Page 61 - bne_Magazine_April_2018

bne April 2018
Opinion 61
transparency. China’s way of doing business is reflected in the fact that Balkan governments have in most cases so far directly awarded contracts to Chinese firms in diplomatic negotiations rather than through competitive bidding processes that include feasibility studies. In some cases, ad hoc legislation was even introduced in order to facilitate Beijing’s demands. China, of course, is not solely responsible for this. Southeast Europe’s increasingly authoritarian political elites
“Beijing’s loan-based financing, however, risks heavily burdening the region with debt”
embrace the flexibility, swiftness and top-down nature of Chinese investment decisions. Politicians can align projects with political cycles, serve patronage networks and increase electoral support.
Consequently, this lack of transparent and open bidding spurs a range of adverse trends such as less efficient public spending due to distorted investment decisions, a weaker legal system due to various exceptions and high-level political corruption. A particularly troubling aspect is the gradual undermining
of the region’s reform agenda, especially in the areas of competition policy and governance, and hence the likely delay in the region’s attainment of EU norms. What is more, Beijing’s state-led model, coupled with local decision-makers’ harmful self-interests, could go as far as weakening the governments’ political determination to follow the EU’s lead and jeopardise the region’s eventual EU accession.
Why improving governance is in China’s interest
Chinese investors may well prefer a lack of regulation and oversight as it allows for more and cheaper work to be done. However, it is in China’s own interest to follow the governance standards set by the EU, as the bloc’s presence and reform agenda are fundamental safeguards of political stability necessary for China’s long-term strategic investments and plans in the region.
Public opinion in the Balkans is already worsening due to the lack of visible spillover effects from Chinese projects. Complying with EU standards by competing in open bidding processes, which include feasibility studies and allow stakeholders to express concerns through formal channels, will ensure that citizens are not forced to express their anger by causing various problems during the project implementation phase (as has already happened in other countries along the Belt and Road initiative).
China also risks undermining its strategic aim of creating a transportation corridor. The most glaring examples so far have been China’s infrastructure project bids in Macedonia, which
have been marred by allegations of corruption from the outset. These events not only contributed to the country’s political crisis and fall of former prime minister Nikola Gruevski, they also led to the new government blocking any further work on the Kicevo-Ohrid highway amid accusations of a €150mn loss to the state budget.
China should work together with the EU to improve its investment agreements and financing methods along the Balkan Silk Road. The EU, for its part, should further recognise the high cost of compliance with EU standards and continue to help increase the capacity of local administrations. After all, it is in both their interest to fuel economic growth and maintain political stability in Southeast Europe.
Adam Urosevic is a risk analyst at ViennEast, a business intelligence company specialised in Central and Eastern Europe (CEE).
bne has a full roster of columnists and opinion-makers, among them:
Mark Galeotti Liam Halligan Suna Erdem
Chris Weafer David Cecire Ben Aris
You can find all bne’s comment at
www.intellinews.com/opinion
www.bne.eu