NEW NON-TRANSPARENT DEALS WITH CHINESE INVESTORS ON THE HISTORY: The Chinese "quietly" take over Željeznice (Railways) RS

The Railways of Republika Srpska (ŽRS)  could soon become the property of investors from China under non-transparent conditions, according to our sources. In support of this claim are the meetings held with potential Chinese investors in the past period by representatives of the RS Government and this public company.

At the end of May, relevant minister Nedjeljko Čubrilović and Slađan Jović, general director of ŽRS, were in China, where they met with representatives of China Railway International Co.,Ltd (CRI). The only thing that the public learned from that meeting is that this company, which is engaged in the construction of railway infrastructure, is "seriously interested" in investments in the railway transport of the RS.
However, back in September last year, Minister Čubrilović signed a memorandum with another Chinese company, Qiqihar Rolling Stock Co.LTD (CRRC), on "cooperation on strengthening and improving the workshop capacities" of RS Railways. With this memorandum, conditions have been created for the procurement of locomotives and wagons from the Chinese company, thus eliminating possible competition in advance, according to experts in the field of public procurement.

Public secret

It is interesting that the minister and the management of ŽRS are holding talks with Chinese companies about certain parts of Railways RS, even though the restructuring process of this public company has not yet been completed. Only after the completion of that process, ŽRS should be transformed into a holding consisting of three subsidiary companies, so that the infrastructure would be separated from passenger and freight traffic.
The problem is not the investments that would be more than good for this over-indebted company, the interlocutors say, the problem is the way in which everything is hidden from the public eye this time, including the risks that business with Chinese investors entails.
During the signing of the memorandum with representatives of the CRRC company in September last year, Minister Čubrilović said that this document was the result of "successful cooperation between the Ministry of Transport and Communications of the Republic of Srpska and the CRRC company, which will contribute to the further development, improvement and realization of strategic plans in the field of railway traffic".
That's about all that the public could find out about the nature of the cooperation with this possible investor. There was no mention of the amount of the investment, the deadlines, and especially the ways in which it would be realized.
The same situation was repeated at the end of May after the meeting with representatives of (CRI).
Regarding details unknown to the public, we did not receive answers from Minister Čubrilović, who did not respond to our calls, nor to questions.
Slađan Jović, general director of ŽRS, was somewhat more open to conversation.
He denies that there were discussions with the Chinese investor about the privatization of Railways. However, he expects to start the "execution of works" on the infrastructure and procurement of rolling stock as early as next year. He also expects that in the first phase, an investment worth around 100 million euros will be realized.
"We didn't talk about privatization, we talked about renewing both our infrastructure, which is run by the RS, as well as rolling stock in terms of traction vehicles, i.e. locomotives, as well as passenger sets to improve and improve road traffic in the RS," said Jović  for Impulse.
However, previously, as he confirmed, the process of reconstruction of the company must be completed.

Chinese across the line
As the executive director of ŽRS, Dragan Zelenović, announced at the beginning of May, the restructuring process in that company should be completed by the end of this year.
This process, which has been carried out since 2017 with the help of a 100 million mark loan from the World Bank, was supposed to be completed by the end of 2021. However, all deadlines were missed.
It should also be noted that ŽRS ended last year with a cumulative loss of around 143 million marks.
The restructuring plan also provides for the conversion of debt into equity. In this way, as announced, the RS should become the owner of more than 90 percent of the shares of Railways.
In this way, according to our interlocutors, the way for the Chinese takeover of this company would be simplified, and for the RS Government to provide guarantees to bankers.
"How is it possible to talk to two alleged investors even though the restructuring of the company has not been completed and it is not yet known if and how the process will be completed. What should we give the Chinese as a guarantee for these investments? The minister should announce that," says our interlocutor from ŽRS (name known to the editorial staff). According to his claims, there is a serious danger that the RS will simultaneously sell ŽRS for nothing, and at the same time pledge its property as a guarantee for the Chinese investment.
Such claims are supported by negative experiences with Chinese investors through numerous projects in Bosnia and Herzegovina.
On the other hand, it is a fact that through the "Belt and Road" initiative, China has invested numerous funds in many countries, including EU countries.
According to Transparency International BiH (TI BiH), no one is against the investments, the problems are of a systemic nature.
"Where there were good laws, Chinese investors adapted to those laws and operated normally. However, where they encountered a weak system, they used the weaknesses of the system. Numerous countries fell into these traps, where they were left without significant public enterprises, because they could not repay certain loans", warns Srđan Traljić from TI BiH.
China Railway International is widely present in the region, and a branch of this company was established in Belgrade in 2017, for business needs in the region. The company is implementing the construction of the railway line Novi Sad - Subotica, and the ultimate goal is to connect Belgrade and Budapest with a modern railway.

The project is part of the Chinese initiative "One Belt, One Road", the goal of which is for Chinese companies to reach new trade partners abroad. China's ambitions for rail traffic in the region also fit into these plans. Who will end up paying for the new Chinese investment remains to be seen.

CONCLUSION

Another text that talks about the non-transparent agreements and contracts that the authorities in Bosnia and Herzegovina, that is, the Bosnian entity Republika Srpska, conclude with Chinese companies. Unfortunately, non-transparent business and secret contracts have become a common way of doing business for Chinese companies in Bosnia and Herzegovina and the countries of the Western Balkans. Signing a contract (in this case on cooperation) without specifying the terms of the signed contract to the public raises justified suspicions that certain parts of the contract are harmful to the interests of a specific company (in this case Željeznica RS), the entities of the RS, the state and its citizens.

The issue of non-transparency of contracts with most Chinese companies has long been in the focus of attention of domestic and regional media, because we have almost the same practice in most countries of the Western Balkans where Chinese investors (more often creditors) are present. The problem in this particular case is also the fact that the cooperation agreements with Chinese companies were signed before the restructuring process of Railways RS (which was financed by the World Bank) was completed. The issue of non-transparency of contracts with Chinese companies continues to be problematized mainly by the media and non-governmental organizations, while government institutions do not deal with these issues at all. What is indisputable is that there are more and more secret contracts with Chinese creditors/investors in BiH, but also in other countries of the Western Balkans, without the authorities taking any action to prevent such a practice.