Basic Information

Name: Bar–Boljare Highway
Location: Smokovac, Uvač, Mateševo
Type of Project: Transportation
Project Developer(s): The Government of Montenegro
Main Contractor(s): China Road and Bridge Corporation (CRBC), a subsidiary of China Communications Construction Company (CCCC); local subcontractors include BEMAX (Montenegro), Cijevna Komerc (Montenegro), and Skladgradnja (Croatia)
Known Financier(s): Export–Import Bank of China
Cost: 1.1 billion USD
Project Status: Under construction

Project Outline

The priority Smokovac–Uvač–Mateševo section of the Bar–Boljare Highway is 41 kilometres long and includes 20 bridges and 16 tunnels. The longest bridge is the Moracica Bridge (960 metres), while the longest tunnel is the Vjeternik Tunnel (2,975 metres). The mountainous terrain is very challenging for construction, and increases the costs of the structure, making this one of the most expensive highways in Europe.

The project aims to shorten the travelling time from Montenegro’s capital city, Podgorica, to the mountainous north of the country and to bypass the Moraca Canyon, one of the most dangerous traffic routes in the region. The Smokovac–Uvač–Mateševo section of the highway starts some 15 kilometres outside Podgorica and ends 10 kilometres before Kolasin, a tourist town in the north of the country with approximately 3,000 inhabitants. Although the section passes through an area of the country where there are no large towns, it intersects the River Tara, a UNESCO World Heritage Site, which has suffered serious impacts because of the project.

While the Bar–Boljare Highway, of which the Smokovac–Uvač–Mateševo Road is a section, is part of the envisaged Corridor XI connecting Bari in Italy through a ferry to the Port of Bar, and then Podgorica, Belgrade, and Bucharest, the political narratives the Montenegrin authorities used to justify its construction have been mainly locally oriented. It was argued that the highway connecting the south to the north of the country is the final step towards the completion of Montenegrin nationhood and an essential precondition for the development of the country’s north. In Montenegro, infrastructure projects are regularly used for political purposes, with ribbon-cutting ceremonies performed by politicians right before elections along with speeches that praise the developers as visionaries. Ruling political parties do not hesitate to use public money to present themselves as leaders of development.

The efforts to build this highway pre-date Montenegro’s independence in 2006. The project has been brought up before every election, even though many considered its financing and construction impossible. Planning started to move ahead in the late 2000s. In June 2008, the Montenegrin Government made a prequalification public call to choose the main contractor. Eleven companies bid on the tender, none of which was Chinese. The Croatian company Konstruktor won the bidding, while the Prime Ministers of Montenegro, Serbia, and Croatia participated in a ribbon-cutting ceremony to inaugurate construction. However, the Croatian company failed to deliver the completion guarantees as no bank was willing to back the project, and the government turned to the other two shortlisted bidders, to no avail.

Western financial institutions showed reluctance to finance the project, suggesting more feasible alternatives. Apparently, their hesitancy forced companies that had been shortlisted for the tender to withdraw from the project, as they were hoping to rely on cheap loans from European financial institutions like the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). However, the Montenegrin Government was determined to build the priority section no matter what. In 2010 and 2011, the Montenegrin authorities initiated the first nonofficial contacts with representatives of China Eximbank, CRBC, and its parent company, the China Communications Construction Company (CCCC), who expressed their interest in both financing and building the highway.

These initial contacts with Chinese companies failed to deliver concrete arrangements, so the government went back to the EIB for help. The EIB announced that in the case of a Chinese withdrawal, it was ready to participate in the project under its own conditions, which would mean a new feasibility study and a new public tender—in other words, following its standard, transparent procedures.

As the first step, the EIB financed another feasibility study to determine whether the highway was the right solution or whether alternatives could be explored—something previously rejected by the Montenegrin authorities, who were bent on building the highway on that route no matter what. Meanwhile, the Montenegrin Government continued its discussions with Chinese companies—a dialogue that resulted in a concrete offer by CCCC. At that time, negotiations were conducted in private and no specific information was released to the public, leaving the media to speculate about what the Chinese side might have offered.

In August 2012, URS Infrastructure and Environment UK Limited (the Scott Wilson Group) completed the EIB’s feasibility study, suggesting that, instead of building the new highway, the more feasible and economically viable option would be to upgrade existing roads—an option for which EIB funds would be available. According to the Annex to the Progress Report to the European Commission for the period between 1 September 2012 and 25 April 2013, the EIB then asked the Montenegrin Government to decide whether they would follow the suggestion laid out by the feasibility study and extend the studies for the upgrade of the mixed carriageway in the priority section of the highway from Podgorica to Mateševo. The report also mentioned that the government at that time was exploring the possibility of building the highway with a Chinese consortium under the financial instruments offered by China’s regional initiative—presumably, the 16(17)+1 platform.

Eventually, the Montenegrin Government rejected the option of upgrading the existing roads and chose to look for a partner to build the highway proper. As well as the offer from the CCCC, letters of interest with other offers arrived from the Turkish-American consortium Bechtel-Enka and the Turkish Consortium Dogus Gulsan. Only the Chinese offer was backed by a financial institution, the China Eximbank.

Without any public tender or explanation of the criteria followed in the selection process, in November 2013, Montenegro’s Minister of Traffic and Maritime Affairs announced that the Chinese offer ranked first. It can be assumed this was because the Chinese offer was the only one that came with a financing option. It should also be noted that, while in the first tender of 2008 the authorities were looking for a company to construct the entire highway, this new agreement was reached only for the section between Smokovac and Mateševo—the most challenging and the most expensive part of the route.

In February 2014, Montenegro’s Minister of Traffic and Maritime Affairs signed an agreement with CRBC to build the highway. The contract value was 809 million EUR (1.1 billion USD). In October the same year, Finance Minister Radoje Zugic and Chinese Ambassador Cui Zhiwei, representing Montenegro and the China Eximbank, respectively, signed the loan agreement to finance the construction of the priority section from Smokovac to Mateševo. The 944 million USD loan has a 2% interest rate, with a 20-year repayment period, and a six-year grace period.

Construction work officially started in May 2015, and the project was originally slated for completion within 48 months. However, to start working on the project, CRBC needed to receive all the required permits. Allegedly, some of these permits were delayed, which significantly postponed construction. In April 2021, Minister of Capital Investments Mladen Bojanić announced that an annex to the contract with CRBC had been signed, establishing a new deadline for the completion of the project on 30 November 2021. At the time of writing in June 2021, the highway was still under construction.

Project Impacts

• Employment and labour rights: It was originally announced that some 4,000 workers would be engaged in construction, but this promise did not materialise. There were never more than 230 local workers employed on the project, compared with a maximum number of 2,500 Chinese workers. Some Chinese workers reportedly died in labour-related accidents. Representatives from a trade union in the construction sector (the Sindikatu građevinarstva i industrije građevinskog materijala) unsuccessfully attempted to access the site. After being denied permission to visit the site after more than a year of negotiations with the Chinese company, the union accused the CRBC of lacking ‘democratic capacity’.
• Lack of transparency: Local nongovernmental organisations (NGOs) and opposition parties raised concerns about the lack of transparency of the whole process and lack of public tenders for the choice of subcontractors.
• Environmental issues: Local environmentalists published videos showing the devastation of the River Tara—one of the most important areas of natural heritage in the region—which attracted the attention of concerned environmentalists internationally.
• Land: The local community in the village of Ras, in the vicinity of the Smokovac junction that connects a local road from Podgorica to the highway, claims the road is endangering their agricultural land. These protests have not been addressed, and there have been no changes to the project.
• International politics: The loan and contracting arrangement with the Chinese bank brought a lot of attention from the international community and quite few negative reactions from Montenegro’s Western partners regarding the potential fiscal and geo-economic implications. Both the European Union and the United States expressed their concern about a possible ‘debt trap’ that could open the door for Chinese interference in Montenegrin foreign policy.

Before work on the project started, the Montenegrin Prime Minister announced that some 4,000 workers would be hired during construction. Although the workforce fluctuated according to the requirements of construction, the number of employees eventually proved to be much lower, and most positions were filled by Chinese workers. No more than 230 local workers were hired at any one time to work on the project, compared with a maximum of 2,500 Chinese workers. Subcontractors used both local and regional workers. Although four Chinese workers reportedly died on the job, little attention has been paid to issues related to working conditions, except reassurance from Montenegrin authorities that relevant standards and regulations were observed.

The damage construction work has caused to the River Tara, a UNESCO World Heritage Site, received much more public attention. The river had already been at the centre of a campaign by environmentalists in 2004, when the government announced plans to build a massive hydropower plant in the north. Despite footage clearly showing damage to the river, the Montenegrin Ministry of Sustainable Development and Tourism initially rejected the accusations and offered reassurances that everything was being done according to the relevant regulations. For their part, the CRBC offered to repair 500 metres of damaged riverbank—a move that was negatively received by the environmental community as that section of the river represents only a small part of the damage caused. When a new government took power in Montenegro in 2020, it sued CRBC for damages—a process that at the time of writing in May 2021 is ongoing.

In 2017, a dispute about the Smokovac Junction arose between the government and CRBC. The Chinese side insists the junction was not included in the contract and should be paid for separately; according to the government, however, the junction is part of the contract and, if CRBC refuses to deliver, it is ready to request arbitration. Another disagreement arose regarding water supply, electrification of the highway, and its supporting facilities. The dispute was eventually resolved in 2019 with the addition of an annex to the contract and an additional payment to CRBC of approximately 30 million EUR for ‘forgotten’ works. That did not, however, solve all the problems related to the Smokovac Junction. The local community around the junction protested, asking the government to find an alternative location as the project was endangering agricultural land. These protests have not been addressed, and there have been no adjustments to the project.

The most hotly debated issue regarding the highway was the risk of a ‘debt trap’, as the loan arrangement, with all its related costs, reached 25% of Montenegro’s annual gross domestic product (GDP) in 2014. Further, the International Monetary Fund envisaged that the construction of the remaining sections of the highway would cost another 25% of annual GDP and could seriously damage the country’s fiscal sustainability. The situation escalated in 2020, in the wake of the economic crisis caused by the COVID-19 pandemic and a change of government that put an end to three decades of rule by the Democratic Party of Socialists (DPS). In April 2021, a few months after being installed, the new government sent an official request to the European Union, asking for its help to diversify Montenegro’s credit arrangements with China and to continue the highway project. Although initially the European Union dismissed the proposal, it later said it would consider the Montenegrin request. Meanwhile, the Chinese Ambassador to Montenegro dismissed claims about the geopolitical implications of the loan and stressed the importance of the highway project.

According to Article 8.1 of the loan contract between Montenegro and China Eximbank, Montenegro ‘rejects its immunity in regards to its sovereignty or in other way, for itself and its property, except for the diplomatic and consular representations and military properties, in relations with any sort of arbitration process under the article 8.5, and the eventual arbitration shall be carried out in Beijing.’ This has raised concerns that Eximbank could seize land should Montenegro fail to meet its repayment obligations. Although foreign media outlets have extensively reported about these fears, commentators have also noted that this awkwardly worded clause does not actually make clear if land serves as collateral for the loan.

Analysis of asset seizures by Chinese creditors has found scant evidence that this is a frequent occurence. In the often-quoted case of Sri Lanka, the Hambantota port was leased to a Chinese state-owned enterprise as part of a loan restructure, but the case does not fit a simplistic narrative of asset seizure. Similarly, although in 2011 Tajikistan ceded over 1,100 square kilometres of land to China in a move that was rumoured to be linked to debt forgiveness, this is contested. Lack of clarity notwithstanding, in the case of Montenegro, asset seizure is an unlikely outcome, as it would likely provoke very negative publicity for China. In addition, it is questionable what China Eximbank could actually do with land in Montenegro, not to mention the fact the relevant procedure, if at all possible would be complex and time consuming. A more pressing concern is that Eximbank or another Chinese entity could seek to secure stakes in other Montenegrin state assets, such as energy utilities or other state-owned companies, as part of a debt renegotiation (as occurred in Laos in 2020). Even this would likely result in negative publicity for China. The most likely scenario in the case of the failed payment would be that a Chinese state-owned company takes over the control of the highway, but in light of the project’s dubious financial feasibility, this would probably be the best-case scenario for Montenegro.

Finally, the project has often been criticised for its lack of transparency and the classification of relevant data. The government has usually rejected these claims, insisting that the most important information has been publicly released. While it is true that the agreement with China Eximbank and the general contract with CRBC were both published, NGOs point out that many crucial details—in particular, related to the work of local subcontractors—remain classified. The fact that the highway project is part of a bilateral agreement with China has allowed the government to avoid public tender procedures, leaving space to award subcontracts to a clientelist network of the former regime. In 2013, Montenegro and China signed a bilateral agreement on cooperation in the field of infrastructure, which formed a basis on which other agreements with Chinese companies were stipulated

The most important benefit of the highway is to bypass the dangerous Moraca Canyon and a route on which many lives have been lost, but also to connect the developed south to the underdeveloped north of the country. Although the previous government mainly used tourism to justify the project, no clear strategy has been advanced on how the highway could help the deindustrialised north, with its rising demographic concerns caused by economic emigration.

In-Depth Sources

Birnbaum, Michael. 2021. ‘Montenegro Mortgaged Itself to China. Now It Wants Europe’s Help to Cut It Free.’ The Washington Post, 18 April. Link.

Gray, Emily. 2018. ‘The European Silk Road: Montenegro’s Decision to Build a New Highway.’ Stanford, CA: FSI Publications. Link.

Grgić, Mladen. 2019. ‘Chinese Infrastructural Investments in the Balkans: Political Implications of the Highway Project in Montenegro.’ Territory, Politics, Governance 7(1): 42–60.

Kovacevic, Milica. 2021. ‘Vulnerabilities to Chinese Influence in Montenegro.’ Centre for Democratic Transition website. Link.

Network for Affirmation of the NGO Sector (MANS). 2019. ‘Will Tara Survive the Highway Construction?’ MANS website. Link.

Network for Affirmation of the NGO Sector (MANS). 2020. ‘Put bez kraja [Road Without End].’ MANS website. Link.

Reuters. 2018. ‘Chinese “Highway to Nowhere” Haunts Montenegro.’ Reuters, 16 July. Link.

von der Brelie, Hans. 2021. ‘The Billion-Dollar Motorway Leading Montenegro to Nowhere.’Euronews, 9 May. Link.