Corrosive Capital in the Western Balkans: An Analysis of Four High Impact Chinese Investments

In this paper, Damir Marusic, Senior Fellow at the Atlantic Council, analyzes the impacts of corrosive capital on corruption in the Western Balkans. He presents and examines the key findings of four recently published policy reports by Center for International Private Enterprise (CIPE) local partners in North Macedonia, Serbia, Bosnia and Herzegovina, and Montenegro. Each report investigates the negative economic and environmental consequences associated with Chinese investment throughout the region. To close, Marusic provides a series of recommendations for the European Union (EU) and national governments to prevent corrosive impacts from exacerbating the region’s governance gaps and struggles with corruption.

CENTER FOR INTERNATIONAL PRIVATE ENTERPRISE MAY 2021 B CIPE | 2021 CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS All rightsreserved Copyright ©2021bytheCenter for International Private Enterprise “Corrosive Capital”trademarkisownedbyCIPE. the effects of corrosive capitalondemocratic governanceandhumanrights.The is aCIPEinitiative that provides supportfor activitiesandprograms tomitigate is"; norepresentations are madethat thecontentiserror-free. Corrosive Capital® necessarily reflect those of CIPEoritsstaff. Thecontent ofthis reportis provided "as in thisreport represent theopinionsandanalysisof theauthorsanddonot globe through private enterpriseandmarket-oriented reform. Theviewsexpressed Private Enterprise(CIPE),whosemissionistostrengthen democracyaround the Disclosure: Thisreport wasprepared withsupportfrom theCenterfor International CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS CIPE | 2021 1 Corruption Corruption lifting all boats,” albeit at an uneven pace. an uneven pace. albeit at lifting all boats,” to be solved remained that The problems ultimately enough, but they were real were — apolitical — and in nature technocratic out over time. would be worked was one such problem. checked, ethnic partition would come soon ethnic checked, This could, in turn, pull enough to Kosovo. into a fight that and Turkey Albania, Greece, Wars seem like the first Balkan would make scuffles. mere uneasily peaceful grew But as the region faded. urgency in the early 2000s, that faith With the EU ushering in the euro, was in the so-called liberal world order the its height. For the countries of at the world, of the rest like Balkans, Western to becoming was no alternative there of this emergent, full-fledged members peaceful, trade-based system. Proponents rising tide described it as “a globalization of it was by a fear that if the war’s logic was not that it was by a fear An Analysis of Four High of Four An Analysis soft underbelly soft .” He was writing in the year 

kept policymakers in European capitals up in European policymakers kept firm advocacy Holbrooke’s night. Richard at as was informed intervention in Bosnia for to uphold human rights as much by a desire vulnerability for the West. The historical The historical the West. vulnerability for I was War analogies write themselves: World in Sarajevo, by an assassination off kicked Question” the “Eastern that, but well before Since then, Krastev’s observation has Since then, Krastev’s observation wisdom. received become something like experts, myself included, have Balkan as a lingering pointed to the region that if Russia wants to increase the pressure the pressure if Russia wants to increase that it should try beyond the territory on Europe, he wrote. Soviet Union,” the former of after Russia annexed Crimea and was Crimea and Russia annexed after leaders worried about warning European to the Kremlin coming from destabilization dictates “Logic southward. turn their gaze Ivan Krastev once famously described the Ivan Krastev once famously described as the “ Balkans Western Europe of Balkans: Balkans: Chinese Investments Impact Corrosive Capital in the Western in the Western Capital Corrosive 2 CIPE | 2021 CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS idea that astate isnotmerely theproperty their clan-andtribe-basedprecursors. The since state-level societies firstemerged from under that umbrella termhave beenpresent profession, theissueswecommonlygroup corruption isasoldtheworld’soldest While itmightbetoocutetosaythat impersonal organization.” it cametobeoutlawedand replaced by but rather whyinmodernpolitical systems solved isthusnotwhypatronage exists, bighistoricalmysterythat hastobe“The book As Francis Fukuyama notedinhisseminal democratically accountableinstitutions. that isonlypartlysubsumedbyincreasingly as anorganizing principletothisday, one clientelism andpatronage networks persist advanced, consolidated democracies, so intheUnitedStates. Even inso-called republics allacross theWest, especially these dayswasthenorminemerging roundly denouncedbytransparency NGOs the kindof clientelismandpatronage development are quicktopointoutthat stayed withus.Students of democratic Despite thesechanges,corruptionhas began toassertitself. French revolutions that thisparadigmshift only withtheadventof theAmericanand seventeenth andeighteenthcenturies.Itwas only startedtocoalesceintheWest inthe of itsruler, butrather akindof publictrust, Political OrderandDecay , Arguably, itwasn’tuntilWorld Bank lack of concernoutlastedtheColdWar. the “second”and“third” world.Butthe pocketed Sovietsinwhat wasthentermed the heartsandmindsagainstdeep- were secondary tothecompetitionfor 20th century, concernsaboutcorruption development community. Formostof the by bothlocalsandtheinternational the rest of theworldtovariousdegrees West, theycontinuetobetolerated in have beenmostlyoutlawedinthemodern While naked systemsof patronage may mainly meant theywere abletouse political partylabels,butmodernization men “gilded themselves withWesternized Since the19thcentury, Kaninargued, these imperial powersandlocaleconomies. local notableswhointermediate between through beingruledbyso-calledBigMen, the region’s peopleshave longsurvived fractious toemerge ascoherent states, economies.” Too sparselypopulated and “at themargins of succeedingglobal described Balkans. In2003, analystDavid Kanin been prominently ondisplayintheWestern The intractabilityof corruptionhaslong very thornyissue. grappling withwhat wouldprove tobea that theWestern NGOworldstarted “cancer of corruption”speechin1996 President JamesWolfensohn madehis



the region asalwaysexisting



CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS CIPE | 2021 3 for



recently asked recently Belgrade.



rocked practices only gets us back to square one. one. practices only gets us back to square Balkans getting the Western The work of is daunting, but ultimately footing to surer to if these countries hope unavoidable a their governance and ensure improve their populations. for better future have have China is art is that term of The current into these capital” deploying “corrosive is much to recommend societies, and there transparency The lack of this expression. to these murky deals does real attendant of damage to the eventual emergence accountability institutions. Nevertheless, into thinking oneself one should not fool the root capital” is itself “corrosive that falling are It isn’t. Chinese efforts problem. such and while reports ground, on fertile as these ably map out the contours of doing, ending these the damage they are Serbia, and Bosnia and Herzegovina. Bosnia and Herzegovina. Serbia, and the reports case studies, Using illustrative current the of paint a picture together in the region. Chinese penetration of state shaping the news are these cases Many of Montenegro today. its to help pay off the EU a bailout from an economically Chinese loan financing (and has been project questionable highway against widespread And protests rebuffed). lack of pollution, labor abuses, and general Chinese firms prospecting accountability for copper and gold deposits in rural Serbia for The included four reports lay out different lay out different reports The included four the same story unfolding facets of of the successor states several of across North Macedonia, Yugoslavia—Montenegro, that flouts market logic. But the result is a result is logic. But the flouts market that these long-standing trends, of perpetuation efforts. on reform and a brake sure, part of the dynamic reflects a strategic a strategic the dynamic reflects part of sure, economies imbalance, with small emerging capital authoritarian state facing a large in a way money around throws model that the more insidious challenge is coming from from insidious challenge is coming the more reserves China, which is using its vast capital to to transparency and local indifference To be region. the throughout buy influence they challenge the West in the Western in the Western they challenge the West was on the the focus In 2015, Balkans. was to create whose strategy Kremlin, Today, messes and be invited to fix them. Understanding this dynamic is not to make to make Understanding this dynamic is not to add corruption, but rather for excuses is necessary context. This social dynamic exploiting as powers are revisionist what an army of Western technocrats was trying was trying technocrats Western an army of governance to do the same. Ingrained die hard. patterns the communist era and emerged largely largely and emerged the communist era ended. Instead of War the Cold intact after Empires the Ottoman or Austro-Hungarian these lands, modernize trying to govern and Westernizing structures to broaden and and broaden to structures Westernizing networks.” patronage deepen traditional through persisted he argued, This pattern, 4 CIPE | 2021 CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS Adriatic country’seconomyhasbeenits renewables), China’smajorforay inthe Montenegro’s energy sector(includingin the Chineseswoopedin. throughout the2000s,untilfinallyin2014 highway hadbeenplaguedbysetbacks project for modernizingMontenegro, the the Serbianborder. Acriticalinfrastructure that wouldconnecttheportcityof Barwith 170-kilometer route through ruggedterrain investment intheBar-Boljare highway, a Komarnica bridgeonthehighway from Barto Boljare inMontenegro. investments in Apart from some Montenegro to getthedealdonewithmore transparent and 2010, Montenegro’s governmenttried Nevertheless, itappearsthat between2008 the project wouldneverbeprofitable. leaked tojournalists,whohave reported that public. Someof these assessmentshave been breaking ground, theyremain hiddenfrom the feasibility studieswere doneaheadof handsomely from thedeal.Thoughseveral suggests that localelites have benefited Transition located (CDT) inPodgorica, The report bytheCenterfor Democratic building andmaintainingCroatia’s new partners. ACroatian firm responsible for Photo Credit: Government of Montenegro CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS CIPE | 2021 5 Boljare, and on Chinese investment. Given and on Chinese investment. Given Boljare, the coalition is pro-Serbian, part of that finishing the highway it’s possible that even as a high priority, will remain project by the outgoing government malfeasance to light. is brought discipline can get the country back to more to more discipline can get the country back above, sustainable debt levels. (As noted the EU have to get a bailout from attempts not panned out.) Montenegro’s It seemed inconceivable that the government could countenance such a high-profile abandonment of However, last year. most of through project hard- an unprecedentedly in 2020, late once-dominant election sent the fought Socialists (DPS) of Party of Democratic into opposition. Big Man Milo Djukanovic It’s not yet clear which way the fractious and fragile new coalition will lean on Bar- Many of the planning documents planning documents the Many of been have to the project connected transparency thus stonewalling classified, are corruption, there NGOs. Beyond local about environmental worries profound long-term fiscal and the degradation will have the project impact completing decades to come. The for on Montenegro which has yielded a investment, current has already to nowhere,” “road real-life percent ballooned the debt to almost 90 ought to COVID Recovery after GDP. of some, but only fiscal the situation stabilize be subcontracted out to local firms seem to guaranteed a handsome windfall to have politically connected players — to the tune of million. some €445.31 force majeure of COVID-19 appears to appears COVID-19 of majeure force pushed completion well into 2021. have Meanwhile, clauses in the original contract the work of 30 percent guaranteeing that costly and challenging part of the project, the project, costly and challenging part of to be completed in May 2019 was slated but was pushed back to September 2020, even as cost overruns multiplied. The government has disclosed voluntarily. project the in 2015, ground Since breaking has bogged down. Phase 1, the most that made exemptions to provisions found in found to provisions made exemptions that the details of As a result, treaties. international remain completelythe final deal with China dribs and drabs the what opaque apart from later and amended to broaden the scope of and amended to broaden later thatallowable financing vehicles — a move allowed the government to skirt its public due to a loophole procedures procurement Government of the People’s Republic of China People’s Republic of the Government of on the promotionhad signed an agreement construction. infrastructure for cooperation of ratified two years The deal was officially consortium also failed to come up with consortium also failed deadline. of a set financing ahead government and theBy 2011, Montenegro’s highways won the concession first, but the first, but the won the concession highways did not when financing through deal fell Greek-Israeli second-placed The materialize. 6 CIPE | 2021 CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS development of Corridor VIII, identified at the North Macedonia.At issue, there isthe to that inMontenegro hasmanifested in by aFrench firm found thewhole of the to have beenanissue.Thougha2007study like inMontenegro, initialfeasibility seems “Societas Civilis”–Skopje (IDSCS)notes,just As thereport byInstitutefor Democracy Skopje, andSofia inbetween. Varna inBulgaria,passingthrough Tirana, connecting Durrës inAlbania toBurgas and project wastobuildasetof highways connect theAdriatic totheBlackSea, project for developingtheregion. Setto in Crete in 1994, asavitalinfrastructure second Pan-European transportConference Kichevo-Ohrid highway A verysimilardynamic Macedonia North

even more dubious. the economicfeasibility of thewholeproject in the2007assessment.Thisactionmade Ohrid leg,somethingthat wasnotincluded Shtip highwaywasaddedtotheKichevo- and theChineseEXIMbank),Miladinovci- the form of theconstructiongiantSinohydro time willingChinesepartnersmaterialized (in its partsof theproject. Andindeed,bythe more transparent procurement process for had trouble lininguppartnersthrough a Corridor VIIIproject viable,NorthMacedonia Road SectionMiladinovci–Shtip andRoad Infrastructure Projects for Constructionof parliament passedtheLawonRealization of of China. In2013, basedonthisagreement, the Governmentof thePeople’sRepublic technical cooperation oninfrastructure with and ratified theAgreement for economicand In 2012,theMacedoniangovernmentsigned Photo Credit: IDSCS CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS CIPE | 2021 7 Photo Credit: IDSCS Credit: Photo which has a track record of profiteering profiteering of which has a track record has questionable cost inflation, from under not come under special scrutiny government. The ongoing the current China is with a behemoth like relationship a small Balkan too important for ultimately country to challenge. subsequently fled to Hungary and was and was fled to Hungary subsequently brought were even as charges given asylum Zaev’s home. Though at against him in Macedonian a leaf government turned to bring attempts politics, with genuine and good accountability democratic is it to the country, governance practices he had like himself felt Zaev notable that Given sunk project. to finish the highway had any political costs, he may not have But it is also worth noting that alternative. costs did spiral well beyond the project's Sinohydro, and that original projections, Kichevo-Ohrid highway Kichevo-Ohrid government in May 2017, and Gruevski and Gruevski government in May 2017, of getting kickbacks through favored firms favored through getting kickbacks of seem to as subcontractors, corrupt officials the top. off been trying to skim directly have a new Zaev successfully formed (SDSM) published hours of wiretapped wiretapped (SDSM) published hours of the government, implicating conversations in attempting including Gruevski himself, Instead the deal. from provisions to pocket of mass corruption ended up bringing mass corruption of Gruevski. Nikola of down the government the opposition Zaev of Zoran In 2015, Macedonia Union of Social Democratic procurement that had been put in place in had been that procurement with the EU’s acquis. accordance evidence however, in Montenegro, Unlike Section Kichevo–Ohrid. This questionable legal questionable This Section Kichevo–Ohrid. to was designed in Montenegro, like maneuver, laws on public existing around do an end-run 8 CIPE | 2021 CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS Contemporary Policy(CCP) inBelgrade, Chinese companyZijin,bytheCenterfor and smeltingcomplexRTBBortothe accounts, this process, too,wasriddled with by plowingresources intoit.Butbyall In 2009, Serbiatriedto turn theplantaround company’s debttotalingsome $1billion. the lowpriceof copperat thetime,and by thecompany’sagingmachineryandplant, Investors, alas,nevershowedup,scared off government turneditssightsonprivatization. depend onitsexistencefor itslivelihood,the towns andvillagesintheBormunicipality never considered feasible, giventhat entire resources. Sinceliquidating thecompanywas turned intoamassivedrainonSerbianstate What hadoncebeenacriticalnational asset and lackof investmenthadtaken theirtoll. 2000s dawned,however, mismanagement bulwark of theSerbianeconomy. Asthe and precious metals,itwasalong-standing the 1990s.Located inaregion richincopper era conglomerate that wasprofitable through studies standout.RTBBorwasaYugoslav- The parallelswiththealready-discussed case Serbian people. is that theanswerisalmostcertainlynot what comesthrough clearlyintheaccount is more circumspect about sale of themining The report onSerbia’s Serbia cui bono . But Tadić wenttoBeijingandsignedboththe overtures toChina.Then-president Boris that theSerbiangovernmentstartedmaking It was,coincidentally, alsoaround 2009 by 60percent. “investments” that output hadtobecutback was pollutingsoseverely evenafter these funds remain obscure, buttheagingplant details of what exactlyhappenedtothese nothing toshowfor itafter severalyears.The in rehabilitating theplantwithalmost corruption, withsome$430millioninvested alternative to China for the firm’s salvation. alternative toChina for thefirm’ssalvation. publicly pushedtheideathat there was no run-up tothetender, governmentofficials opaque publictenderwasannounced. Inthe half of 2018, after abriefbutonceagain RTB BorwasfinallysoldtoZijininthesecond and anti-corruptionactivists. the highestlevelsissuspectedbycivilsociety country’s balanceof payments,corruptionat that itdoesn’tseemtofigure fullyinthe as towhere thisfigure comesfrom. Given amount to$10billion.Nodetailswere given Chinese investmentsinSerbiawouldsoon In 2019, Serbianleadersannouncedthat relationship between thetwocountries. the basisfor aburgeoning, thoughopaque, amended severaltimessince,have servedas of Infrastructure. Thesetwoagreements, and Technical Cooperation inthearea Partnership andtheAgreement onEconomic Joint Statement onEstablishing Strategic CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS CIPE | 2021 9 of dynamite around the mines, continue to dynamite around of either up, but Serbian authorities have crop them or have to address dragged their feet Bor around them. Protests actively ignored spilled over to the streets recently have Belgrade, with pointed questions being of the Serbian government is about why asked companies. shielding foreign to believe that they were unaware that the that unaware they were that to believe over a control set to acquire were Chinese At RTB Bor. for asset very complimentary raises further questionsminimum, this fact seeming eagerness toabout the government’s Chinese over rival bidders.give the deal to the terms how the also underscores The report almost agreement the undisclosed of regulatory certainly don’t include adequate and including water oversight. Problems, homes in air pollution, and even damage to use irresponsible neighboring villages from Photo Credit: Stefan Veselinović and Jovana Georgievski Stefan Veselinović Credit: Photo Air pollution in the mining town of Bor in eastern Serbia Air pollution in the mining town of concrete evidence that Serbian authorities evidence that concrete Still, it is hardof this. all benefiting from were government several years earlier. Shortly government several years earlier. the remaining Zijin also purchased that, after an American firm. minority rights from is no there writers underline that The report’s copper and gold at Cukaru Peri, near Bor—a Peri, near Bor—a Cukaru copper and gold at after was announced only five days deal that firm Zijin took over a Canadian the tender. Serbian the from rights majority won had that Further muddying up the waters is the fact muddying up the waters Further rights to also bought Zijin separately that of significant deposits the newly-discovered by Russian money—did throw their hats in the their hats throw by Russian money—did They both lost out, eventhe purchase. ring for to fulfill all not promised as Zijin seems to have in the tender. enumerated the requirements Therefore, it may come as a shock to Serbian it may come Therefore, Canadian- two other firms—a voters that backed likely firm, and a Cypriot Finnish fund 10 CIPE | 2021 CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS the selection of Huawei as the 4G technology the selectionof Huaweiasthe4Gtechnology Centers for CivicInitiatives (CCI), focused on and Herzegovina (BiH),undertaken bythe — theroom theyneedtomaneuver. politicians andstate-backed foreign investors structures givesalltheactors—corruptethnic legislation andbyzantinegovernance the lackof transparency from outdated signing bilateral tradeagreements withBeijing, fragmented state. Insteadof thegovernment of “governance gaps”inaprofoundly weakness prevalent inBosnia:theexistence The report highlightsadifferent kind of main cellphoneproviders inthecountry. provider by BHTelekom, oneof thethree BH Telecom signinSarajevo The case study in Bosnia The casestudyinBosnia Herzegovina Bosnia and problems would have presented challenges. problems wouldhave presented challenges. But evenhadbetterlawsbeeninplace,other agreements withtheEU. acquis, asrequired byBosnia’sprior and Electronic Media,alignedwiththe a newLawonElectronic Communications Furthermore, BiHstillhadn’tpromulgated the upgradeto4Gwere notwellspecified. strategic documentsthat accompanied 2003 andhasnotsincebeenupdated. The telecommunications inBiHwaspassed The legalframeworkregulating much more tomake theprocess of choosing state-owned enterprise,shouldhave done its PublicProcurement Law, BHTelekom, a telecommunications sectorisnotboundby left muchtobedesired. Though Bosnia’s The waythepublictenderwaspushedthrough Photo Credit: CCI CIPE | 2021

CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS 11 Photo Credit: CCI Credit: Photo patronage politics in Bosnia, it is not too patronage of possible difficult to discern the outlines the maneuvering helping secure back-room China. This case study points to the win for all but defines same glaring vulnerability that in a rooted a governance pattern the region: patronage. deep tradition of Trump administration to elevate the issue. elevate to administration Trump by routers Huawei the use of then, Before to concern while of providers, telecom flag it has the political red specialists, was not as the reportsince become. Nevertheless, security legitimate were there clear, makes even with the 4Gconcerns about Huawei these concerns and none of technology, very high on the list of been seem to have decisions. those making the relevant BH Telekom all together and given that Taken of the prizes has long been among one of Telecoms infrastructure procured from Huawei by BH Telecom from procured infrastructure Telecoms high-speed networks that prompted the prompted that high-speed networks 5G technology in BiH. And while the fact that And while 5G technology in BiH. ChineseHuawei is deeply intertwined with the some time has been raising alarms for state the next generation of it was the rollout now, previously made the most financial sense. previously at the paper looks It’s worth noting that than out 4G rather in rolling Huawei’s role introducing the requirement that bidders that the requirement introducing the of the “purchase for include a provision on topexisting equipment.” This put Huawei had whose offer Tesla, over Ericsson Nikola existing transparency legislation already on already legislation existing transparency the authors note that The report’s the books. one notable maneuvertender itself featured mid-process, terms — the changing of a hardware provider more transparent. Instead, transparent. more provider a hardware per its internal proceeded the company short of which falls rulebook, procurement 12 CIPE | 2021 CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS deeply embedded in a society’s governance deeply embeddedinasociety’sgovernance for it.Thedangerof definingcorruptionas correctly shouldnotimplymakingexcuses impressions of the businessclimate in both However, there have beenupticks inpositive negative attitudes towards China. respective economiestendedtohave who sawproblems withtheircountries’ misspent. Inallthecountriessurveyed,those public fundswere beingmisappropriated and businesses intheircountries,mostfelt that felt like there wasnolevelplayingfield for while mostrespondents across theregion Recent regional pollingby CIPEshowsthat contributions comingfrom theWest. of China-as-savior anddownplaythepositive only inSerbia,activelypromote thenarrative usual. Addtothisthat elites,especiallybutnot entrenched elitesare practicingbusinessas immediate termhelpsmaskthefactthat bumps itgivestotheeconomyin Chinese moneyandtheattendant palpable The badnewsisthat theinflux of cheap polls well,whilebusinessasusualdoesnot. The goodnewsisthat transparency generally trying ifit’sallcultural? her handsupindespair. What’s thepointof traditions istotemptthereformer tothrow To understandaproblem be done? What isto

Some have suggestedthat thegoalshould course —increased bymore than4percent. support — China wasthelargest source of economic economy. Andperceptions inSerbiathat involvement inthecountry’spoliticsand correlated withapositiveoutlookonChina’s delay inopeningaccessionnegotiations — further sincethesurveybyyetanother European integration —presumably boosted Macedonia, negative attitudes towards North MacedoniaandSerbia.In when the examples (as outlined in these when theexamples (asoutlinedinthese with accusations of corruption,especially as legitimate governmentsinthese countries itself ishesitanttobludgeon what are seen to bemore pointed.Understandably, theEU Instead, anypublicdiplomacyefforts need integration ispossiblehastaken a beating. the West remains potent,butthebeliefthat stalling of European accession.Thepullof China canbeseenasaproxy reaction tothe fully aware of what isgoingon.Sympathy for serving reasons. Andvoters, byandlarge, are from expediencyorfor darker, more self- with Chinatheireyeswideopen,either countries are tovaryingdegrees engaging This isnotlikely toeffective. Elites inallthese association withtheWest directly tocitizens. to communicate thebenefits of closer mount betterpublicdiplomacycampaigns dangers of doingbusinesswithChinaandto be toalertpartnergovernmentsthe grossly false perceptions , of CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS CIPE | 2021 13 with the EU with the EU

economic economic 

as political development proceeds, and no as political development proceeds, out how to “do” political one has figured recent As the troubled development easily. communist countries the formerly history of demonstrates, in Central and Eastern Europe to a better place is uneven and full the path since the overall record Still, setbacks. of improvement. unmistakable 1989 is one of the reasons, unfortunate For a host of those behind. None of are Balkans Western to them. is foreclosed progress means that membership in the various Western clubs. clubs. Western in the various membership may be accession full European Though Balkan Western all the for the table off efforts future, the foreseeable countries for to developing pathways at region for the integration Not only energetically. need to be pursued it will living, but of will this raise standards doing of standards also (over time) raise generally. business more this will none of is that The truth, however, only Corruption recedes be quick or easy. And all this needs to be accompanied And all this needs to be accompanied eventual guarantees of with truly credible green issues and sustainable development issues and sustainable development green additional practices, it can rightly exert these governments to do better. on pressure projects highlighted in Montenegro, North highlighted in Montenegro, projects severe all having Macedonia, and Serbia are degradation. issues with environmental the EU has decided to prioritize Given that in outdated existing laws on procurement existing laws on procurement in outdated less and public tenders to push through left the have deals that than transparent the Furthermore, countries worse off. The reports themselves provide plenty of of plenty provide themselves The reports case four points. In all pressure available studies, governments exploited loopholes and regional media find think tank reports think tank media find and regional by officials words few but a easy to ignore, a news can dominate highlighting findings on the back foot. cycle and put politicians reports) are not illegal. Still, tighter messaging Still, not illegal. are reports) better coordinated and ought to be is possible Local the ground. society actors on with civil 14 CIPE | 2021 CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS IGOR STOJANOVIĆ, DERONJA SULJIĆ, LEJLA DARIO JOVANOVIĆ, IVAN NIKOLOVSKI, Democracy SocietasCivilisSkopje ZORAN NECHEV, MILICA KOVAČEVIĆ, NEMANHA TODOROVIĆ ŠTIPLIJA, IGOR NOVAKOVIĆ, JOHN KAY, ERIC HONTZ, Contributors DAMIR MARUSIC, Author Primary Acknowledgements Associate Program Officer, Center forInternational Private Enterprise Deputy RegionalDirector, Centerfor International Private Enterprise SeniorFellow, Atlantic Council Head of theCenterfor EUintegration/Senior Researcher, Institutefor Researcher, Institutefor DemocracySocietas CivilisSkopje Research Director, International andSecurityCenter-ISAC Fund MonitoringandPolicyExpert Project Manager, Centres for CivicInitiatives (CCI) President, Centerfor Democratic Transition Project Coordinator, Centres for CivicInitiatives (CCI) Editor-in-Chief, European Western Balkans CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS CIPE | 2021 15 global @CIPE

 @CIPEDC |

 WWW.CIPE.ORG | WWW.CIPE.ORG CENTER FOR INTERNATIONAL PRIVATE ENTERPRISE PRIVATE CENTER FOR INTERNATIONAL 20036 D.C. NW Suite 700 Washington, 1211 Connecticut Avenue, (202) 721-9200 with other international development and democracy organizations to carry out joint projects. development and democracy organizations with other international CIPE is headquartered in Washington, D.C. and currently has regional offices and offices has regional and currently D.C. in Washington, CIPE is headquartered partners past and as well as a vast network of countries, than a dozen in more representatives collaborates and CIPE regularly support CIPE’s work, donors directly A wide range of present. the globe through private enterprise and market-oriented reform, fulfilling our vision of a our vision fulfilling reform, enterprise and market-oriented private the globe through CIPE does all to prosper. and opportunity for democracy delivers the freedom world where universities, think commerce, of chambers associations, this by partnering with local business worldwide. reforms and economic to advance democratic and advocacy groups tanks, The Center for International Private Enterprise (CIPE) is a core institute of the National the National institute of (CIPE) is a core Enterprise Private International The Center for States of the United affiliate international a non-profit Democracy and Endowment for democracy around CIPE’s mission is to strengthen Founded in 1983, Commerce. Chamber of About CIPE About CIPE | 2021

CORROSIVE CAPITAL IN THE WESTERN BALKANS: AN ANALYSIS OF FOUR HIGH IMPACT CHINESE INVESTMENTS 17