Will Montenegro’s new government bring a new strategy for China? – The diplomat
In this photo taken early Monday, August 31, 2020, supporters of opposition groups celebrate after declaring victory in Montenegro’s parliamentary elections in Podgorica, Montenegro.
Credit: AP Photo / Risto Bozovic
On August 31, Montenegro experienced the first election-driven regime change in its history. A colorful opposition coalition of right, left and center parties, with strong support from the Serbian Orthodox Church and the NGO sector, won in a close vote. What opposition activists hoped to bring about in Belarus happened in Montenegro – but Montenegro could have experienced the same kind of political crisis as Belarus had it not been for its proximity and political dependence on it. the EU, and an integration process that has gone too far to allow major political unrest.
The defeat of the Montenegrin “hybrid” regime, as defined by Freedom House, is also important for China. The Chinese hold 25% of Montenegrin public debt, and their loans for an unworkable infrastructure project are often cited as the main trigger for Montenegro’s unsustainable debt. Indeed, the former Montenegrin regime embraced Russian, Middle Eastern and offshore investments, as well as politically cheap Chinese loans. The new leaders are already announcing their intention to publish the controversial contracts with Chinese companies and renegotiate the loans.
Montenegro’s first deal with the Export-Import Bank (Exim Bank) of China was the purchase of two ships for a dying Montenegrin national shipping company. The government tried to regenerate the national shipping giant, which had been devastated by a long-lasting transition, by buying two ships from China, along with strong state guarantees. But the idea came in the midst of another crisis for the shipping industry. No one would ever fund such a short-sighted policy, except China, of course. Now the Montenegrin government is covering the loan, while the shipping company is in the same terrible financial situation.
The next big project was the famous (or infamous) Bar-Boljare highway project, which is part of a longer inter-country road connecting the Serbian and Montenegrin capitals. The 41-kilometer stretch of road financed by Exim Bank, and built by China Road and Bridge Corporation (CRBD), is mired in long delays, while the initial cost of 800 million euros could end at 1.3 billion euros, thanks to unexpected additional work. , interest rates and currency risks. (For comparison, Montenegro’s GDP was estimated at 4.9 billion euros in 2019.) As if that weren’t enough, it looks like the remaining sections of the planned longer route will remain a dream. No one is ready to finance other works without state guarantees, which at this level of public debt (from independence in 2006 to 2020, the country’s debt has increased from 38% of GDP more than 80%), will be impossible. The highway project is one of the main topics in Montenegrin newspapers, and the newly elected majority government had to address the issue at its first press conference, promising to investigate the controversies surrounding the project.
A Chinese company is implicated in a controversial case involving a wind power plant, with reports being pinged pong between the Maltese and Montenegrin press. The alleged corruption scandal involves offshore companies and Chinese and Maltese state giants, and is being investigated by prosecutors in Montenegro and Malta. However, in this case, the focus is not so much on the Chinese role as it is on the Maltese and Montenegrin officials.
All of these China-funded projects were meant to be used by the government as evidence of historical economic growth and infrastructural achievements – if not for the inconvenient facts, the highway was delayed and too expensive, ship purchases were unsuccessful and the power plant is under investigation. by prosecutors from at least two countries. In the end, the projects proved to be a powerful engine for the opposition in exposing the government’s wrongdoing.
In this context, what should China expect from regime change and the new (hopefully) democratic regime in Montenegro? Concerns about pro-Serbian, pro-Russian (and therefore by default pro-Chinese) forces taking control of the government are overblown. Peaceful regime change in a country as small as Montenegro does not make world news without anti-liberal and anti-European forces threatening the peace and stability of a troubled Balkan region. The presence of these voices, however, has been overstated, and they do not reflect the reality of Montenegro’s dynamic political arena.
The new government (supposed to be made up of experts) will be backed by a colorful coalition that has obvious ideological differences. These differences will ensure that the country stays on the same foreign policy path (EU integration being a priority), without any controversial issues being opened. A brutal change in foreign policy could jeopardize the coalition, which has its hands full with its goals of fighting (rampant) corruption, disrupting organized crime and supporting the country’s economic recovery in what appears to be the most serious economic and financial crisis since its independence.
The new government’s desire to attract much-needed sympathies in the EU, and finally to relaunch the integration process, could mean a slowdown in intense economic relations with China. Chinese loans – politically cheap, but financially expensive – have negative consequences on the integration process. They undermine public procurement procedures and have a negative impact on public debt sustainability. The release of the loan deals, as the new government has promised, could damage China’s image abroad and could portray China as an opportunistic power taking advantage of unconditional cash-hungry hybrid regimes.
However, the point is that China holds a significant share of Montenegrin public debt, for which Montenegro has given strong state guarantees (banned in the EU). The country faces serious financial challenges in the coming months, with limited room for maneuver. Thus, the new government of Montenegro should approach China with more caution and avoid new debt traps for projects that do not bring sustainable growth. Montenegro needs friends and international support to build on the momentum of its historic elections and ensure that the democratic enthusiasm of its people remains alive during the years of transition.
Mladen Grgic is an associate of the European Institute of Asian Studies, PhD. Candidate at the University of Pompeu Fabra, Barcelona, and member of the board of the American Chamber of Commerce in Montenegro.