sixteen kilometers road from Budva to Tivat airport, along the Montenegrin coast, will be built by the Chinese consortium Shandong for almost 54 million euros.
According to Radio Free Europe (CSR), which is 14 million more than the authorities planned to spend.
Of these 54 million euros, the state provided less than 15 million, it was announced at a government meeting at the end of September. The government said the missing funds would come from "the capital budget or other funding sources."
The RSE has received no response from the State Road Administration as to whether the state will take on debt as a result.
Previously, Montenegro had a problematic experience of borrowing funds for projects carried out by Chinese companies, for example, in the case of the construction of a section of the highway, writes RSE.
Economic analyst Mirza Muleshkovic estimates for the RSE that China's influence in Montenegro and the region has grown in recent years, partly because of the loans the country offers to governments with which its companies implement projects.
And the fact that four out of eight applications for the construction of the boulevard came from Chinese companies indicates the interest of Chinese companies in doing business in Montenegro.
Can the boulevard be more expensive than agreed?
The consortium "Shandong Foreign Economic and Technical Cooperation" and "Shandong Luqiao Group" registered a representative office in Podgorica six months ago.
However, the €54 million price of the road could still rise as the tender documents include a sliding scale clause, which is a protection, especially for contractors, from inflationary movements in the market.
“Whether it will be higher or lower than the amount of the application depends primarily on the movement of prices for metals, fuel, sand, cement…,” the government said in a statement on providing the missing funds for the construction of the boulevard.
Commenting on China's business in the region, Mulešković points to the effectiveness of their business strategy: "China has made the smart move of providing the financial resources it has and thereby further strengthening its influence in these countries."
However, he says countries should consider the terms on which they borrow, as well as what that debt includes. “Often we only have a story about the interest rates and the terms of the debt, but we also need to see everything else related to those debts.”
Chinese projects in Montenegro
Broader business cooperation between Montenegro and China began more than ten years ago, when an agreement was reached with a Chinese partner to purchase ships for two state-owned companies.
According to the Digital Forensic Center, the value of Chinese projects in five non-EU countries in the Western Balkans exceeds 13 billion euros.
However, the EU and the US have identified the negative consequences of cooperation with China. One of them is the creation of unsustainable debt, which threatens economic stability and therefore the general social environment and security of countries that take out Chinese loans, writes RSE.
