Breaking of Highway Construction Deadline Requires Additional Contract Annex

By , 11 Oct 2020, 12:48 PM Business
Breaking of Highway Construction Deadline Requires Additional Contract Annex Moracica Bridge, the part of the future highway, Photo by Antonela Stjepčević

October 11, 2020 - Breaking the deadline for completing the first section of the highway in Montenegro from Podgorica to Kolasin requires signing a new annex to the contract between the Government of Montenegro and the Chinese company CRBC (China Road and Bridge Corporation), which is the main contractor. According to the previous annex to the contract, the first section from Smokovac to Matesevo was supposed to be completed by the end of September, writes RFE.

The Ministry of Transport did not answer questions put by Radio Free Europe (RFE) as to when a new annex to the contract with the Chinese company CRBC should be signed after another deadline to complete the construction of the first section from Podgorica to Kolasin. The Chinese company also informed RFE that it will not be announced for now.

Is there an exit for the Montenegrin highway?

A vital feature of the Montenegrin Government's arrangement with the Chinese company is the non-transparency of contracts and loan spending, says Dejan Milovac from the MANS research center.

"Chronic non-transparency creates suspicions that we believe that an investment, now worth more than a billion, cannot pass without corruption in Montenegro. All communication between CRBC, Exim Bank (Chinese Credit Bank), and the Ministry of Transport, on the other hand, has been declared a business secret. From MANS's standpoint, it is completely unacceptable that citizens do not know how the largest loan Montenegro has taken in modern history is being spent. "After four years from the beginning of the construction, we find out, for example, that there are additional works, construction of a loop, water and electricity supply, which were not foreseen in the original contract," says Milovac.

The first section of the highway in Montenegro, which should eventually lead from the Adriatic Sea (Bar) to the Serbia (Boljare) border, was supposed to be completed in May 2019. Due to the unmet deadline, an annex to the contract was signed for a new deadline on 30 September 2020. The agreed price was initially 809 million dollars and then increased by another 90 million for the subsequent construction of access roads to Podgorica and communal infrastructure along the highway.

In addition to requests from the non-governmental sector, political parties are also seeking an analysis of previous agreements, critical parts of which have remained secret to the Montenegrin public.

In the meantime, political changes have taken place in Montenegro. If they form a new government, the business with Chinese companies will be taken over by a triple coalition that won a majority to create a new government.

The leader of the coalition "For the Future of Montenegro" and the candidate for prime minister, Zdravko Krivokapić, announced control over the contract for the highway construction and the way the Chinese loan would be spent.

A senior official of the Civic Movement URA, Miloš Konatar announced to RFE that the contract for the highway construction will no longer be secret, emphasizing that so far, citizens have paid dearly for all arrangements declared secret by the previous Government.

"Citizens have paid more than 100 million euros in quantitative terms precisely because of the inaccuracy of the contract at the beginning of the construction. Many items from the contract have been declared a state secret and are inaccessible to the public. And we must first carry out a comprehensive analysis, increase the transparency of the project to include all the intelligence we have," says Miloš Konatar, adding that the lack of transparency must change in the coming period:

"Let's see completely clearly how much the citizens of Montenegro will ultimately pay for the section of the highway and how much this project has cost us so far."

One of the biggest unknowns is whether the start of the loan payment to the Chinese Exim Bank will be postponed with the postponement of the completion of the highway's construction, i.e., whether the grace period that expires in 2021 will be extended.

Economic analyst Zarija Pejović says that Montenegro will have to refinance the loan installments, and the new Government will negotiate a possible postponement of the loan payment:

"I think that the new Government will have to negotiate as soon as possible with the representatives of CRBC. I hope that a compromise will be found on that issue."

After completing the first section, Montenegro is waiting for the construction of the second section from Mateševo ​​to Boljari. Dejan Milovac from MANS states that the priority is to build a complete highway:

"The worst thing would be, when it comes to the new government, to suspend the project for any reason and for Montenegro to have only those 41 kilometers of highway, which in no way can justify everything that was invested in that project."

On the section from Smokovac to Mateševo ​​(priority part of the Bar - Boljare highway), almost 93 percent of the works have been completed. At the beginning of August next year, everything could be completed, Jonuz Mujević, Executive Director of Monteput, one of the contractors, told RSE regarding the highway.

Mujevic said that they are now waiting for and answer from the chief engineer, i.e., the supervisory body, to respond to the request of CRBC, the main contractor, regarding the extension of the deadline.

"When we get the view of the chief engineer towards the investor, we will know what steps should be taken. The new annex to the contract on design and construction will be signed after the decision of the supervisory body, which will specify the new deadline for completion of works, considering that the existing deadline has been breached," says Mujevic, adding that the works are progressing at a "specific" pace.

"We are both satisfied and dissatisfied with that dynamic, but it work is being done. "Since the arrival of Chinese workers, the work has intensified, and if it continues like this, we will have a positive outcome," Mujevic points out.

He also states that the pandemic contributed the most to the extension of the deadline for completing the first section of the highway because a large number of Chinese workers, who use their regular vacation around the New Year, could not return to work.

"Therefore, from February to June, we had almost no workers on individual sections of the road (sections three and four). Work re-started in June, and we are satisfied with the current dynamic," says Mujević.

According to him, that section will be completed because the funds have been provided. Asked when the work can be expected to end, he replied:

"My opinion is that it will be at the beginning of August next year."

According to the CRBC, about 1,000 workers are working on the construction of the highway, of which 379 are Chinese citizens, and the rest are domestic workers, employees of subcontractors.

Asked several times whether there is a possibility of Montenegro falling into debt bondage due to the already high public debt, which amounts to 78% of GDP, Montenegrin officials have repeatedly denied this possibility.

Text by Srđan Janković, Radio Free Europe

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