New business for a company from China along the coast of Montenegro

Sixteen kilometers of road from Budva to the Tivat airport, along the Montenegrin coast, will be built by the Chinese consortium "Shandong" for almost 54 million euros, 14 million more than the authorities planned to spend.

Of those 54 million euros, the state has provided less than 15 million, it was announced at the Government session at the end of September.

The government stated that the missing funds will come from the "capital budget or other means of financing".

Radio Free Europe (RSE) did not receive an answer from the government's Traffic Administration as to whether the state will incur debt as a result.

Montenegro has previously had a problematic experience of borrowing for projects carried out by Chinese companies, such as in the case of the construction of a section of the highway.

Economic analyst Mirza Mulešković assesses for RSE that Chinese influence has grown in recent years, in Montenegro and in the region, partly because of the loans that country offers to governments with which its companies implement projects.

And the fact that four out of eight bids for the construction of the boulevard came from Chinese companies testifies to the interest of Chinese companies in business in Montenegro.

Can the boulevard be more expensive than agreed?

The consortium "Shandong foreign economic & technical coopeation" and "Shandong luqiao group" registered a representative office in Podgorica half a year ago.

The price of the road of 54 million euros, however, could still increase, because the tender documents include a clause on a sliding scale that represents protection, especially of contractors, from inflationary movements in the market.

"Whether it will be higher or lower than the amount of the bids depends primarily on the movement of the prices of metal products, fuel, sand, cement...", it is stated in the information of the Government on providing the missing financial resources for the construction of the boulevard.
Commenting on China's business in the region, Mulešković points to the effectiveness of their business strategy:

"It is a smart move by China, to make available the financial resources it had and thus further strengthen its influence in these countries".

However, he says that countries must take into account the conditions under which they borrow, as well as what that debt includes.

"Often we have a story only about interest rates and debt conditions, but we should also see everything else related to these debts".

Which Chinese companies sent a bid
Of the eight bids received for the tender, the three cheapest ones were given by Chinese companies.

The only one known to the Montenegrin public is "China road and bridge construction", which was building the first section of the 41-kilometer highway, for which the state borrowed almost 900 million dollars from the Chinese Exim Bank.

Due to the danger to state finances, the European Commission helped the Montenegrin Government, with the help of Western banks, to protect itself from currency risk because the Chinese loan was taken in dollars, the value of which varied in relation to the euro.

The company also built the Pelješki Bridge in Croatia, which cost more than 400 million euros. They are also working on several "heavy" Serbian-Chinese projects worth around 3.5 billion euros, which were mostly contracted without a tender, and for which Serbia borrowed money from Chinese banks.

The other two companies that submitted bids for the construction of the boulevard are also interested in investing in Montenegro.

Thus, "Sichuan Road and Bridge Group Corporation" has been helping the marketing of Montenegrin wines "Plantaža 13. Jul" on the Chinese market for years.

"Sinohydro corporation limited" previously expressed interest in the construction of hydroelectric power plants in Morača and Komarnica in Montenegro. Otherwise, they have a memorandum with the Government of Serbia on water infrastructure, and they are also involved in affairs in Bosnia and Herzegovina.

The second tender for the boulevard in Montenegro

The "Shandong" consortium, which won the job of building the road from Budva to the Tivat airport, is not very present in the region, and it won the job in the second tender where offers were submitted in July 2022.

At the first tender in 2021, the cheapest offer (42.6 million euros) was submitted by the Chinese company "China Civil Engineering Construction Corporation" (CCECC), which previously participated in the modernization of the railway in Montenegro.

However, the company gave up due to a large jump in prices on the international market, and the Administration initiated the procedure of collecting the guarantee for that offer, which was a condition for announcing a new tender.

For more than 10 days, the Traffic Administration has not responded to RSE's inquiries regarding the collection of the guarantee.

The problem of expropriation in Grblje

The construction of the boulevard should last two years, it was announced at the contract signing ceremony in Podgorica on March 29, which was also attended by Prime Minister Dritan Abazović.

However, one of the problems that has not yet been solved is the expropriation of land, especially in Grblje, a coastal town between Budva and Kotor, and part of the locals, among other things, oppose the increase in the number of traffic lanes.

At the Government session at the end of September, the then Minister of Foreign Affairs, Ranko Krivokapić, said that the costs of building the boulevard increased precisely because of the expropriation problem.

"We have been waiting for that road. In the meantime, the construction of illegal brick buildings broke out along the construction stretch, from the Kotor roundabout to the Jaz beach. And now we will pay at least three times more for the same road."

The widening of the road has been talked about for almost a decade.

The Secretary General of the Government, Boris Marić, said that there are cases of double expropriation, that is, that part of the locals who previously received money for the same land are now asking for it again.

Chinese projects in Montenegro

More extensive business cooperation between Montenegro and China began more than ten years ago, when it was agreed with the Chinese partner to purchase ships for two state companies, Crnogorska and Barska plovidba.

The state borrowed from the Chinese state-owned Exim Bank for the ships.

The ecological reconstruction of the Thermal Power Plant in Pljevlja is carried out by "Dongfang Electric Corporation", and "Shanghai Electric Power Engineering" completed the Možura wind power plant in the very south of the country.

China achieves cooperation with the Balkan countries through the multilateral Platform 16+1, which was formed in 2012 and is part of the Belt and Road Initiative on cooperation with the countries of Central and Southeastern Europe, the largest number of which are in the Balkans.

According to the Digital Forensic Center, the value of Chinese projects in the 16+1 countries exceeds 27 billion euros. More than half of that amount is in the five countries of the Western Balkans that are not members of the European Union (EU).

However, the EU and the USA detected the negative consequences of cooperation with China. One of them is the creation of unsustainable debt, which threatens economic stability and thus the overall social and security environment of countries that take Chinese loans.