CHINA-FUNDED ‘HIGHWAY TO NOWHERE’ HAUNTS MONTENEGRO

PODGORICA— Perched atop massive cement pillars that tower above Montenegro’s picturesque Moraca river canyon, scores of Chinese workers are building a state-of-the-art highway through some of the roughest terrain in southern Europe.

The government has described the 165-kilometer highway, with its imposing bridges and deep-cut tunnels, as the construction of the century and a pathway to the modern world.

It is designed to link the Port of Bar on Montenegro’s Adriatic coast to landlocked neighbor Serbia. But once the first, challenging 41-km stretch through mountains north of the capital is completed, the government faces a difficult choice.

A 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.

Despite those measures, Montenegro’s debt is expected to approach 80 percent of gross domestic product this year, and International Monetary Fund says the country cannot afford to take on any more debt to finish its ambitious project.

Weighed down by debt

“There is a big question about how they complete it,” said an EU official who requested anonymity. “Their fiscal space has shrunk enormously. They have strangled themselves. And for the time being this is a highway to nowhere.”

The road is at the heart of an intense debate about Chinese influence in Europe.

As Beijing extends its economic reach under the ambitious Belt and Road Initiative, poor countries across Asia and Africa have seized on attractive Chinese loans and the promise of transformative infrastructure projects.

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.

Montenegro is the first country in Europe to find itself in this position.

“This highway is a big deal in Montenegro. It reminds people of Tito and the days of grand socialist projects in the region,” said academic Mladen Grgic, referring to Yugoslavia’s former longtime communist leader, Josip Broz Tito.

“But it’s a trap. Now that it’s been started, the politicians can’t stop it—no matter how harmful it might be. And frankly they don’t want to,” said Grgic, author of a 2017 study on the highway.

‘Not bankable’

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.

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 option it now favors is a public-private partnership (PPP) in which an outside partner would build and operate the highway.

China Road and Bridge Corp., the large state-owned Chinese company that is building the first section, signed a memorandum of understanding in March to complete the rest of the road on a PPP basis.

“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 Euro- pean Investment Bank, the European Union’s lender.

Feasibility studies

Doubts about the highway surfaced after two feasibility studies, conducted in 2006 and 2012, showed it was not economically viable. Both concluded there would not be enough traffic to justify a concession.

Ivan Kekovic, an engineer who was involved in the project in its early years but later warned against it, told Reuters that average traffic of 22,000 to 25,000 vehicles a day would be needed to justify a highway of the proposed scale.

Daily traffic on the busiest stretch, from the capital Podgorica to the Port of Bar, is less than 6,000 vehicles.