Accusing China of creating a baseless ‘debt trap’ for Montenegro
Illustration: Liu Rui / GT
The Montenegrin government’s request to the Commission of the European Union to help it repay the debt to China’s ExIm bank for the construction of the highway serves as a further indictment of the Belt and Road Initiative. China’s International Highway (BRI).
Many media renew and even reinforce the criticism of this globally useful project, baselessly accusing Chinese foreign policy of its alleged intentions to create a “debt trap”. According to some reports, the country could become economically dependent on China, leaving room for its political dependence on China.
Calling these accusations unfounded, I have already expressed my opinion on the value of the BIS. I see it as a global value, as an essential affirmation of multilateralism, as a chance to strengthen regional connectivity and as a development opportunity for all participating countries. I consider President Xi Jinping’s initiative to implement and affirm this project as a huge chance for participating countries to use the attractive and competitive financial potential of the BIS.
Thanks to this, they can foster their development in strategically important infrastructure projects and do more with regard to regional connections. In addition, through links with and within regions, participants can also assert a noble mission of multilateralism and intensify closer cooperation in the economy and beyond.
Through its banks, China has provided the most favorable and proficient loans, offered well-known infrastructure entrepreneurs and provided the opportunity for domestic entrepreneurs to become partners in these projects, allowing local businesses to ‘to be involved. Thanks to loans and entrepreneurs building with and with local businesses, this initiative is an excellent opportunity for the economic development of the participating countries using its advantages.
I am sure Montenegro has recognized and correctly used these advantages. To implement the most important road infrastructure project, the highway connecting its coast with the northern region, up to the border with Serbia, Montenegro chose the loan of the Chinese bank Exim. At the same time, he chose the Chinese Road and Bridge Corporation CRBC (one of the main Chinese bridge and road companies) as the contractor for the implementation. These Chinese companies were neither the first nor the only ones with which the Montenegrin government negotiated.
Montenegro had been interested in the construction of this highway for decades, rightly calling it “the project of the century”. The road will connect Bar, the largest coastal town and port in Montenegro, with the Serbian capital Belgrade, the largest and economically strongest city in the Western Balkans. This highway will allow the highest quality traffic connectivity, better economic and comprehensive cooperation between Montenegro and Serbia. It will also strengthen connectivity between citizens of Montenegro and Serbia and reaffirm close ties between the two friendly states.
Considering the strategic importance of the project, Montenegro has carefully prepared its implementation. He decided to build the most important, the most complicated and the most expensive section as a priority. This part of the highway connects the Montenegrin capital Podgorica with Matesevo, a place in the northern part of Montenegro, i.e. central and northern Montenegro. By building this section, Montenegro will benefit considerably by enabling more accessible and faster development of the northern region, which has enormous natural resources and whose use is limited by inadequate road connectivity.
This section of the highway will increasingly slow the internal migration of citizens from the north to the more developed regions of the center and south and creates a prerequisite for bringing back those who have left the country in search of a better economic environment. . In addition, the existing 70 km road will be replaced by a modern highway, which will provide its customers with the most exceptional traffic safety.
It is important to point out that the existing road has beautiful scenery, but it is extremely dangerous and rightly known as the “road of the dead”. However, apart from economic and demographic reasons, this section has its equally important safety priority.
To finance and build this highway, the government of Montenegro accepted an initiative from the leading road and bridge construction company in neighboring and friendly Croatia, which offered to guarantee the implementation of the project. It was also an opportunity to strengthen and intensify the global relations between two countries. But this company could not meet the standards and secure funds, so the government of Montenegro began to carefully and responsibly search for a new partner to finance this great project, not just infrastructure.
Allocating 15 percent of the state budget to finance this project, the government of Montenegro was at the same time carefully seeking the loan for the rest of the necessary funds. After checking all the possibilities and offers of regional and global infrastructure companies and their creditors, she chose the loan from Chinese bank ExIm and chose CRBC as the contractor. The loan terms offered by ExIm Bank were by far the most favorable and no bank or financial organization could match them. In accordance with its best state interest, Montenegro took out this loan. The CRBC, as a contractor, with a significant participation of local construction companies, has almost completed the construction of this section of highway. The motorway is located in one of the most difficult to build landscapes in all of Europe. The road must be commissioned in less than a year and must begin to produce its benefits. Unfortunately, instead of negotiations to continue building new, shorter and cheaper sections in and outside Montenegro, the issue of China’s “debt trap” in Montenegro has been opened without merit.
The question of China’s “debt trap” is unfounded for several reasons.
First, regardless of the percentage of debt, which is around one-third of Montenegro’s annual GDP and one-third of Montenegro’s total debt, it is almost certain that Montenegro will be able to repay the debt.
With less economic activity, reduced incomes caused by an economic decline (especially tourism), the profits would affect the realization of the ongoing investments, but this would certainly not threaten the fiscal liquidity and the responsibility of Montenegro as as a reliable partner of banks and financial institutions. In the hope of continuing to implement ongoing projects through so-called capital budgets, it was legitimate for ExIm Bank to improve payment terms.
In addition, relations between Montenegro and China have always been one of mutual respect and sincere cooperation. Regardless of its size, China has always shown great respect for Montenegro. This respect is not only a consequence of Montenegro’s respect for the one-China principle and its multilateral commitments, but also of the level of inter-state cooperation. I am proud to have contributed to this as President of Montenegro, especially by cooperating with Confucius Institute and affirming Traditional Chinese Medicine in Montenegro.
Finally, I have no doubt that the ExIm bank is supporting Montenegro in putting in place favorable conditions to repay the loan at the time of the COVID-19 pandemic and its serious consequences. I have no doubts about the positive view of ExIm Bank on this matter. Not only because of the aforementioned facts, but also to shatter the unfounded prejudice of the “debt trap” attached to the great and important BIS. Montenegro does not and does not deserve to be attached to such prejudices.
The author was President of Montenegro from 2003 to 2018. email@example.com