Steel silence: It's a long way to the highway

 

Written by: Bojan Blaževski (North Macedonia), Mila Radulović and Zoran Radulović (Montenegro)

Cover photo: Bojan Blaževski

 

North Macedonia and Montenegro are among the countries that in the middle of the last decade, through the Belt and Road Initiative, contracted significant infrastructure projects financed by loans from the Chinese state Export-Import Bank (Eksim Bank) and implemented by construction companies from China. It is about two highways in North Macedonia (Kičevo-Ohrid and Miladinovac - Štip) and one section of the highway through Montenegro (Smokovac-Mateševo).

 

A decade later, we are still talking about the problems brought by those deals worth more than 900 million (at the time) dollars for each of the two countries, individually.

The work in North Macedonia is not yet completely finished, and the authorities are still hiding contracts on the financing of "Chinese" highways.

The section in Montenegro has been used for two years, but the final price of its construction is not yet known. Since the investor (the state) and the contractor (China Road and Bridge Corporation – CRBC) have not yet resolved the mutual disputes that followed them from the very beginning of the work. But they have not yet brought them before the agreed Arbitration Court of the Chamber of Commerce in Zurich.

Although it was opened for traffic on July 13, 2022, three years and two months late compared to the first agreed deadline, the Smokovac - Mateševo section (Princesa Ksenija highway) received a use permit only this year. We got that information from JP Monteput, to which the state entrusted the management of the highway. "This implies that there are no technical defects that affect the safety and functionality of the facility. "During the trial run, observed deficiencies were eliminated, and functional tests were performed by the contractor in cooperation with the supervisory authority and the investor," Monteputo points out. About possible penalties from one or the other party due to recorded omissions and multi-year delay in the realization of the project - not a word. Neither from them nor from the Government. And we are talking about serious money.

 

On the eve of the opening of the highway in 2022, Ines Mrdović from the NGO Action for Social Justice, previously engaged in the Department for the fight against corruption at the Ministry of Capital Investments, announced that the CRBC is demanding more than 190 million euros from Montenegro in the name of damages and lost obtained due to inaccurate geological data from the Preliminary Project (the Chinese based the Main Project on them), reduced intensity of work during the corona virus pandemic, Monteput's delay in acquiring equipment without which the highway could not be opened to traffic.

 

On the other hand, the Black List of the Tax Administration of Montenegro shows that at the end of last year, CRBC was the second largest tax debtor in the country with outstanding obligations of 11.2 million euros. Unofficially, we learn that most of those claims (about nine million) related to excise taxes and VAT for petroleum products - diesel fuel and fuel oil for asphalt production - which the contractor and subcontractors did not prove were spent during the highway works. A smaller part of the debt, about two million, allegedly refers to unpaid taxes and contributions for the salaries of some of the hired domestic and Chinese workers.

"It is not known what the epilogue is to the CRBC claims. Neither the Montenegrin nor the Chinese sides have spoken about them publicly, so it is not known whether they have been withdrawn, leveled with each other, closed," says Ines Mrdović. "In this month, and bearing in mind that the two-year period in which CRBC was obliged to correct the omissions is expiring, the Chinese company should issue the final invoice for the design and construction of the highway. This should finally show how much the construction works cost, so if there were recognized claims, then it would have to be reflected in the invoice. In any case, the citizens would finally have to know how much this part of the highway cost, at least when it comes to the construction part."

 

A similar story in Skopje: In accordance with Article 18 of the adopted law from 2013 on the construction of the Kičevo-Ohrid highway, it is stipulated that, if the contractor Sinohidro does not complete the construction work within the agreed period, he is obliged to pay fines in the amount of 0.03 of the total price of the construction contract, and up to 10 percent of the total value of the contract. However, the JP for state roads did not initiate the collection of penalties, without explaining the reasons for this step.

"According to the construction contract concluded with the contractor in connection with this issue in all the annexes of the basic contract, the investor and the contractor mutually waived their claims in accordance with point 20.1. and 2.5. of the general conditions of the contract", was briefly announced by the Macedonian Public Enterprise for State Roads.

 

NOT EVEN “T” FOR TRANSPARENCY

Let's go back to the beginning. The Public Enterprise for State Roads (JPDP) has been ignoring the Macedonian Law on Free Access to Information of Public Importance (the Law on Public Importance) for more than three months, which guarantees the right of journalists and the public to find out under what conditions the authorities took funds from China for the construction of the Kičevo- Ohrid and Miladinovci-Stip. We sent a request for access (inspection) to the loan contracts between the State Road Company and Exim Bank on March 13, 2024, but we did not receive a positive response until the time of publication of this text.

We submitted two complaints to the Agency for the Protection of the Right to Free Access to Information of Public Importance. On both occasions, she issued a decision acknowledging the submitted complaints and obliging JPDP to deliver the requested contracts. Instead of publishing the Agreement, JPDP informed us in its reply dated April 1 that the loan agreements with Eski bank were concluded on the basis of the Law on the Implementation of Infrastructure Projects for the Construction of the Miladinovci-Štip and Kičevo-Ohrid Roads and the Law on Guarantees Given by the State obligations from the Loan Agreement for the realization of those projects. These laws were adopted by the RSM Assembly in October 2013 and November 2019.

"Contracts are publicly available", reads the reply we received on April 1 from JP for state roads. By checking the editions of the Official Gazette, it can be seen that only the contracts with the contractor, the Chinese state-owned company Sinohydro, were published, but not those with Exim Bank.

"After examining the Complaint and the available documentation, the Agency determined that the Information Holder did not act in accordance with the provisions of the Law... In this particular case, the Information Holder issued a Decision approving the Request to the applicant, but did not provide him with access to the requested information," the Agency's decision states from April 29 after we filed the first lawsuit against the Public Enterprise for State Roads.

Despite this decision of the Agency, JPDP states in its reply dated May 20 that the loan agreements concluded with the Chinese Exim Bank are secret. "According to Article 8, item 8.4. and 8.7. Loan Agreements, third parties cannot have access to Loan Agreements."

This practically means that the Public Enterprise for State Roads undertook not to disclose the contracts without the prior consent of the lender, the State Bank of China. Thus, the public is prevented from getting to know the details of the loan arrangement, although the money will be returned with funds from the Macedonian state budget.

After such an answer, we sent a second complaint to the Agency, which again issued a decision obliging JPDP to submit contracts with Eksim Bank. In the Agency's Decision of June 3, new details of the signed loan agreements are revealed.

Namely, in the response that JPDP submitted to the Agency, it is stated that Macedonian laws, including the SPI Law, do not apply in the case of loan contracts for the construction of the Kičevo-Ohrid and Miladinovci-Štip highways. "The rights and obligations of the contracting parties are regulated and interpreted in accordance with the laws of China, and not in accordance with the applicable laws of our country," reads the JPDP's response.

Contrary to this explanation, the Agency points out that the general provisions of the loan agreement with a foreign bank cannot be an exception to free access to information of public importance.

"In this case, we are not talking about an exception to free access to information of a public nature, but about the obligation to inform the public about the operations of the information carrier, that is, about the requested documents arising from the organization, business costs and the way of using public goods. Also, the public character of the requested information is reflected in the fact that the requested information refers to taking a loan that is repaid from the budget of the RSM, which is financed with the funds of citizens and taxpayers," the Agency's Decision states.

Despite the fact that the Agency clearly states that the requested loan agreements signed with Exim Bank fall into the category of information of public interest, JPDP did not submit the requested documents.

 

WHAT DO THE LOAN AGREEMENTS WITH THE CHINESE HIDE?

 

When we compared the previously known parts of the contract on Macedonian loans for the construction of highways obtained from Exim Bank (published in the Official Gazette) and what we learned from the above-mentioned correspondence with JPDP with the Contract signed by Montenegro with the same bank, for the same purpose and around the same time, we came to the conclusion that they might be very similar. If not identical. (The contract is available at the link).

Montenegrin and Macedonian agreements on loans from China are almost identical in terms of amounts, interest rates and repayment terms. The amount of the loan arrangement for the highway in Montenegro was 944 million dollars. The Macedonian authorities borrowed a total of 963 million US dollars, on two occasions. This is the total amount specified in the laws by which the state of North Macedonia guarantees the performance of obligations under loan agreements of Eksim Bank.

It should be noted that not all the funds provided for in the loans have been withdrawn and used. Mostly due to the fact that the deadline for the completion of the Kicevo-Ohrid highway is constantly being postponed. Instead of being completed in 2018, after six annexes to the agreement voted in the RSM Assembly, the deadline for the completion of construction works was extended until December 31, 2026.

In the Official Gazette of the RSM (numbers 149 of 2013 and 244 of 2019), it is stated that the loan repayment period is 20 years, with a grace period of five years, and the interest rate is fixed at two percent per year. The loan will be repaid in 30 equal half-yearly installments - on January 21 and July 21 (to repay the initial loan from 2013), that is, by April 20 and October 20 (for additional funds borrowed for the Kičevo-Ohrid highway in 2019. year).

The dates of January 21 and July 21 for installment payments are identical in the Montenegrin loan agreement signed in 2014. Just like the interest, repayment period and commissions: one-time after closing the loan (0.25 percent) and that which was paid annually on unused funds (also 0.25 percent). The only known difference between these loans is the agreed grace period. In North Macedonia it was 60 months (five years) and in Montenegro 72 months (six years). In addition, the repayment of the loan began before the completion of the financed works. Both in one and the other country.

"Any dispute arising out of or in connection with this Agreement will be resolved through friendly consultations," reads Article 8.5 of the Credit Agreement signed by the Government of Montenegro (Ministry of Finance) and the Export-Import Bank of China. "If a solution cannot be reached through those consultations, each party will have the right to submit the dispute to arbitration by the China International Economic and Trade Arbitration Commission (CIETAC). The arbitration will be conducted in accordance with the CIETAC Arbitration Rules in effect at the time of the submission to arbitration. The arbitral award shall be final and binding on both parties. The place of arbitration will be Beijing.”

On April 30, we received a short answer to the question about arbitration in the case of a dispute over a loan from Eksim Bank, from the Macedonian JP for state roads: "In the event of a dispute, the procedure will be conducted in Beijing."

There are more matches. In the voluminous correspondence regarding the request for free access to information of a public nature, the Macedonian JPDP revealed that points 8.4 and 8.7 of the loan agreement with Exim Bank stipulate that third parties may not have access to these documents.

 

We checked the same articles in the Montenegrin Loan Agreement. Clause 8.4 states: "This Agreement, as well as the rights and obligations under this Agreement, shall be governed by and construed in accordance with the laws of China." In addition, Clause 8.7 states: “The Borrower shall keep all terms, conditions and standard of fees under or in connection with this Agreement in strict confidence. Without the Lender's prior written consent, the Borrower shall not disclose any information under this Agreement or in connection with this Agreement to any third party unless provided for by applicable law."

It would be very important for the Macedonian public to find out whether the observed coincidence also exists in the item that foresees that "...goods, technologies and services..." necessary for the implementation of the financed project will be procured in China (Article 2.5 of the Montenegrin Credit Agreement). Just as in the chapters on Borrower Guarantees, Special Obligations of the Contracting Parties and Cases of Default. In short, it states the ways in which the lender can forcibly collect its claims, as well as the reasons for suspending the payment of the (remaining part) of the loan and early collection of the used money.

"Performance of the Borrower's obligations under this Agreement shall constitute commercial activities", as stated in Article 5.5 of the Agreement. "Neither the Borrower nor any of its assets, other than assets related to diplomatic and consular missions and military assets, are entitled to immunity by virtue of sovereignty or otherwise from arbitration, suit, execution or other legal process based on its obligations hereunder Agreement, as the case may be, in any jurisdiction”.

This means that, if at some point the Montenegrin state is not able to service the loan of Exim Bank within the agreed period, China can legally take possession, of its choice, of a key energy facility, port, railway or road infrastructure, ore wealth... It is likely that the same is true for North Macedonia. And situations where China takes over the key infrastructure of countries that it financed through the Belt and Road have already happened.

The Montenegrin loan agreement states that when there is a change in the law or state policy in the country that takes the loan or the country that gives the loan, "which makes it impossible to fulfill the obligations under the contract", the Chinese bank can notify in writing that it terminates the payment of the arrangement and/or declares currently due the entire principal amount and accrued interest on the basis of the contract. No additional requests, notifications or other formalities.

These are just some of the potential "mines" of the Treaty. Starting from such alarming articles of the Montenegrin Agreement, we asked the JP for state roads whether there are the same or similar articles in the signed loan agreements for the construction of the Kičevo-Ohrid and Miladinovci-Štip highways. We did not receive an answer, although we asked questions more than a month and a half before writing the journalistic story.

"An interest rate of two percent was favorable for investment projects in developing countries, but it had its price in terms of contractual conditions," said Mila Kasalica, economic analyst and former secretary in the Ministry of Finance of Montenegro. "Although, at the level of the contractual norm, some provisions of the Agreement form a significant risk in the realization of the loan, they can be constructively accepted as a preventive measure in the planning and execution of the agreement. Therefore, they do not have to be a reason for panic. But they must be subject to high attention and a maximally thought-out approach to the control of contracted investments. This requires the implementation of control standards that will beyond any doubt provide a sustainable and systemic and legally, economically and structurally indisputable database: figures, reports and documents that must not be subject to the secrecy of the public administration".

And data availability and control were precisely the "missing link" in the implementation of Chinese highway construction projects in North Macedonia and Montenegro.

 

REPAYMENT OF THE CHINESE DEBT

 

Regarding the amount of North Macedonia's debt to China for highways, the Ministry of Finance informs that as of March 31, 2024, the debt to Exim Bank amounts to 481.09 million euros. Of this, 132.04 million euros is owed to China for the built Miladinovci-Stip highway, while a debt of 349.05 million euros was created for the Kičevo-Ohrid highway.

North Macedonia's total external debt to China amounts to 8.7 percent of the total external public debt and 3 percent of Macedonia's gross domestic product (GDP), according to the research "Hope for the best, prepare for the worst: is the Republic of North Macedonia susceptible to economic to the pressure of the People's Republic of China" published in the spring of 2024 by authors Ana Krstinovska, Zlatko Simonovski and Aleksandra Davitkovska-Spasovska.

However, the payment of the Macedonian debt to China for the Kičevo-Ohrid and Miladinovci-Štip highways is not without problems. JPDP had a problem with paying the installment, after which the state bank guarantee was activated, and the necessary funds were paid by the Ministry of Finance. This is stated in the Final Report of the SAI on the Audit of Financial Statements and Audit of Compliance for the Year 2022 of the JP for State Roads from February 2024. According to that report, the total liabilities of JP for state roads to the Ministry of Finance at the end of 2022 amounted to over 76.6 million euros.

We asked the Ministry of Finance and JPDP about the problem with the repayment of the Macedonian debt installment to the Chinese bank. The Public Enterprise for State Roads explains that the Ministry of Finance paid part of the installment to China during the covid-19 pandemic and during the crisis period, but for each installment that the Ministry paid, debt rescheduling agreements were concluded, after which JPDP pays monthly installments to the Ministry of Finance. We did not receive an answer to the question from the Ministry of Finance.

In contrast to North Macedonia, where the authorities keep this issue out of the public eye, the return of the war to China produced a major debate in Montenegro that occasionally took on an international character.

The then Vice-President of the Montenegrin Government, Dritan Abazović, stated in the European Parliament in March 2021 that the EU should help Montenegro repay the "billion euro" loan to Exim Bank that it took for the construction of a section of the highway (this is not the only loan arrangement between that Chinese bank and of Montenegro, i.e. its state enterprises). That loan is a noose around the country's neck, which threatens it with debt slavery, said Abazović, asking for help "to reduce China's influence in Montenegro", while many in Podgorica assessed that he "exaggerated the problem a little".

 

"I appealed to the financial institutions of the EU to think about the models of aid to Montenegro, in order to suppress any unhealthy foreign influence and bring it to a reasonable level," explained Abazović subsequently in response to parliamentary questions.

The EU responded that they do not have the practice of repaying the debts of their partners, and Serbian President Aleksandar Vučić, one of the key promoters of the expansion of Chinese influence in this part of Europe, spoke about the Montenegrin/Abazović request: "Imagine that we build roads and ask the Chinese to come to us, to make the trip as quickly as possible and to give us money and people to finish it all. And then they do it all, and I say that this is how they use their influence. It's not the bank's fault when they give you a loan, it's your choice. Why did you ask for a loan from China anyway?" Vučić asked his colleagues from Montenegro.

For the most part, the story died down after Montenegro, protecting itself from the so-called currency risk due to changes in the euro-dollar exchange rate, entered into a hedging arrangement with four large international banks. That arrangement expired in the spring of last year, and Montenegro came out of it with a significant financial gain. That's why a new contract was concluded at the beginning of the year that will last until 2035, that is, the payment of the last installment to Exim Bank.

According to the data of the Ministry of Finance, after the payment of the sixth (January) installment to Exim Bank, 290 million euros have been paid so far for the repayment of that loan. Of that, 190.5 million dollars are related to the principal, and 99.4 million dollars to the repayment of interest installments. "The loan with Exim Bank was concluded in the amount of 944 million dollars, of which funds in the amount of 911.74 million dollars were used. The balance of the debt as of January 25, 2024, amounts to 721.28 million dollars, or 663.55 million euros," announced Zimus from the Ministry of Finance.

By the way, the new installments of the Montenegrin and Macedonian loan are due for payment shortly after the publication of this text - on July 21.

Valbona Zenelli in the analysis "Chinese influence in the Western Balkans and its influence on the integration process of the region in the EU" warns that Chinese fast money in the Balkan countries acts as an easy way for leaders to retain power, adding that Chinese loan contracts are awarded directly to Chinese state-owned enterprises in secret contracts, without calling for international tenders.

 

"The more countries borrow from China, the greater the risks that Beijing may try to renegotiate the loans in exchange for advancing its diplomatic and political goals, not excluding possible asset seizures, which has been confirmed with other countries involved in the Belt and Road Initiative. path", warns Zeneli in his research.

In 2020, Macedonian analyst Zoran Nečev from the Societas Civilis Institute for Democracy, together with Ivan Nikolovski, made a study "Immersed in a dead end: mistaken faith in Chinese corrosive capital for the construction of highways in North Macedonia". From today's perspective, Zoran Nečev asks whether the economic profitability of highway construction is the main goal of Chinese loans to North Macedonia and Montenegro.

 

"It's a kind of corrosive capital. In the process, you create a subordinate relationship, and when you are subordinate, it is much easier to influence you and the decisions you make. This is the main reason why China enters such businesses," says Nečev.

British journalist James Robert Baron, who lives in Taiwan and recently researched government loans granted by China around the world, points out that Chinese investment in highways in North Macedonia and Montenegro has no objective economic logic.

"They are always an exercise, at best, in soft power, and often in malicious influence. We have seen Beijing in some countries - especially in Africa - take control of natural resources over a period of decades, in exchange for what are nominally called infrastructure projects, but often amount to nothing more than a large bribe to government officials," says the British journalist.

Zoran Nečev adds that the blame cannot be sought exclusively in China, but also in domestic politicians. "It's never just China. Without the invitation of our or the Montenegrin government, such a deal would never have happened. Both sides see some interest, but it doesn't have to be purely financial. Finances are always important, we saw in that period that there was a huge suspicion of corruption," says Nečev.

The facts confirm these views. According to studies of the justification of the construction of the highway in Montenegro from 2009 and 2012, the company Scott Wilson and URS Infrastructure & Environment UK Limited, the section Smokovac - Mateševo did not meet even the basic criteria for financing from the relevant international financial institutions. Despite those warnings, Montenegro entered the project with the help of China, its state bank and construction companies.  

Before the start of the construction of the Smokovac - Mateševo highway, the Government came out with projections that tolls and other commercial revenues from this section would bring 31.3 million euros annually. For two years of operation of the highway, about 20 million euros (in total) were generated from tolls. Approximately, 10 million in 12 months. Since the projected and actual toll prices are the same, it follows that the volume of traffic is at least three times smaller than what was announced by the former authorities, citing alleged research and exact data.

Is the construction of infrastructure, even if it was financially unprofitable, the only motive for the authorities in Skopje and Podgorica to enter into these arrangements? The question was asked a long time ago, but there is still no valid answer to it.

As a reminder, the Special Public Prosecutor's Office in North Macedonia opened the Trajectory case related to the procedure for the selection of the Chinese company Sinohidro as the contractor for the construction works of the Kičevo-Ohrid and Miladinovci-Štip highways. The trial for this case began at the end of 2017, and former Prime Minister Nikola Gruevski, former Ministers of Transport and Communications Mile Janakieski, Deputy Prime Minister Vladimir Peševski and former JPDP Director Ljupco Georgievski were accused. Instead of a court verdict, the criminal proceedings for this case were suspended in November 2023 due to amendments to the Criminal Code, which were adopted by the RSM Assembly.

In Montenegro, in 2020, the Special State Prosecutor's Office (SDT) opened an investigation in the Petlje case, two years after it turned out that the contract with CRBC did not include the construction of the Smokovac interchange, through which the highway is accessed from the direction of Podgorica. In addition, the water and electrical installations along the highway were "forgotten". After the information that the former Minister of Transport Ivan Brajović was questioned in that case "in the capacity of a citizen", the public is not aware of the further course of the investigation. Nor about its eventual completion. SDT investigations in Montenegro are, according to the law, secret until the indictment is filed.

Basically, all these works are paid extra. Some were performed by CRBS with its subcontractors, while Monteput was responsible for some of the work that was not covered by the Main Project. That is why the government approved a loan of 39 million euros.

According to the Ministry of Finance, CRBC was paid for additional "unforeseen" works: 30.2 million euros for the first phase of the Smokovac loop, 8.6 million euros for the temporary power supply of the construction site, 13.5 million euros for the water supply system and the installation of cable sewerage on the open route and Moračica bridge 4.8 million. Monteput, the construction of the power grid on the highway cost an additional 39 million.

While the construction of the highway was in full swing, the NGO MANS warned of an interesting "detail" that could perhaps explain the inertness of the financiers (Government of Montenegro) towards the numerous observed failures of the contractor (CRBC), including the ecological devastation of the upper course of the river Tara. The so-called Tear of Europe is protected by UNESCO, as part of the world's natural heritage, but this did not protect it from construction in its bed and sand mining under the pretext of "regulation of torrential flows". Because of which, in part, it received a prestigious international status.

It has mainly been shown that the Esport-import Bank of China, like other large banks, has among its internal documents the Guidelines for assessing the environmental and social impact of the projects it lends (link to the new version of that document from 2022). There is, among other things, wrote that "borrowers or project owners should regularly report to the Bank about the actual environmental and social impacts brought about by the construction of the project". With the warning that "for projects that are under construction or in operation and that cause serious environmental and social problems... Exim Bank has the right to stop paying loans and demand early repayment of loans, in accordance with the contract...".

According to insiders, it is a fairly common document. But it is not very often that the lender and the contractor have the same owner. One of the most powerful countries in the world. Which is not really recognized for respecting ecological standards. Thus, the Montenegrin government (like all others from the Belt and Road story) could find itself between a rock and a hard place: if it makes it official that CRBC "caused serious environmental problems", Exim Bank could suspend further financing of the project and demand the return of all funds withdrawn until then from the contracted loan.

Zeneli states in his analysis that compared to Western capital, Chinese capital increases corruption, mismanagement and projects that escape EU standards.

"Chinese lending to the governments of the Western Balkans mainly takes place through the Chinese Export-Import Bank (Exim), which is state-financed and state-owned, and whose main purpose is to support China in foreign trade, investments and international cooperation, whereby it mainly finances up to 85 percent of the project, while Chinese state-owned companies are always the main contractors, using Chinese equipment and labor force", describes the deals that the Balkan countries conclude with China in the implementation of infrastructure projects.

 

For the purposes of producing this story, we contacted the Embassy of the People's Republic of China in Skopje, as well as the headquarters of Exim Bank in Beijing, on five occasions via e-mail: 18. and April 29, May 7 and 17 and June 6. Our questions, including the one about the role of the Chinese embassy in the country in the negotiations of Exim Bank as the lender, the Macedonian authorities as the borrower and the Chinese company Sinohydro as the project contractor, have not been answered until the writing of this document.

 

WHAT'S NEXT FOR THE UNFINISHED HIGHWAYS?

 

Sections of highways built with Chinese loans in North Macedonia and Montenegro are in various stages of completion.

After the experience with the loan and the contractor from China, Montenegro intends to build the remaining part of the Bar-Boljara highway in a different arrangement, supported by loans and grants from the EU. This, among other things, requires the application and observance of EU standards in the selection of financiers, contractors and contractors.

In mid-July, it was confirmed that the European Commission approved a grant of 100 million euros to Montenegro to support the construction of the next section of the Bar-Boljara highway, between Mateševo and Andrijevica, whose construction costs are estimated at around 600 million euros. The EU Delegation in Podgorica announced that the contribution of 100 million euros from the IPA III funds represents the first tranche of EU support, which will be the second, worth up to 100 million euros, in the next tranche of EU funds. "Montenegro will apply competitive public procurement procedures and transparent work implementation processes that are aligned with European standards," the Delegation announced.

However, only one of the two Chinese highways has been built in North Macedonia, namely the 47-kilometer Miladinovci-Stip highway, which was put into use in July 2019. The construction cost 177.3 million euros, so not all the funds made available to the country by the signed contract with Exim Bank were used.

However, even after five years since the official opening of the highway, driving on this section is a risk, especially after heavy rainfall. On parts of the highway section, there are "waterfalls" that fall directly onto the roadway, while during heavy rainfall, the soil also flows onto the roadway. What is most dangerous are the landslides along the highway, which are still active today.

Acacia seedlings were planted on the Miladinovci-Štip road to reduce the risk of landslides, but the planting did not help in all places. On the hillsides along the highway where the problem was occurring, landslides were remedied by additional construction of retaining walls, as well as by filling large stones to prevent further activation of landslides.

The Public Enterprise for State Roads announces that slightly more than 4.4 million euros were spent on the construction work on the Miladinovci-Stip highway, which was not completed by the Chinese company Sinohydro. These funds are not covered by the loan taken from Eksim Bank, due to the expiry of the loan in January 2019. On the JP website for state roads, in their Work Program for 2024, it is stated that funds will be provided this year for the "completion of unfinished construction works" on this highway. JPDP clarifies

that it is about construction works outside the highway that are needed for the communication of the local population in Sveti Nikolo, and which Sinohidro did not complete due to the expiration of the loan.

There is also a problem with landslides on the Kicevo-Ohrid highway, which has not yet been put into use. Although it was originally supposed to be completed in 2018, the deadline for the completion of the 57-kilometer section is December 31, 2026. The sixth annex on the extension of the construction period was adopted at the session of the RSM parliament on April 1, 2024.

The initial price at which the Chinese company Sinohidro was supposed to build the Kičevo-Ohrid highway increased from the initial 374 million euros to the current 598 million euros. Despite the fact that the Government of SDSM borrowed an additional 180 million dollars for the completion of construction works in 2019, the previous Minister of Transport and Communications Blagoj Bočvarski stated that 13 new landslides appeared on this highway, which will require additional design and new technical solutions to complete the project.

JPDP could not answer how much additional funds will be allocated for the rehabilitation of new landslides and additional construction works, as well as whether additional funds will be taken from Exim Bank again. "The financial analysis will be done after the preparation of the basic projects for the stabilization and protection of the slope", they answered briefly and added that the redesign of the rehabilitation of the new landslides should be completed by May 2025.

This means that the sum of 598 million euros for the completion of the Kičevo-Ohrid highway may not be enough for all construction works.

Professor from the Faculty of Civil Engineering, University of St. Ćirila i Metodija, Zoran Krakutovski explains that his colleagues from the faculty are working on finding technical solutions for landslides on the Kičevo-Ohrid highway, but adds that in the future, during the construction of other infrastructure works, in addition to complete and well-prepared technical documentation, all major projects should they also contain risk analyzes and measures to prevent them.

"The lack of project documentation dates back to the beginning of construction, but the then political structure of the government decided to start construction, which turned out to be a deficiency in the realization of the project," he says.

That this is not only a Macedonian problem is evidenced by an example from Montenegro: After 45 months of official construction and less than three months before the originally planned completion of the highway works (May 2019), there was no complete Main Project, but it was completed "in a percentage of 98 percent", as announced by the Government. In addition, it turned out that this was not a problem for the contractor and subcontractors - the works were carried out without the Main Project and sometimes beyond what he ordered.

This is how it happened that the state expropriated land that, in the end, would remain outside the highway belt. Even more absurd situations were recorded: while the Ministry of Transport was preparing for the expropriation of the land on the Smokovac interchange, the Ministry of Agriculture subsidized the establishment of private vineyards in the same location... When the interchange is complete (along with the existing exit to Podgorica, a branch for the bypass around Podgorica and crossing with by the future Adriatic-Ionian highway) it will become a wasteland. On the northern edge of the capital of Montenegro.