Promise makes a fool happy : Multimillion-dollar Chinese investments are piling up (failed) in Bosnia and Herzegovina

 

The results of China's multimillion-dollar projects in Bosnia and Herzegovina, which have been pompously announced in recent years, could be identified with the old folk saying: "Promise a fool to rejoice".

 

In April of this year, a factory for the production of gypsum plasterboards was supposed to open in Ugljevik, but there is nothing from the complex.

 

This investment from China, in which EUR 50 million should have been invested, was announced in February 2022 in Ugljevik. The company "Beijing New Building Materials-BNBM" decided to participate in the production of gypsum boards with 90 percent, and Rudnik i Termeelektrane (RiTE) Ugljevik the rest. The then director of RiTE Ugljevik Čedomir Stojanović told reporters that he expected 100 new workers to be employed as part of this investment, and that "this is a big deal for the region, but also for the entire Republika Srpska".

 

Deception and new deadlines

Two years later, the results from the field show that the public was misled.

 

As InfoRadar has learned, the Chinese have been given a new deadline for the construction of the factory - the end of 2026. Diko Cvijetinović, director of the Ugljevik Mines and Thermal Power Plant (RiTE), says that a "new plan" is now in effect.

 

– The deadline was moved to the end of 2026, considering that investors had certain changes in the market and with prices. Finding a solution to property-legal relations is in progress, given that part of the land is owned by Republika Srpska, and part is owned by RiTe - explains Cvijetinović.

 

He states that preparatory works are underway.

 

- The conceptual project is finished, and when everything is finished regarding the land, the final contract will be drawn up. This will be by the end of the year - points out Cvijetinović and explains that in 2026, RiTE will also undergo a major overhaul that will last six months.

 

Confirmed deal

He explained that the assembly of shareholders of RiTE Ugljevik to the company "BNBM Eastern Europe", which is 90 percent owned by the Chinese "BNBM", confirmed the contract that commits RiTE Ugljevik to the continuous supply of raw materials.

 

The goal of the Chinese investor, which is the largest factory in the world in the production of gypsum boards, is for sales to cover the entire European market. Every year, the factory will be able to count on 70,000 tons of coal and 250,000 tons of gypsum, which is produced as a by-product from the desulfurization system. It is planned that the complex will be built on a plot of about 18 hectares, and the estimated gross construction area of the planned facilities is about 60,000 square meters.

 

In the contract, RiTE undertook to deliver the coal obtained from the mine. In the event that for some reason there is not enough of it, it will have to find its way on the market.

 

The Minister of Energy and Mining of the Republika Srpska, Petar Đokić, was also present during the signing of the mentioned contract, who then told the media that around 40 million square meters of gypsum boards would be produced in that production facility. He also stated that it will be a great contribution to the further growth of industrial production in the Republic of Srpska. After the ceremony held in Ugljevik, the Ministry of Energy and Mining rarely announced anything on this issue.

 

A game of deaf phones

 

Minister Đokić did not respond to our phone calls, as well as questions sent by e-mail, and the Ministry referred us to the management of RiTe Ugljevik.

 

As a reminder, the management of RiTE Ugljevik signed an agreement with the company "BNBM" in 2022 on the establishment of the joint venture "BNBM Eastern Europe", which started the project of building a factory for the production of gypsum boards and gypsum products. The gypsum factory would be of great importance for RiTE Ugljevik because the cost of the desulfurization system is between 15 and 20 million marks per year. By selling gypsum, part of the costs for its work could be covered, and the problem of gypsum disposal would be solved.

 

In the same year, but seven months later, the Chinese company Cosco shipping announces the opening of a "fast intermodal service - transport by land and sea (Land Sea Express) in Tuzla", which will make this city the first in BiH to have a direct railway connection on the "New Silk Road ".

 

It was also said then that this service will include an intermodal connection via rail traffic and that the project was implemented with the support of the Railways of the Federation of Bosnia and Herzegovina.

 

Željeznica FBiH confirmed to InfoRadar that they have given their support to this project "in terms of ensuring capacity for the announced dynamics of container trains and other conditions for the organization of transport from the ports on the Adriatic (Port of Rijeka and Port of Ploče) to the container terminal in Tuzla and vice versa".

 

- In the previous period, for the needs of the Cosco shipping company, the FBiH Railways organized "ad hoc" transportation through the terminal, which did not have the character of a permanent service. Certainly, ŽFBiH d.o.o. Sarajevo have their own interest in this project, which basically and to the greatest extent depends on its carrier, that is, the company Cosco shipping - they point out in Željeznica FBiH.

 

No one knows what will happen next

Dragon Maritime See, which specializes in agency services for the transportation of goods for Cosco Shipping, did not respond to our inquiries as to what stage the mentioned project is in and whether and when it will be realized.

 

The representatives of the Agency for the Promotion of Foreign Investments of Bosnia and Herzegovina did not give answers either.

 

- We tried to get in touch with the Dragon Maritime company in Sarajevo, which is supposed to be the representative office of Cosco shipping, but they are not responding - FIPA answered us.

 

The Tuzla Cantonal Chamber of Commerce claims that the company Riva, owned by Abdulah Avdagić, started work on this project. Avdagić told Inforadar that it is "the first dry port in this area and a project that no one has done so far in Bosnia and Herzegovina".

 

He stated that it was a very complex project, but that he could not talk about the details over the phone.

 

- There is no need to write and mention it in that way. There are very few people who understand this - believes Avdagić.

 

He has been under investigation since last year for tax evasion and because of the suspicion that he has been handing out money in envelopes to workers for years.

 

Extended investigation

According to Admir Arnautović, spokesman for the TK Prosecutor's Office, the aforementioned investigation has been extended to Avdagić's wife and several other persons and is in the final phase.

 

- The prosecutor's decision is expected soon - Arnautović said.

 

A year before the mentioned projects, and during the 2021 online summit of the countries of Central and Eastern Europe (CEEC), the Ivovik project was announced - worth around 137 million euros. Owned and financed by a consortium of Chinese state-owned firms and banks, it was presented as the "first fruit of cooperation" between Beijing and Sarajevo.

 

This largest Chinese direct investment in Bosnia and Herzegovina is home to generations of villagers, among whom is Ante Ivković, who is represented by lawyer Perica Babić. Ivković and

several of his neighbors claim that their land was taken from them and given to Chinese companies as part of an ambitious project to build a wind farm.

 

Big ambitions around the wind farm have become a complex saga of land disputes, and the method of awarding concessions has become questionable.

 

Livan lawyer Perica Babić tells InfoRadar that the owners of that land have never given consent to anyone - neither to any authority, nor to a company for the use of their land.

 

- What is new is that we received the report of an expert who established that it is the property of the Ivković family. So, according to the relevant data and on the actual and legal basis, it is about the land owned by Ivković. Now we are waiting for the scheduling of the main hearing before the court, which should hopefully be next month. We will ask them to hand over the part of the land that they are unjustifiably holding, which is outside the concession area - says Babić and adds that the construction of wind power plants is taking place on land that is by no means part of the concession.

 

Investments (only) on paper

One of the concessionaires is VE Ivovik d.o.o. Sarajevo, which is building the wind park of the same name. Ante Ivković and several of his relatives filed a lawsuit against this company for trespassing. The Ivković family, as plaintiffs, demand that the defendant (the company Ivovik) be prohibited from any disturbance and that they be ordered to restore the previous state of ownership in such a way that they will remove the filled layer of material, return the soil layer and return everything to the original condition of the meadow and pasture as they were before the disturbance . The preliminary hearing was held in June last year in the Municipal Court of Livno.

 

According to Forbes BiH, at least eight legal complaints have been filed against Chinese companies in BiH in connection with plans to build three new coal-fired thermal power plants: Tuzla 7, Ugljevik 3 and Stanari.

 

- The construction of the Banja Luka-Prijedor highway was also controversial. The Chinese company leading the construction, Shandong High-speed International, has received complaints regarding possible corruption and illegal changes to the road's direction - writes Forbes.

 

Among the unrealized Chinese investments, the tunnel construction project between East Novi Sarajevo and Pale should certainly be mentioned.

 

On February 21, 2022, the mayor of East Sarajevo, Ljubiša Ćosić, signed a Memorandum of Cooperation related to the construction of a tunnel that would connect the municipalities of East Sarajevo in the Sarajevo representative office of the Chinese company Sinohydro, which operates as part of the Power China group.

 

The tunneling through Trebević was conceived as a multi-year project worth 200 million euros, which should connect Eastern Sarajevo and Pale by traffic. Planned - not yet realized.

 

The Gacko 2 thermal power plant construction project, which was announced in 2017, has long been forgotten. However, last year the story was updated again when information appeared in the public that Elektroprivreda RS founded the company "Termoelektrana Gacko, development and investment". While the authorities claim that it is a Chinese-Czech corporation that will complete the work in four years, the non-governmental sector is not optimistic.

 

The Agency for the Promotion of Foreign Investments, referring to the China Global Investment Tracker research, states that the Chinese have invested more than three billion US dollars in credit in Bosnia and Herzegovina until 2023.

 

Transparency International BiH believes that BiH has a "systemic problem with investments from China".

 

And this is not the case only with investments from China, but also with other investments because BiH does not have a good legal framework to prevent abuses. Through the "Belt and Road" initiative, China tried to invest huge amounts of money in developing countries, and where investors had good regulations, they adapted, and where they encountered a system that had no institutions and could not respond to all challenges, are situations where countries fall into a debt trap. This is something that should be paid attention to - they believe in TI BiH.

 

TI BiH states that they have warned about such situations before.

 

- We were engaged in the construction of the highway Banja Luka - Prijedor, and we also have the construction of a railway in Sarajevo. Both projects are about the same company and both contracts are hidden, and the conditions under which the deals and the financial model were agreed are hidden - adds Srđan Traljić from TI BiH.

 

He reminds that many countries took out loans that they could not pay back later.

 

- No one is against investments, that is quite clear, but it is important to have a responsible government and we must have a system in which everything will be transparent, but also so that citizens know under what conditions they borrow and under what conditions we go into these projects - Traljić is clear.

 

What do the data say?

According to data from the Central Bank of BiH, the Chinese invest more in the Republika Srpska than in the Federation of BiH. Chinese investments mainly refer to loans given by Chinese banks to Chinese companies for the construction of roads and power plants.

 

From 2010 to 2022, Bosnia and Herzegovina received more than $2.44 billion in loans from China for the construction of highways, hydroelectric power plants, investments in gasification and coal production, according to FIPA, emphasizing that investments and loans will increase drastically after 2019.

 

BiH took more than 2.44 billion dollars as loans from China for the construction of highways, hydropower plants, investments in gasification and coal production. Raised Chinese loans cover the period from 2010 to 2022.