Why are contracts with Chinese companies hidden in Serbia?

While the authorities claim that the concrete canopy at the entrance to the station, which collapsed on November 1 and killed 14 people, has not been reconstructed and announce that an investigation will determine responsibility, the documents and contracts containing all the details of the project are still unknown.

"We have a situation where representatives of various state bodies have to be taken at their word as to what has been done, and there is no possibility to determine what the work of the companies that did the reconstruction was by simply looking at the subject of the procurement," says Nemanja Nenadić from the non-governmental organization Transparencynost Serbia.

The reconstruction of the railway station was part of a capital state project - the construction of a high-speed railway from Belgrade to Budapest.

It is one of a series of infrastructure projects in which contracts are concluded based on the interstate agreement between Serbia and China.

They are not subject to the Law on Public Procurement, which prescribes the obligation to announce a tender in which the best bidder is selected.

Business with Chinese partners is concluded through direct negotiation.

These are commercial contracts that may contain a confidentiality clause.

 

Unanswered questions

Thousands of people gathered on November 5 at the invitation of the opposition and citizens' associations at a protest in Novi Sad, demanding the authorities' responsibility for the death of 14 people in the demolition of the railway station canopy.

 

The protest also demanded public insight into the contract with the Chinese consortium that did the reconstruction of the station building, as well as the publication of other secret contracts with private companies engaged in key infrastructure projects in the country.

The execution of works on the Belgrade-Budapest high-speed railway project, including the reconstruction of the Railway Station building, was entrusted to the Chinese consortium CRIC&CCCC, which consists of the companies China Railway International and China Communications Construction Company.

The Ministry of Transport did not respond to Radio Free Europe's (RSE) request for the delivery of contracts signed by the Serbian authorities with these companies.

In January 2024, the Ministry announced to the Novi Sad portal 021 that "the Chinese partners do not want to publish the details of the contract".

The CRIC&CCCC consortium did not respond to RSE's inquiry in this regard.

CRIC and CCCC are just some of the companies from China that are engaged in the construction of infrastructure throughout Serbia.

What does the government say?

Serbian President Aleksandar Vučić accused the former government of being responsible for the secrecy of contracts with Chinese companies.

On November 4, he told Hepi television that the Agreement on economic and technical cooperation in the field of infrastructure with China was signed in 2009 by the then Deputy Prime Minister Mlađan Dinkić.

 

Although the initial interstate agreement, which has stronger force than domestic laws, was signed during the time of the Democrats, the document was amended and supplemented several times when the current ruling coalition of the Serbian Progressive Party and the Socialist Party of Serbia took power.

 

What is written in the Agreement and who signed what?

Vučić said that Annex 1, which amended the original Agreement, was signed on behalf of the Government of Serbia by Dušan Nikezić, today a member of the opposition Freedom and Justice Party.

However, Annex 1, which was signed in 2012, does not state anything about data secrecy, according to documents analyzed by RSE.

In that Annex, which is publicly available on the website of the Government of Serbia, it is written, among other things, that "the Ministry of Economy and Regional Development of Serbia and the Ministry of Trade of China are appointed to monitor the implementation of the Agreement", which was also written in the document from 2009.

A part was added that states that the Ministry of Finance and the City of Belgrade are responsible for monitoring and implementing the agreement, in the part related to the construction of the Zemun-Borča bridge.

This capital project, better known as Pupin's Bridge, was officially opened in 2014 by the prime ministers of China and Serbia at the time, Li Kećiang and Aleksandar Vučić.

Amendments to the Agreement were voted by the Assembly of Serbia in June 2013, when the Socialist Party of Serbia and the Serbian Progressive Party had the majority.

With their coming to power, the Agreement was changed again.

In August 2013, Annex 2 was added to the document, which states that contracts and projects "are not subject to the obligation to call for public tenders for the performance of investment works and the delivery of goods and services, unless otherwise specified in the commercial contract".

 

It is added that "the selection of the most favorable subcontractor and supplier of goods is carried out in accordance with the procedure established in the commercial contract on the execution of the project".

Commercial contracts may contain a confidentiality clause. This would mean that a private Chinese investor must agree to his announcement.

Four years later, the construction of the first section of the Belgrade-Budapest high-speed railway was agreed in Beijing, and in 2017, Annex 3 was signed, which changes the Cooperation Agreement with China again.

In it, among other things, in the part that specifies the procurement and purchase of machines, equipment and materials, locomotives and rail vehicles (including electromotor trains) are added, and it emphasizes the functioning of infrastructure projects "in the field of transport".

The decree on the promulgation of the Law confirming the amendments to the Agreement was signed by the current President of Serbia, Aleksandar Vučić, in March 2020.

 

Capital Chinese projects

With the coming to power of the Serbian Progressive Party, Serbia joined the Belt and Road Initiative launched by Chinese President Xi Jinping with the aim of the country's penetration into the West.

The initiative is the target of criticism from Western countries who see it as exploiting vulnerable countries by imposing unsustainable debt through disputed contracts, but also as a violation of transparency rules.

Although Serbia is a candidate for membership in the European Union, Belgrade officials describe relations with Beijing as "steely friendship".

In the first decade of cooperation with China, projects such as the Belgrade-Budapest railway, the "Miloš Veliki" highway section, the bypass around Belgrade and other roads throughout Serbia were completed or started.

 

China is also building a bridge over the Danube in Novi Sad in Serbia. This bridge was declared by the state as a project of national importance, which also allows the work to be concluded with the contractor through a direct contract.

Companies from China are also engaged in the construction of the Fruškogorsk corridor in Vojvodina, which will connect Bačka with Srem, and they are also building facilities for the EXPO 2027 international exhibition, which has been declared a project of national importance.

The Ministry of Finance previously refused to provide RSE journalists with contracts with the Chinese company involved in the EXPO project.

 

How do jobs work?

The state hires Chinese companies for infrastructure construction based on an interstate agreement and negotiates the work directly with them.

Chinese companies then choose subcontractors. For their engagement, they need the consent of the state - public companies or institutions that hire them and the Ministry of Construction.

"It is also different from what exists when the regular procurement procedure is applied, where subcontractors must be listed and at least it is known which companies they are and whether they meet the requirements," says Nemanja Nenadić from Transparency Serbia.

The company that reconstructed the railway station in Novi Sad also built, among other things, a section of the "Miloš Veliki" highway in central Serbia.

CCCC hired the Slovac quarry as a subcontractor for this work, whose co-owners at the time were Zvonko Veselinović and Milan Radoičić.

The two are under sanctions from the United States of America and Great Britain due to suspicions of corruption and international organized crime, and Radoičić claimed responsibility for the armed attack in Banjska, Kosovo in September 2023.

Until then, he was also one of the leaders of the largest party of Kosovo Serbs, which has the support of the authorities in Belgrade.

 

The Chinese company got this job, worth 450 million euros, through a direct contract with the state.

"The total cost of such projects remains unknown or becomes known only when a law is submitted to the Parliament for the purpose of confirming a loan, since such projects are almost always financed from loans," says Nemanja Nenadić.

In order to provide money for the construction of infrastructure, Serbia, according to the rule, borrows money from Chinese banks.

Due to borrowing and dealings with China, which are described in the reports of international organizations as non-transparent and subject to corruption, Serbia has also been the target of criticism from the European Union.

In addition to infrastructural projects, the Chinese are also involved in power projects, and they are the owners of the Ironworks in Smederevo, the mining complex in Bor and the car tire factory in Zrenjanin.

These investments were also followed by accusations of non-transparency, as well as violation of workers' rights and environmental pollution.

 

Growing debt to China

The Washington Center for Global Development pointed out that a key feature of China's loans is the reliance on confidentiality clauses to prevent the governments of debtor countries from disclosing details of their debt.

A study by this organization, published in 2021, analyzed China's lending practices on 100 contracts in 24 developing countries - in Africa, Asia, Europe and Latin America, including Montenegro, Kyrgyzstan and Serbia.

"In general, there is a lack of transparency in all aspects and a wide range of conditions that ensure that China can protect its investments," Scott Morris, one of the report's authors, told RSE at the time.

While the authors point out that confidentiality is a common feature of many loans, the Chinese contracts completely change the standard practice — binding the government of the recipient of the loan, not the one providing the loan, to non-disclosure.

 

Serbia's loan contracts are ratified by the Parliament, which makes the basic loan amounts publicly available. However, the value of the work can be increased by later annexes to the contract, so that the final price of the projects is not completely transparent.

Serbia's debt to China has increased 12 times in the last ten years, according to data from the National Bank of Serbia from 2023.

The largest part of the debt consists of loans from the Chinese Export-Import Bank.

Serbia, among other things, is currently paying a loan for the Zemun-Borča bridge in Belgrade, the ring road around Belgrade, the "Miloš Veliki" highway and the new unit of the Kostolac B thermal power plant.

For the longest time (until 2039), they will pay off the section of the highway "Miloš Veliki" Preljina - Požega and the section of the railway Novi Sad - Subotica within the international railway Belgrade - Budapest.

 

 

CONCLUSION

 

Non-transparency is one of the basic determinants of the activities of Chinese creditors and Chinese investors in the countries of the Western Balkans. This article deals with the question of why the contracts signed by the Serbian state with Chinese creditors and investors are mostly secret, so that the public is not familiar with the details of those contracts. The situation is similar in Bosnia and Herzegovina, where Chinese companies and the current authorities (Republika Srpska) refuse to publish details about the construction of the Banja Luka-Prijedor highway section, even though there is a court ruling that contracts should be disclosed to the public.

The fact that Chinese creditors and investors, but also domestic authorities in the Western Balkan countries, are not interested in publishing the details of the contract, indicates that there are parts of the contracts that are at least controversial. The problem is further complicated by the practice of not calling for public tenders for loans obtained from Chinese banks (in which the value of the works and details of the implementation of the projects are stated), but the jobs are awarded to Chinese firms, which is probably an integral part of the loan agreement. Respect for the right of the public to learn about the details of loan agreements obtained from Chinese banks, as well as the work performed by Chinese companies on infrastructure projects in Serbia, but also in other countries of the Western Balkans, must be respected. This is especially necessary after the tragedy with the collapse of the canopy at the Railway Station in Novi Sad, which killed 14 people. The work on the reconstruction of the canopy was carried out by Chinese companies, but the details of the contract are not yet public.