Page 60 - bne_Magazine_April_2018

60 Opinion COMMENT:
Is the Balkan Silk Road
a force for good (governance)?
Adam Urosevic of ViennEast
Primarily interested in the Western Balkans’ geographi- cal position as a gateway to the European market, China has over the past few years become a prominent player in the region through its state-led loans and invest- ments in large infrastructure projects. Despite being much welcomed by a region in urgent need of capital, Chinese investments and policies along the “Balkan Silk Road” not only risk public resentment and unsustainable debt on local governments, but could undermine political determination for crucial reforms required for EU accession. Since it is in China’s own economic interest to ensure political stability
in the Western Balkans, it should cooperate with the EU’s reform agenda and improve transparency and accountability along the Balkan Silk Road.
With an export-driven economy and more than $3 trillion in foreign exchange reserves, China is aiming to offset slower economic growth and overcapacity at home through its
Belt and Road Initiative (BRI) – a mixture of infrastructure networks, land and maritime routes from China across the Middle East, Africa and Europe. The Balkans represent,
in this respect, a passage to the final and potentially most lucrative destination of China’s modern-day Silk Road: the Western European market. Brussels has already responded to China’s increasingly significant foreign direct investment into member states with a call for EU-wide investment screening procedures. China thus views the so-called Balkan Silk Road as a logistical back road to the EU and has accordingly become a prominent player in the region through its state-led loans and investments in large infrastructure projects (primarily in transport and energy).
Although the European Commission increasingly perceives China as posing a normative challenge, Beijing has, unlike Moscow, no interest in sabotaging the EU accession process as this would weaken the region’s stability and potentially undermine its logistical link for Chinese exports from the Greek port of Piraeus to Europe and jeopardise a later access to the EU single market.
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Chinese Premier Li Keqiang with Serbia's then prime minister (now president) Aleksandar Vucic in Belgrade in 2015.
Much-needed economic boost with strings attached
China’s investment spree is welcomed in one of Europe’s poor- est regions given that it lacks crucial infrastructure, is not a prime investment destination and has difficulty implementing the strict and costly requirements required by international lenders such as the European Investment Bank (EIB) and European Bank for Reconstruction and Development (EBRD). Beijing’s loan-based financing, however, risks heavily burden- ing the region with debt.
The most telling example of this has been Montenegro’s deci- sion to cut back on its social welfare plan for families with mul- tiple children due to Chinese loans limiting the fiscal space. Moreover, these loans usually come with strings attached such as nominating Chinese companies as contractors. The Chinese financing of the highly symbolic Friendship Bridge in Belgrade
“Since it is in China’s own economic interest to ensure political stability in the Western Balkans, it should cooperate with the EU’s reform agenda”
demanded that 60% of the construction be carried out by Chi- nese contractors. Such conditions not only deny cash-strapped governments the chance to find potentially better and cheaper contractors, but limit positive economic effects in the country and potentially create resentment in a region with high unemployment rates.
Deficient governance: jeopardising an EU future?
While China may not aim to export its ideology, Beijing inadvertently disseminates its preference for state-led investment decisions, which lack accountability and