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China Deepens Balkan Footprint With Plans For Power Plant In Bosnia

Republika Srpska officials along with a representative from the Chinese Embassy in Sarajevo attend a groundbreaking ceremony for the hydroelectric plants in December 2021.
Republika Srpska officials along with a representative from the Chinese Embassy in Sarajevo attend a groundbreaking ceremony for the hydroelectric plants in December 2021.

BANJA LUKA, Bosnia-Herzegovina -- Despite lacking the necessary legal permits and facing growing pushback from local activists, a Chinese company is moving forward with plans to build a hydroelectric plant in southeastern Bosnia-Herzegovina.

The entire project is worth some $107 million and is the result of an agreement signed in Beijing in 2019 between Republika Srpska Prime Minister Radovan Viskovic and the state-owned China National Aero-technology International Engineering Corporation (AVIC).

The proposed plant is located close to the town of Foca within the Bosnian Serb entity of Republika Srpska, some 25 kilometers from the Bosnian-Montenegrin border.

But activists have sounded the alarm over the project, noting that it still does not have the necessary environmental permits to begin construction and is lacking an environmental-impact study on how the plant will affect the Bistrica River. Despite these lingering concerns, ground was broken on the hydroelectric complex in December 2021 at a ceremony attended by Republika Srpska officials and representatives from the Chinese Embassy in Sarajevo.

"We have seen the draft [environmental] impact study that was submitted [and] it is very controversial [and] very poorly done," Jelena Ivanic, vice president of the Center for the Environment, a Banja Luka-based watchdog group, told RFE/RL. "[They] do not have specific data, so it is impossible for them to take the necessary measures to protect [against damage]."

views of the Bistrica River near Foca
views of the Bistrica River near Foca

Ivanic says the version of the draft impact study she saw does not mention a nearby hydroelectric plant located along the source of the Bistrica River and, according to her organization, the project only has permits for preparatory work, not full-scale construction.

Ivanic says that for these reasons the hydroelectric project is controversial, and it faced strong pushback during an April meeting between residents and officials, with many locals saying they opposed the project.

A Complicated Path Forward

Dejan Pavlovic, the acting director for the proposed hydroelectric complex, told RFE/RL that permits held by the project were valid and sufficient for the work under way, noting that currently only preparatory work such as building access roads, clearing vegetation, and flattening terrain was being done.

Pavlovic added that he had applied for permits to begin full-scale construction and expected them to be approved by August.

However, questions remain over the environmental-impact study for the project, which was put together by the Institute for the Protection and Ecology of the Republika Srpska, a public institution under the authority of the entity's Science and Technology Ministry.

Predrag Ilic, the institute's acting director, admitted to RFE/RL that errors occurred when the study was being put together and said that they would be rectified in the final version of the report. "We will make an updated study on all those comments [raised by the Center for the Environment]," he said.

Further complications exist around the financing for the project.

AVIC, which was placed under sanctions by the U.S. Treasury in 2021 for its close ties to the Chinese military, originally made promises to provide financing for the hydroelectric plants that it would also be the contractor for, but those talks have not progressed.

AVIC did not respond to RFE/RL's request for comment on its involvement in the project.

Talks involving financing from the state-owned Industrial and Commercial Bank of China (ICBC) have also been floated, but currently only $15.7 million has been raised for the project as a loan by the state hydropower company Elektroprivreda Republika Srpska from a Bosnian bank.

Elektroprivreda Republika Srpska owns the subsidiary company, Hidroelektrane Bistrica, that is the holder of the concession for the project near Foca. The deadline for the hydroelectric power plant complex near Foca is the end of 2026.

China's Balkan Push

China has become a growing investor in the Balkans in recent years, with countries in the region -- including Bosnia -- signing on to its globe-spanning infrastructure project, the Belt and Road Initiative (BRI).

According to a 2021 study by Bulgarian-based Center for the Study of Democracy, Bosnia, Hungary, Montenegro, and Serbia -- the regional leaders in terms of Chinese investment -- experienced a drop in their business environments and rule of law as Chinese capital flowed in.

The report notes the loopholes for Beijing-backed companies, such as receiving tax exemptions, the ability to bypass local labor laws, and other forms of preferential treatment are likely not the result of Chinese investment, but a contributing factor in attracting it.

Boris Mrkela from the investment-monitoring group Just Finance International says that similar factors are likely at play for AVIC at the power plant project near Foca. "According to our research, the constant among all Chinese investors in the Western Balkans is the readiness to start work on projects that lack significant permits," he told RFE/RL.

Chinese companies have faced similar controversy over projects in Serbia, such as a mining project in Bor and a tire factory in Zrenjanin, which also moved forward despite lacking the legal permits to do so.

Mrkela says that is a worrying trend for the Balkans, especially when it comes to the potential environmental impact the projects approved through loopholes could bring.

Written by Reid Standish in Prague based on reporting by Goran Katic in Bosnia

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