CRBC: The road construction project from Foča to Šćepan Polje will be carried out by a Chinese company convicted of environmental destruction.

 

 

The European Bank for Reconstruction and Development (EBRD) was supposed to finance this project, and the initial estimated value of the works was 90 million euros. The EU delegation prepared project and tender documentation, but the authorities of Republika Srpska did not approach the EBRD for funding for years, which was officially confirmed by this institution last year.

 

Meanwhile, people have been dying on the catastrophic road that does not meet the standards of a main road, as vehicles barely pass each other on certain sections.

 

CRBC had previously intended to build significant infrastructure projects in Republika Srpska, such as a 6 km section of the highway between the Rudanka Bridge and the southern end of the Putnikovo Brdo 2 Tunnel on Corridor Vc, as well as the Doboj Bypass. However, the contract, worth more than 183 million KM, was ultimately awarded to Integral Engineering a.d. Laktaši.

 

In this tender, the Chinese company didn't have luck, but they got the job without a tender. Why are they considered the most favorable contractor and for whom, and is it a prerequisite for the Exim Bank?

 

CRBC's Modus Operandi

 

The Exim Bank and CRBC have been present in the Western Balkans for decades, and their work is associated with numerous irregularities. The way some Chinese investors and contractors operate often involves securing loans with controversial clauses and signing non-transparent contracts.

 

CRBC in Novi Sad, as well as in the Republic of Srpska, got the job of building a bridge over the Danube without a tender. Environmental activists protested, demanding the release of the government's contract with CRBC and a study on the environmental impact, as CRBC had planned to clear-cut forests on the banks of the Danube as a prerequisite for starting bridge construction. The fact that CRBC does not adhere to environmental standards during construction was confirmed by a court in Podgorica, which ruled that the Chinese company must pay nearly 400,000 KM for destroying flora and fauna in the Tara River.

 

Two years later, the Basic Court in Podgorica ruled that CRBC had built facilities in Kolašin without notifying or providing documentation for the job, as reported by RTVCG.

 

"Acting contrary to Article 10 of the Law on Environmental Protection has led to a significant and extensive disruption of biodiversity, manifested in a negative impact on river biodiversity, hydrology, water quality, and landscape," the judgment reads, according to the RTVCG journalists who had access to it.

 

CRBC operated in Montenegro with other irregularities as well, damaging not only the environment but also the state budget. They are the second-largest tax debtor and owe the state more than 11 million euros based on data from the Montenegrin Tax Administration.

 

The danger of Chinese loans lies in the fact that the EXIM Bank includes a clause in the contracts by which, in case of repayment problems, it claims rights to state assets.

 

"China is a serious country that heavily secures itself when it does something. So if we are unable to repay this enormous loan, not only for this road but also for other investments and construction works carried out by Chinese firms coming to Republika Srpska, if Republika Srpska is unable to repay and service these loans, of course, the Chinese state will secure itself and take various natural resources such as forests, water, mountain properties, agricultural land. You have the example of neighboring Montenegro, which delayed payment of a installment to China where the Chinese authorities immediately reacted and almost wanted to collect it by taking the port of Bar," said Ognjen Bodiroga, a Member of Parliament for the SDS party in the National Assembly of Republika Srpska.

 

The Government of Republika Srpska is conducting a parallel process.

 

While signing a Memorandum of Cooperation with the Chinese CRBC, which clearly implies that the contractor has already been selected, discussions are still ongoing at the EBRD regarding the financing of the "death route."

 

They stated that the EU Delegation in Bosnia and Herzegovina has been informed of the fact that the Ministry of Transport and Communications of Republika Srpska has signed a Memorandum of Understanding with representatives of the Chinese company "CRBC," which includes a loan financed by the Exim Bank. However, they are not informed about the conditions.

 

"We would like to remind that projects funded by the European Union traditionally offer the most favorable conditions for infrastructure investment in the Western Balkans, with loans at favorable rates, as well as a significant component of grants. In addition, projects financed by the European Union adhere to high standards in preventing corruption, environmental protection, and welfare," says Ferdinand Koenig, spokesperson for the EU Delegation to Bosnia and Herzegovina, to SPIN Info.

 

"The European Union has already allocated 2.2 million euros for preparatory work for this project through funds from the Instrument for Pre-accession Assistance (IPA) allocated to Bosnia and Herzegovina. The funds supported the preparation of technical documentation, as well as the tendering process for the construction works on this trunk road in 2017."

 

"The project is estimated to be worth around 90 million euros for a total length of 19.1 kilometers. However, this is an estimate that may potentially need to be updated. The request from the Bosnian authorities for updating the project documentation is currently under consideration by the 'Connecta 2' project funded by the European Union. The European Union has received a formal request from the Bosnian authorities for financing the road from Foča to Šćepan Polje. Considering the significance of the Foča - Hum project for regional connectivity, the European Union is reviewing this request. Whether this project will be considered within the framework of the Growth Plan depends on Bosnia and Herzegovina, as the Reform Agenda related to the Growth Plan is still not finalized and agreed upon between the EU and Bosnia and Herzegovina," Koenig adds.

 

It remains unclear why the Bosnian authorities are seeking funding from Chinese creditors when they have the opportunity to obtain funds under more favorable terms from the European Union.

 

Rezo Bitsadze, responsible for external communications at the EBRD for the Western Balkans, emphasizes that the Memorandum of Understanding and the Financing Agreement are different types of agreements.

 

"In the end, it will be up to the government to decide which is the best means of financing their various infrastructure projects," explains Bitsadze to Spin info.

 

He notes that the EBRD received a request from the government last year to co-finance this "strategic project, which is of significance to Bosnia and Herzegovina and enhances connectivity between Sarajevo and Podgorica" together with the World Bank.

 

 

"From the moment we received this request, both the World Bank and ourselves have been in continuous discussions with the Government and the road companies about all aspects of the project, such as financing, environmental impact, and climate change resilience. We hope to sign an official mandate letter with the Government of Republika Srpska soon," said Bitsadze.

 

Differences between the EBRD and the Exim Bank

 

We have already noted that the RS authorities, while addressing the EBRD, have meanwhile turned to the Chinese. Why would someone choose a less favorable creditor?

 

"EBRD financing is transparent, with a set of conditions, and most importantly, aimed at achieving the given project optimally, which is meant to make a real contribution. There are mechanisms of internal consistency that are monitored, and therefore negotiating these credit lines, or implementing them, is not easy. It's possible that in this context, for the Government of Republika Srpska, some other alternative investors may appear as 'more favorable'," says economic analyst Admir Čavalić for Spin Info.

 

All of this raises the question of how wise it is to seek a Chinese loan, especially at a time when the financial situation in Republika Srpska is poor and Chinese creditors in Montenegro are ready to seek repayment of debts through privatization of public assets such as the Port of Bar or highways.

 

"Chinese loans are becoming increasingly prevalent in the region and offer opportunities for rapid infrastructure development. However, caution should be exercised regarding these, based on previous experiences, not only in Montenegro but globally as well. The public often remains deprived of complete information regarding the terms of the loans. This complicates the analysis and criticism of the arrangements in real-time. The effects, whether good or bad, only manifest themselves later," warns Čavalić.

 

Chinese creditors also follow a modus operandi - they seek guarantees in state assets, and their contracts are non-transparent. For a country on the EU path, such as Bosnia and Herzegovina, the focus should be on the opposite side - increasing transparency.

 

"There are several key aspects that Chinese creditors offer. Firstly, there's the speed of implementing the loan arrangement and ultimately the project. They may not be more favorable, but they react faster, which is crucial in some situations - for example, when waiting for a few years for infrastructure construction and maintenance is not feasible. These loan arrangements are also not known for their transparency. On the contrary, sometimes even basic contract details are not known. Consequently, in countries with weaker institutions, such as those in the Western Balkans, this can be abused, often for the specific interests of different parties," adds Čavalić.

 

An SDS member of the National Assembly of RS believes that the announcements regarding the construction of the Foča-Šćepan Polje highway are just part of the pre-election performance of the RS authorities, as the start of construction has been announced for years.

 

 

"As they had a pre-election groundbreaking ceremony a few days ago for the construction of the Foča-Tjentište road, and now they have a pre-election memorandum concerning the construction of the Foča-Šćepan Polje road. This is the worst highway in Europe that connects two major capitals, Sarajevo and Podgorica," believes Bodiroga.

 

According to Bodiroga, with the current route of the Foča-Šćepan Polje road, it is impossible to build because it is full of underground water, landslides, and collapses, and it must be relocated.

 

"Just based on those promises, we see how contradictory and deceptive these statements are, to be honest, to this, I must say, suffering people who are really more misled because they are fed up with promises, and nothing comes out of them. The government that has been in power continuously for a long time has long been selling off property in a way that benefits its tycoons, who are enormously wealthy, who are the main financiers of election campaigns, selling land from agricultural to mountainous areas, such as attractive plots in Jahorina. Soon, I wouldn't be surprised if they sell off forests because especially in Herzegovina, we are rich in forest products. Look at how many small hydroelectric power plants have been built by people close to the government, from which the local community benefits nothing," Bodiroga says.

 

Overnight loans from the EXIM Bank have cost Montenegro almost losing its national assets and state property.

 

Montenegrin economist Mila Kasalica explains that the countries of the Western Balkans need significant funds for infrastructure that will finally lift the economies of the region from the primitive state of underdevelopment of previous centuries. She adds that, as a general principle of apparent comparison, Chinese infrastructure loans are more favorable than any credit arrangement globally.

 

"However, the countries of the region must be more thoughtful and weigh the advantages and disadvantages of each infrastructure credit arrangement with any creditor from Europe and/or from a global context. By definition of the developmental perspective of convergence towards the EU, the countries of the region should always prioritize the development of capital projects tied to any funding scheme from European funds (Western Balkans Fund, EIB, EBRD, EC support for development initiatives). However, the countries of the region, much more often with the political and elite of public administration, are ready for all sorts of 'overnight solutions,' making hasty decisions according to long-standing publicly unverified backstage agendas. At the same time, with such lack of transparency, they quickly become discouraged by the strictness of public procurement procedures and the gradual development of conceptual projects and main infrastructure projects required by European bodies and agencies," explains Kasalica.

 

The very "overnight loans" and the speed at which the Chinese Exim Bank provides loans to Montenegro cost the country the possibility of losing national assets and state property. The construction of the first section of the Bar-Boljare highway in Montenegro, less than a decade ago, sparked significant conflicts in the public sphere. The then ruling political elite, for the sake of majority, and without a conceptual project, took on the risk of indebtedness, secured by the Chinese development bank, due to favorable terms and significantly favorable interest rates.

 

"According to the Preferential Loan Agreement with the Exim Bank, Montenegro guarantees timely repayment of the loan with state-owned assets, which remains the most important risk of the overall credit arrangement. However, due to justified pressure from the non-governmental sector, the loan agreement quickly became public knowledge, and this is the most important moment in monitoring the execution of obligations by the contractor, CRBC, regarding the

construction of the most demanding section of the highway, which obliges any country in the region to ensure that no contract for the construction of public capital projects is kept secret. These are public goods for which significant public funds are allocated for the repayment of associated annuities," explains Kasalica.

 

The regional road connecting Sarajevo and Podgorica, commonly referred to as the "Death Road," is often depicted by locals as perilous due to its lack of guardrails, narrow lanes, and unpaved sections. This portion of the road, traversed by hundreds of thousands of travelers annually, presents significant hazards. According to our sources, both the European Bank for Reconstruction and Development (EBRD) and the World Bank office in Bosnia and Herzegovina still hold hope of financing the reconstruction of the "Death Road." However, their collaboration with Chinese creditors and contractors remains merely a tentative prospect, as the memorandum is a non-binding document at present.