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By Noah Barkin and Aleksandar Vasovic
PODGORICA (Reuters)

Perched atop massive cement pillars that tower above Montenegro’s picturesque Moraca river canyon, scores of Chinese workers are building a state-of-the-art highway through some of the roughest terrain in southern Europe

The government has described the 165 km (103 mile) highway, with its imposing bridges and deep-cut tunnels, as the construction of the century and a pathway to the modern world.

It is designed to link the port of Bar on Montenegro’s Adriatic coast to landlocked neighbour Serbia. But once the first, challenging 41 km stretch through mountains north of the capital is completed, the government faces a difficult choice.

A Chinese loan for the first phase has sent Montenegro’s debt soaring and forced the government to raise taxes, partially freeze public sector wages and end a benefit for mothers to get its finances in order.

 

A bridge construction site of the Bar-Boljare highway is seen in Bioce
A bridge construction site of the Bar-Boljare highway is seen in Bioce, Montenegro June 07, 2018. REUTERS/Stevo Vasiljevic

 

Despite those measures, Montenegro’s debt is expected to approach 80 percent of gross domestic product (GDP) this year and the International Monetary Fund says the country cannot afford to take on any more debt to finish its ambitious project.

“There is a big question about how they complete it,” said an EU official who requested anonymity. “Their fiscal space has shrunk enormously. They have strangled themselves. And for the time being this is a highway to nowhere.”

The road is at the heart of an intense debate about Chinese influence in Europe, both within EU member states and countries aspiring to join the bloc such as Montenegro and its Western Balkan neighbours Serbia, Macedonia and Albania.

 

A tunnel construction site of the Bar-Boljare highway is seen in the village of Vilac
A tunnel construction site of the Bar-Boljare highway is seen in the village of Vilac, Montenegro June 11, 2018. REUTERS/Stevo Vasiljevic

 

As Beijing extends its economic reach under the ambitious Belt and Road Initiative (BRI), poor countries across Asia and Africa have seized on attractive Chinese loans and the promise of transformative infrastructure projects.

This has allowed them to develop in ways that may not have been possible without access to China’s vast foreign exchange reserves. But some countries, such as Sri Lanka, Djibouti and Mongolia, have found themselves weighed down by debt and ever more reliant on Beijing’s largesse.

Montenegro is the first country in Europe to find itself in this position as its government presses on with its dream of a gleaming new highway to lead the nation to a brighter future.

 

 

“This highway is a big deal in Montenegro. It reminds people of Tito and the days of grand socialist projects in the region,” said academic Mladen Grgic, referring to former Yugoslavia’s long-time communist leader Josip Broz Tito.

“But it’s a trap. Now that it’s been started, the politicians can’t stop it – no matter how harmful it might be. And frankly they don’t want to,” said Grgic, author of a 2017 study on the highway.

 

‘NOT BANKABLE’

The idea of building a highway from the coast to Serbia can be traced back to 2005, a year before Montenegro’s vote for independence from its neighbour. The project was championed by Milo Djukanovic, who has served as president or prime minister of Montenegro nearly uninterrupted since 1991.

The government hopes the highway will give an economic boost to the country’s underdeveloped north, bolster trade with Serbia and improve road safety as Montenegro’s narrow, winding mountain roads are notoriously dangerous.

 

A worker ties steel bars at the "Vjeternik" tunnel construction site of the Bar-Boljare highway
A worker ties steel bars at the “Vjeternik” tunnel construction site of the Bar-Boljare highway, Montenegro June 11, 2018. REUTERS/Stevo Vasiljevic

 

Having recognised that there is little scope to take on more debt, the government’s options for building the next three phases of the highway are limited.

The option it now favours is a public private partnership (PPP) in which an outside partner would build and operate the highway, then run it under a concession from the state for 30 years to get a return on their investment.

China Road and Bridge Corporation (CRBC), the large state-owned Chinese company that is building the first section, signed a memorandum of understanding (MOU) in March to complete the rest of the road on a PPP basis.

 

 

Keep reading …

 

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