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Red Flags: Chinese Project In Serbia Raises Familiar Concerns About Beijing's Balkan Investments


This October 2019 photo shows wastewater pouring into the Sava River in Belgrade. According to Serbia’s Environmental Protection Agency, slightly more than a third of households in Serbia are without access to sewage and water-management systems.

Questions over a Chinese contract to build a multimillion-dollar sewer system in a Serbian city has raised red flags among activists who say it is a microcosm of how Belgrade deals with Chinese entities.

The project in the Serbian city of Kragujevac was issued without a tender or public procurement, raising transparency and corruption questions about how Chinese companies and the Serbian government operate in the country.

Construction of the 360-kilometer new sewage network in the central Serbian city began in November and was directly contracted to the Infrastructure Ministry and then awarded to the China Road and Bridge Corporation (CRBC), a Beijing-based international construction company, without a tender process for the bid.

The project is part of a wider Serbian-Chinese venture called Clean Serbia that was launched in 2021 by the Serbian government in 65 cities and municipalities and is worth $3.6 billion.

The aim of the initiative is to modernize, repair, and in some cases build brand-new water-management systems across the country in order to provide better drinking water, combat pollution, and expand access to modern sewage networks, which government statistics show more than one-third of Serbian households do not have access to.

But while city officials in Kragujevac contend their city is in need of a new sewer system to deal with their decades-long problem of wastewater and pollution, several opposition councillors are raising transparency concerns over the lack of information known about the bid and how it was awarded to the CRBC.

Veroljub Stevanovic (right), the former mayor of Kragujevac, with the former Serbian minister of national investments, Verica Kalanovic, in 2008.
Veroljub Stevanovic (right), the former mayor of Kragujevac, with the former Serbian minister of national investments, Verica Kalanovic, in 2008.

“I did not receive any answer except that the Chinese company is the main contractor,” Veroljub Stevanovic, a councillor in Kragujevac’s assembly who previously served as the city’s mayor, told RFE/RL. “Of course, the city’s [wastewater problems] need to be resolved, but first [we need to know] what is the true cost of getting that and what are the conditions of that loan.”

In addition to corruption concerns, the direct agreement reached between the CRBC and the Serbian government -- as well the absence of a tender process for other companies to submit competitive offers -- fits a wider pattern that activists and watchdog groups say is how Serbian officials operate with Chinese businesses.

Nemanja Nenadic of Transparency International in Serbia (file photo)
Nemanja Nenadic of Transparency International in Serbia (file photo)

“It’s essentially a reflection of the weakness of the representatives of our state, who uncritically accept such arrangements,” Nemanja Nenadic, the Serbian program director of the corruption watchdog organization Transparency International, told RFE/RL. “One side of the equation is what a foreign partner demands in order to conclude a deal, the other is whether the Serbian side is willing to accept [those demands].”

Beijing And Belgrade

Beijing enjoys a close relationship with Serbian President Aleksandar Vucic and has been steadily deepening its ties with Serbia and across the Balkans over the last two decades.

Belgrade’s ties with China have since expanded across a wider array of sectors, from trade to defense to technology to education, with billions of dollars in Chinese cash flowing into the country under the guise of the Belt and Road Initiative (BRI), China’s global infrastructure venture, and through bilateral deals.

While Serbia has increasingly followed a foreign policy that looks east to partners such as China and Russia, Belgrade also looks west to the European Union, which is not only a major trading partner and top-level investor through the European Investment Bank (EIB), but also plays a vital role in setting business and workers’ rights standards for projects.

In addition to loans and investment through the EIB, the EU also offers nonrefundable grants to Serbia and other countries in the Balkans for infrastructure and modernization projects, making the bloc’s offering some of the most favorable available.

Still, Chinese investment in Serbia has expanded rapidly and triggered controversy as Beijing-backed companies have received tax exemptions, been allowed to bypass labor laws, and are given other forms of preferential treatment. Similarly, environmental damage caused by a Chinese-owned copper mine near the Serbian city of Bor has led to complaints and protests over pollution.

A study from the Bulgarian-based Center for the Study of Democracy released in September 2021 also said that Beijing’s growing economic footprint in Central and Eastern Europe over the last decade has coincided with a drop in legal and governance standards across the region, with Serbia being singled out as a leading example.

Questions In Kragujevac

It’s against this backdrop that concerns are being raised around the procurement process for Kragujevac's sewer system and wastewater plants.

While it remains known that China’s CRBC will take the helm of the project, few other details are known or have been declared publicly, especially around which other local or international companies the Chinese corporation could enlist as subcontractors for the lucrative deal.

According to Serbian Foreign Minister Tomislav Momirovic, Serbian companies are to represent “not less than 49 percent” of the total subcontractors used in the Clean Serbia initiative.

A billboard in Belgrade depicting Chinese leader Xi Jinping with the words, "Thanks, Brother Xi." Chinese investment in Serbia has expanded rapidly and triggered controversy. (file photo)
A billboard in Belgrade depicting Chinese leader Xi Jinping with the words, "Thanks, Brother Xi." Chinese investment in Serbia has expanded rapidly and triggered controversy. (file photo)

But the lack of a tender process has made this difficult to verify.

According to comments e-mailed to RFE/RL by the Kragujevac mayor's office, cities “covered by the Clean Serbia project have no financial obligations other than providing property for plots on which treatment plants and other projects will be built.”

The issue of cost is also still uncertain, although a bill expected to be put forward to the Serbian parliament confirms one of the credit arrangements for the project, mentioning a $232 million loan that is to be provided by the China Export and Credit Insurance Corporation, a major Chinese state-owned enterprise that is under the purview of China's Finance Ministry.

The Kragujevac mayor's office also told RFE/RL that $217 million has been provided by Serbia to build three wastewater-treatment plants, in addition to the sewer system.

China’s CRBC did not respond to RFE/RL’s requests for comment about how it will select subcontractors and how it will ensure that European standards and regulations will be respected while implementing the project.

Serbian President Aleksandar Vucic (left) with Chinese President Xi Jinping in Beijing in April 2019. Belgrade has increasingly followed a foreign policy that looks east to partners such as China and Russia.
Serbian President Aleksandar Vucic (left) with Chinese President Xi Jinping in Beijing in April 2019. Belgrade has increasingly followed a foreign policy that looks east to partners such as China and Russia.

In response to RFE/RL’s questions about the procurement process, Serbia’s Construction, Transport, and Infrastructure Ministry said it has long-standing agreements with the CRBC and the criteria for choosing partners on the projects were based on the availability of funds and the efficiency of the contractor.

It added that EU standards related to wastewater treatment and domestic laws on planning and construction, as well as environmental protection, are being respected in the design and construction process.

A Familiar Pattern

The Clean Serbia initiative isn’t the first example of Chinese-Serbian cooperation on water and treatment infrastructure and Nenadic from Transparency International says this fits a typical pattern of bypassing existing rules and regulations.

Similar to the project in Kragujevac, Serbia's Construction, Transport, and Infrastructure Ministry signed two agreements with the China Machinery Engineering Corporation (CMEC) in January 2020 for the treatment of wastewater, which were also awarded directly without a tender or public-procurement process.

During the signing of the contract, both the Serbian and Chinese sides emphasized that EU standards would be respected and said many of the bloc’s regulations have even been modeled and introduced into existing Serbian legislation, such as the Law on Public Procurement, which prescribes mandatory bidding and a tender process for all projects.

But as Nenadic points out, these articles are already not being followed, which could be a bellwether for future projects to skirt other rules, despite public pronouncements to the contrary.

“It’s possible that they claim that some EU standards will be respected,” said Nenadic. “However, what is quite obvious is that the rules are already almost identical to EU ones and those are not being respected.”

Written by Reid Standish in Prague based on reporting by Mila Durdevic in Belgrade.
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