Montenegro Plans New Highway Construction Deal with China

Building of the Moračica Bridge, part of the new Montenegrin highway Bar-Boljare (Milica Buha)

The Lede: Montenegro has chosen Chinese companies to build a new highway after controversy surrounding a previous major highway project.

What We Know:

Montenegro has signed a memorandum of understanding with a Chinese consortium and awarded a contract for the construction of a $59 million highway connecting the coastal town of Budva and the airport in the town of Tivat at a distance of 16 kilometers. Officials say that the construction should last two years. The project is part of Montenegro's long-term plans to develop its transport infrastructure, boost tourism, and enhance its position as a regional transport hub.
The construction contract was awarded to a consortium of companies from China's eastern Shandong Province including the Shandong Foreign Economic and Technical Cooperation Group and the Shandong Luqiao Group. The consortium entered the lowest bid for the highway after another Chinese company withdrew a lower offer. The project involves Chinese construction, but not financing.
The highway project faces public resistance in the town of Grblje between Budva and Kotor along the country's Adriatic coast.

The Background: Montenegro was one of the first European countries to sign on to China's Belt and Road Initiative (BRI). China has been investing in Montenegro on large infrastructure projects including the controversial Bar-Boljare highway, the country’s largest ever such project which also saw a $810 million loan from China’s Export-Import Bank which drove Montenegro’s public debt to 90.85% of GDP. The European Commission and a group of Western banks have stepped in to protect Montenegro against currency fluctuations and help the government meet its repayment schedule. Only 41 kilometers of the planned 163-kilometer highway have been completed with future plans remaining uncertain. China has also overseen the construction of a luxury resort on the Adriatic coast and the renovation of the coal-fired power plant in Pljevlja.

Likely Outcomes:

Montenegro will have to be careful in tracking the rising costs of construction as global inflation rises as was the case with the cooperation with China on the Bar-Boljare highway. Without the Chinese financing side of the equation, Montenegro will have to pay for the project with its own revenue or look outward to the European Union or to the banking sector. Any financier would be wary of another highway project in Montenegro.
While Montenegro is a NATO member, it remains a candidate for the European Union. Along with a handful of other Balkan countries, it straddles a niche in geopolitics as a fringe part of Europe that has close cooperation with both the West and with Russia and China. With increasing uncertainty in EU-China relations, especially the shaky partnership with Italy in the BRI, China will keep Montenegro on the agenda as a foot in the door of Europe with many more anticipated infrastructure projects.

Quotables:

“This is only the first in a series of projects concerning the coast, which should facilitate traffic. This construction was urgent, as in the summer tourist season more than 30.000 vehicles daily pass between those two towns.” – Dritan Abazovic, former Prime Minister of Montenegro

Good Reads:

Montenegro Pushes Ahead With New Chinese Project Despite Previous Debt Controversy (Radio Free Europe)

Montenegro Signs Contract With Chinese Company to Build Coastal Highway (Balkan Insight)