Both concluded there would not be enough traffic to justify a concession. Reuters reviewed copies of the studies, the first carried out by French firm Louis Berger for the Montenegrin government, and the second by U.S. FEASIBILITY STUDIESĭoubts about the highway surfaced after two feasibility studies, conducted in 20, showed it was not economically viable. But the process of joining the bloc could take a decade or more, despite a loose target date of 2025 floated by the EU this year. Once it is part of the EU, Montenegro would have access to more structural and cohesion funds from Brussels. One official suggested Montenegro would be better off waiting until it joined the EU before finishing the highway. The IMF cautioned the government in May against a PPP solution that could introduce large contingent liabilities. “We told them that their PPP model was not bankable, that they would be taking on risks they don’t know how to manage,” said an official from the European Investment Bank (EIB), the European Union’s lender. The option it now favors 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.Ĭhina 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.īut European lenders worry that Montenegro would need to offer costly revenue guarantees to make that work, potentially deepening its financial woes. Having recognized 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 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. The project was championed by Milo Djukanovic, who has served as president or prime minister of Montenegro nearly uninterrupted since 1991. 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 neighbor. And frankly they don’t want to,” said Grgic, author of a 2017 study on the highway. Now that it’s been started, the politicians can’t stop it – no matter how harmful it might be. 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. “This highway is a big deal in Montenegro. 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. 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. This has allowed them to develop in ways that may not have been possible without access to China’s vast foreign exchange reserves. 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 neighbors Serbia, Macedonia and Albania.Īs 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. And for the time being this is a highway to nowhere.” “Their fiscal space has shrunk enormously. “There is a big question about how they complete it,” said an EU official who requested anonymity. But once the first, challenging 41 km stretch through mountains north of the capital is completed, the government faces a difficult choice.Ī 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.ĭespite 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. It is designed to link the port of Bar on Montenegro’s Adriatic coast to landlocked neighbor Serbia. 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.
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