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OP-EDS

China’s growing investments in Montenegro – will the new government break their secrecy?

05.11.2020

Photo by: Government of Montenegr

China is present in Montenegro primarily through the construction of a highway linking the port of Bar and Serbian capital Belgrade, with two previous equally controversial involvements – in the purchase of two vessels for a Montenegrin national shipping company, and one that pertains to a wind power plant under investigation in Montenegro and Malta, respectively. In 2020, China climbed to the very top of countries investing in Montenegro since, according to the Central Bank’s data, it leads foreign direct investments in the first eight months, amounting to €70 million ahead of Italy (€43.3 m) and Russia (€42.5 m). Even though China is being mentioned as a major foreign investor for the first time, the Central Bank has declared information about its investments to be confidential.

The lack of transparency accompanies all Chinese investments in Montenegro, since the largest of its projects, the “Project of the Century” as it was dubbed by the previous government, or “Highway to Nowhere” by everyone else, has been shrouded in secrecy from the very outset: the choice of investors was controversial, since after two failed tenders, the China Road and Bridge Corporation (CRBC) was selected without a public tender and under conditions that are still blurred given that the contract with the company is not subject to public scrutiny. Yet, that could soon turn around, since, following the late-August elections, Montenegro is slated to have its first government since the introduction of the multi-party system without the Democratic Party of Socialists as part of it.

Although it is undoubtedly a significant project in terms of building infrastructure and connecting with neighbouring Serbia and other countries, which should affect tourism and the economy in general, it has thus far only been cause of headache for Montenegro. The World Bank projects that, by the end of the year, Montenegro will reach a decline of 12.4% in real GDP and an increase in public debt to 93% of GDP. The Chinese hold 25 percent of Montenegrin public debt. A new extension of the deadline for the completion of the first section, which additionally affects the overall project, and has already increased costs from the initial €800 million to €1.3 billion, is cause for additional concern with regard to the construction of the Bar-Boljare highway. But this certainly did not bother the previous government as it merely jumped from one multi-million contract to another, the final one being the June 2020 contract on the construction of the thermal power plant in the north of the country, to be built by a Chinese-Montenegrin consortium, the value of the entire project amounting to €54 million.

As previously illustrated, China’s presence in Montenegro remains within the economic framework. However, it is growing rapidly and might have political implications in the future, especially if no solution is found for the growing public debt, which could trigger the guarantees included in the contracts if the state is unable to pay the loans.  The fact that, due to the weak negotiating capacity of the government and the extremely poor state of the rule of law, the Chinese were able to impose conditions which proved to be unsuitable for Montenegro, is highly problematic on many levels. This way, instead of this project and similar ones contributing to economic growth, they are in fact one of the main threats to financial sustainability and draw even more attention to hasty decisions and major problems in the country. In that sense, it is up to the new government in Montenegro, but also to the ones in other countries of the region, not to reject Chinese investments, but rather approach them with a clear strategy. Hence, the first important step in Montenegro should be making the the final conditions publicly available as proof that the new policy will be transparency-based and that the new government will have nothing to hide in future projects and investments. This move would also help other countries in the region in defining contracts and avoiding the pitfalls that have hampered Montenegro. At the same time, it will help creating a broader picture of the manner in which Chinese companies operate and the conditions they set. This could help authorities to think more carefully and plan such deals, and control the damage. The second level of protection against a potentially harmful role of China is building democracy and democratic institutions, contributing to a better negotiating position and thus avoiding damaging contracts and their consequences. As the governments focus on economic problems which have arisen as a result of poorly planned contracts and investments, (instead of the other way around), Chinese investments distance them from the European agenda, provided that such an agenda for speeding the integration even exists among the ruling elites.

 

Jovana Marović

Executive Director of the Politikon Network and a member of the Balkans in Europe Policy Advisory Group (BiEPAG)