence of official Beijing is raised after China presented a new five-year plan, promising BiH a "win-win" partnership and investment opportunities - from infrastructure and energy, through agriculture, to high technologies, such as artificial intelligence.

While official Beijing says that "keeping up with China is the same as keeping up with opportunity", analysts call for "caution". They recall the previous patterns of cooperation that were marked by secret contracts, lack of transparency, environmental risks and China's increasingly visible political influence in the internal affairs of BiH.

"China's approach is always strategic and long-term," says Pippa Gallop from the international network Bankwatch, which, among other things, monitors energy projects with Chinese participation in the Western Balkans.

The novelty, in her opinion, represents "unusual" interference by China in the internal affairs of Bosnia and Herzegovina.

As an example, she points out the address of the Chinese representative to the UN Security Council in November this year, during which he spoke against the High Representative in BiH, questioning the adoption of the Resolution on the Srebrenica genocide in the context of "raising tensions" in the country.

She also states that China in countries like BiH "not only invests in infrastructure projects, but also slowly builds influence through loans, company networks and cultural initiatives".

 

This is supported by data from the Foreign Investment Promotion Agency in Bosnia and Herzegovina (FIPA BiH), which states that from 2010 to 2022, Bosnia and Herzegovina borrowed more than 2.44 billion dollars from Chinese creditors, mainly for the construction of highways, hydroelectric power plants and thermal power plants.

 

What does China offer BiH in the next five years?

The "new opportunities for cooperation" within the framework of the new five-year Chinese plan was discussed by the Chargé d'Affaires of the Chinese Embassy Wang Guofei in a column published in mid-November.

He pointed out that China is "BiH's largest trading partner in Asia", and that the new Chinese five-year plan "opens up new opportunities" for economic ties between China and BiH.

"We are ready for win-win cooperation between China and BiH in order to create a better future for the people and citizens of both countries", said the Chinese diplomat.

In addition to economic projects, he also announces the growth of cultural and tourist ties.

"Chinese citizens will travel abroad more and more, and the culturally rich and picturesque Bosnia and Herzegovina is increasingly attractive to the Chinese", the column states.

The Embassy of China in Bosnia and Herzegovina did not answer Radio Free Europe (RSE) to the question of which projects will be the focus of Chinese investments in the next five years.

They did not provide an explanation as to why some projects of Chinese companies in BiH are protected by secret agreements, nor whether they support this kind of non-transparent business practice in BiH.

 

The authorities in BiH are (not) satisfied with the transparency of Chinese projects

Damjan Ožegović from Transparency International BiH warns that "for years, institutions have refused to publish key information on financing and contractual terms, which justifiably raises suspicions of corruption".

As he states, "much information, including interest rates and repayment terms, has never been publicly available".

As an illustration, he cites the construction of the Banja Luka–Prijedor highway, where TI BiH won five court cases against the competent ministry in the BiH entity of Republika Srpska, which, despite the rulings, still refuses access to the financial model.

 

The contract for the construction of that highway was signed in 2018 with the company China Shandong International Economic & Technical Cooperation Group Ltd of Shandong Hi-Speed Group Co., Ltd, which registered a branch in Banja Luka for that purpose.

The project value at the time was around 297 million euros for a 40-kilometer road.

Seven years later, not a single kilometer of the highway has been completed, and an additional increase in the price of the works of around 80 million euros has been approved, with the explanation that it "increased the price of construction materials".

The contract remains secret.

Ožegović adds that the authorities in BiH have the legal right and obligation to publish information of public importance, regardless of the position of the private or foreign investor.

The authorities in Bosnia and Herzegovina have 'no answers' about the lack of transparency of Chinese projects

Radio Free Europe did not receive answers from the BiH Council of Ministers, nor the governments of both BiH entities - the Federation of Bosnia and Herzegovina and the Republika Srpska, to questions about accusations of non-transparency in dealings with Chinese companies in BiH.

Also, the authorities did not provide information on potential projects with China in the next five years.

The only partial response came from the Government of Republika Srpska, which states that this entity has "good cooperation" with China in various areas and that they are "open" to possible new projects with "all potential investors".

"Chinese state-owned companies are currently working on important projects in the Republika Srpska, such as the construction of the Bistrica and Dabar hydroelectric power plants, as well as the Banja Luka - Prijedor highway. Also, in cooperation with Chinese partners, a hospital was recently built in Doboj, and work is planned on the construction of a section of the Belgrade - Banja Luka highway, with special emphasis on the Vukosavlje - Brčko section," the RS Government's response states.

BiH must avoid the 'trap of non-transparent Chinese projects'

China is strengthening its economic and political influence in the Western Balkans, and Bosnia and Herzegovina is part of that process, warns RFE/RL's Marko Banović, an analyst at the Digital Forensics Center (DFC) in Podgorica.

 

"The biggest risk for BiH is non-transparent contracts, weak control and environmental consequences that accompany large infrastructure projects," Banović points out.

He adds that in the coming years, in addition to infrastructure, China's focus will also be on information technologies, 5G networks and artificial intelligence, while strengthening cultural influence through educational programs.

Banović also warns of the example of Serbia, where Chinese investments have brought economic benefits, but also serious pollution, violations of labor rights and a decline in democratic standards.

"BiH must avoid patterns that lead to dependence on Chinese capital and weakening institutions, because this would jeopardize European integration in the long run," Banović concludes.

 

Among the poorly executed works, Gallop also lists the construction of a section of the highway on Corridor Vc, in southern BiH. In August 2023, a newly built bridge on this section cracked, which was later repaired. The bridge was built by a consortium of Chinese and Azerbaijani companies. A domestic company from Široki Brijeg, Hering, was selected as the subcontractor in the tender.

It was also discovered that more than 70 Chinese citizens were illegally employed on the construction site. In addition to infrastructure projects, Chinese companies are also involved in other areas.

 

Warnings from the US and EU

At a hearing in the US Congress on December 2, the chairman of the Subcommittee on Europe, Keith Self, warned that China is "using economic deals across the region to maintain its malign apparatus and exploit corruption in the Western Balkans."

And the European Council on Foreign Relations (ECFR), in its report published in mid-November, ranks BiH among the "most exposed countries to Chinese influence in the Western Balkans", warning that the EU still does not have a clear policy on the engagement of candidates with China.

It is highlighted that Beijing is increasingly entrenched in the economic, industrial and institutional sectors of the region, and that the former president of the BiH entity Republika Srpska (RS), Milorad Dodik, is using ties with Russia and China to "ensure political survival and repel international pressure".

 

 

 

The announcement of China's new five-year plan for Bosnia and Herzegovina, although it was announced by Chinese officials as a "win-win" situation that could benefit both countries, has raised many doubts among analysts. Given the previous experiences with the non-transparent activities of Chinese companies in Bosnia and Herzegovina, as well as suspicions of corruption, these doubts are in a certain way justified.

Especially since, not so long ago, an accident occurred in Bosnia and Herzegovina at a construction site of a Chinese company with a fatal outcome, and investigations showed that the Chinese company had illegally employed about seventy workers. We also witness that in other countries of the Western Balkans, Chinese companies operate according to a similar principle.

Due to the previous experiences of other countries of the Western Balkans, but also of the world, where many countries were forced to give up their most significant infrastructure projects due to the inability to repay Chinese loans, caution in cooperation with Chinese creditors and companies is necessary.