- Moračica Bridge

A country on the verge of bankruptcy and a highway leading to nowhere

The Autoput A-1 Bar-Boljare was meant to be the greatest motorway in Montenegro, but what went wrong?

3w ago
107.2K

A country known for its impassable terrain, building a cross-country highway is a bit dearer than one might think. Joining the beyond expensive project of connecting the Serbian capital of Belgrade to the coast, the Montenegrin government took out an €809 million loan at 2% per annum from the Chinese Government to build one of the world's most impressive motorways in Europe, the 164-kilometre long Bar-Boljare. It would tunnel through jagged mountains and bridge massive valleys - costing the country an estimated €2 billion, making it by far the most expensive section of the transnational Belgrade-Bar mega highway project.

A historically high debt of over 102% GDP.

After negotiations with the Chinese government came to a successful conclusion in late 2014, China Road and Bridge Group and China Poly Group Corporation began work the following year, funded by the Export-Import Bank of China. Not only was the cost of the ambitious project worth nearly a third of Montenegro's entire economy, it would skyrocket the country into a massive debt crisis, with total debts totalling over 102% of the country's GDP.

Credit: AFP/Savo Prelevic

Credit: AFP/Savo Prelevic

50 tunnels and 95 bridges in 164 kilometres of road.

It would consist of a whopping 50 mountain tunnels and 95 bridges, making it one of the most ambitious highways in all of Europe. Doing the maths, it works out to be a tunnel or bridge nearly every kilometre.

We can't afford it.

As of now, only 40 kilometres of the 164km road has been completed, and the current government has admitted that it cannot afford to pay off the debt incurred - the first installment of which is due this month.

Due to the nature of the previous government's decision, the smallest country in the Balkans region has been placed on the verge of bankruptcy, as it pleas with the European Union to help fund the project.

we make a joke: It is a highway from nothing to nothing.

When completed, the road won't lead anywhere anyway.

The former Justice Minister of Montenegro, Dragan Soc, told media that the highway was completely useless anyway, as he stated hopelessly - "we make a joke: It is a highway from nothing to nothing."

"I think we will pay not maybe this generation, but future generations."

"But I don't think this is a problem from China. It is our bad decision."

Now six years after the first final decision was made to begin construction, many questions have been raised about the influence of Montenegro's past leadership, and their stubborn willingness to enter into ambitious contracts with attractive interest rates.

Only the first section of highway put the country into such a deep debt - it may be decades or centuries before the entire debt can be paid off.

"We are now victim of the extremely bad decision of the former government."

It wasn't a well respected decision among the public when the decision was made. Now, Montenegrins are blaming the country's previous government for the spiraling the country into the brink of an economic crisis.

China gaining control over Montenegrin land?

Buried in the terms of the contract speaks more bad news for Montenegro. The terms allow for any unpaid land to be seized by China - of which will be disputed in a Chinese court. Basically it would give China control over Montenegrin land.

So why did such a large cul-de-sac get comissioned?

It's all down to the China's Belt and Road Initiative (BRI) - a global leader in the funding and construction of roads around the globe. With a large presence in Africa, China has built roads, railways, buildings and other infrastructure for 39 African countries.

Montenegro had wanted to build a dream highway for years, but could never source local funding from Europe as the European Union was afraid that Montenegro wouldn't be able to pay off the debt. That's exactly why China's attractive loans seemed perfect.

Many African nations have been warned about debt traps, and despite the opposition, the Montenegrin government proceeded with the road construction.

The European Union is reluctant to help.

Now stuck in a debt trap, the EU has pulled a 'told you so', refusing to help Montenegro pay off their debts. This effectively concedes regional power and influence over to China, a warning that had long been ignored by the Montenegrin government.

So what's next?

The country has since gone silent on the issue, but likely, China is working with the Montenegrin Government to discuss the future of the debt.

All that we know for now is - Montenegro is on the verge of bankruptcy and has nothing but a highway leading to nowhere to show for it.

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Comments (47)

  • Many European countries have been walking around with a "for sale" sign pinned to their foreheads for a long time. You go to Milan, you walk around the affluent areas around 'Porta Nuova', most of what you see was bought by Qatari investment funds, and for the sake of clarity: Italy's public debt is around 160% of GDP.

    Meanwhile, Serbia is working on a huge project on the Sava river and the land is actually owned by an Abu Dhabi investment fund. The list goes on. And that's before we start talking about China.

    The fact of the matter is European countries have been on a descending trajectory for a long time, especially Western European ones that have a lot more to lose.

      22 days ago
    • In TX we lease our toll roads out to foreign companies. So stupid.

        21 days ago
    • the problem is we've leased and sold so much more than our roads. We've sold pieces of history including historically relevant landmarks and lands

        20 days ago
  • Really interesting and a good write up and really poor decision making from previous governments.

    The pandemic itself has put other countries into debt beyond their GDP too however they have the ability to repay…… albeit this and future generations will pay.

    If I was cyclical this could be a way for China to take over countries without conquering them like in the old days. 🤔

      22 days ago
    • China has already been investing heavily in other countries' infrastructures.

        22 days ago
    • Yes aware of that but they’re lending to countries that can’t afford it.

        22 days ago
  • So Montenegro will be a colony of China in a few years.

    Well when they work on the infrastructure it can be the hub for all their transport to Europe.

      21 days ago
  • Those debt levels are nothing 😎🇺🇸

      21 days ago
    • When they exceed the GDP they are an issue. For the US, we have not exceeded our GDP ... yet. The US economy is HUGE. It will take a bit longer for China to overtake the US but it's on the horizon.

        20 days ago
    • I’m not sure what is right or wrong about raising the debt to gdp ratio .

      If you google “ debt to gdp ratio , 1819 to 2021”

      and

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        19 days ago
  • Montenegro is such a lovely country with lovely people, I went and stayed in Zabijak a few years ago, it was gorgeous. I really hope they can break free from China, after all, if China does seize the land, I suppose they could call in the military to take it back, and China wouldn't be able to do much, but that is at one end of the scale

      22 days ago
    • they couldn't call the military because of the contract they signed. historically, it is just another country buying up land. this time, no military intervention. look what has happened in all of Africa: who owns the diamond mines, who...

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        5 days ago
    • It is odd, Montenegro is such a lovely place and I do fear for it, and the EU seems to have let them down. I am not a Brexiteer, but I do feel the EU needs to take a proper look at just what it has become, as opposed to what it was meant to be, and actually...

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        4 days ago
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