Chinese firms facing challenges in Serbia

By Ling Yuhuan Source:Global Times Published: 2013-11-12 0:53:01

The construction site of Zemun-Borca Bridge across the Danube River in Belgrade, Serbia. Photo: Courtesy of the China Road and Bridge Corporation.

The construction site of Zemun-Borca Bridge across the Danube River in Belgrade, Serbia. Photo: Courtesy of the China Road and Bridge Corporation.



"I'm quite confident we can complete the substantial part of the bridge within the contracted period, regardless of difficulties," Chen San'an told the Global Times on a cold afternoon in early October, while effortlessly navigating the busy construction site. 

The Zemun-Borca Bridge project in Serbia, China's first infrastructure project in Europe, commenced in late October 2011, and had been scheduled to be completed by the end of November 2014.

It is being built by the China Road and Bridge Corporation (CRBC), which also subcontracts some work to Serbian companies. Chen is the project manager and the deputy general manager of CRBC's Serbian branch.

The project includes a 1,482-meter bridge across the Danube River between the neighborhoods of Zemun and Borca in Belgrade and access roads leading to the bridge of about 20 kilometers.

While 85 percent of the value of the project, which totals $255 million, is financed by the Export-Import Bank of China, the rest is secured by the Serbian government.

It will be the second bridge across the Danube in Serbia after the Pancevo Bridge.

Petar Mihajlovic, a 22-year-old sports student living in Borca, told the Global Times that the Zemun-Borca Bridge will make life easier for citizens, calling the bridge "one of the most important infrastructure projects on the left bank of the Danube."

Economic and trade cooperation between China and Serbia has risen in recent years. China was the eighth largest trade partner of Serbia in 2012.

Besides the Zemun-Borca Bridge project, Chinese company Shandong High-Speed Group will soon begin the construction of two sections of the Obrenovac-Ljig motorway, Serbian Foreign Minister Ivan Mrkic told the Global Times in an exclusive interview in early October.

In addition, China Machinery Engineering Corportion (CMEC) is already underway with the first phase of work on the Kostolac thermal power plant, said Merkic.

"Our expectations are that the Chinese side will also be involved in the second phase of the project, and some other infrastructure projects as well," he said.

Delayed land acquisition

"As a mid-level market, Serbia is a bridgehead for Chinese companies to enter the European market," said CRBC's Chen, adding that Chinese companies, through competition with companies from EU countries in Serbia, can more clearly see the gaps between themselves and EU companies.

However, he also expressed hope that the Serbian government could improve its efficiency.

He noted that a major challenge facing CRBC at the moment is Serbian authorities' delay in acquiring land.

Due to the delay, a negotiation over extension of the deadline is ongoing between CRBC and Serbian authorities. It has been verbally agreed that a 12-kilometer access road can be delivered by the end of 2015, said Chen.

In response to a question about land acquisition for the Zemun-Borca Bridge project, Merkic told the Global Times that the government of Serbia had "problems" with the city administration of former Belgrade mayor and opposition Democratic Party leader Dragan Djilas, which he said was "simply delaying some acquisitions."

Djilas was toppled from the post in late September.

"The government of Serbia has many complaints with that mayor. About those acquistions, well, there has been postponement and postponement. We hope to complete them in the nearest future," he said.

Long approval process

Echoing Chen, Li Xueqiang, chief representative of CMEC in Serbia, also said he hopes the Serbian authorities could facilitate their approval process.

"When it comes to the approval process, the authorities of European countries usually follow strict laws and regulations, and are sometimes considered inflexible by Chinese companies," he told the Global Times.

"But of course, Chinese companies should also abide by local laws and regulations," he added.

Frequent administrative reshuffles are another challenge for Chinese companies, Meng Yan, general manager with China Shandong International Economic & Technical Cooperation Group, a wholly-owned subsidiary of Shandong High-Speed Group, told the Global Times.

"A local parliamentary election may result in the alternation of senior officials in the Serbian government," he said. "Officials in negotiations with us today are likely to be replaced by different officials the next day."

EU membership

Talking about the prospect of the possible accession of Serbia to the EU - negotiations over which will start in January 2014 at the latest - Chinese companies showed mixed feelings.

"Personally, I don't hope for Serbia to join the EU, for there would be a lot of restrictive policies for Chinese companies in that case," said Li Xueqiang.

According to Li, the EU's restrictions over government intervention in the market make it difficult for Chinese enterprises to participate in EU projects.

"Under EU rules, the government is not allowed to provide loan guarantees for enterprises, and it would be difficult for Chinese enterprises to borrow money from banks without government guarantees," said Li. "Currently, most large-scale projects by Chinese companies are financed by government loans."

In addition, the EU has been mulling legislation since 2012 to seek greater powers to restrict non-EU, especially Chinese, companies from bidding for government contracts in the 28-nation bloc, Reuters reported, to strike back at what the EU considers unfair competition from economic rivals.

Stressing that Serbia is not presently limited by the EU restrictions, the Serbian foreign minister said he hoped there would be an adjustment between the EU and China by the time Serbia joined the bloc, "so that China will participate in the projects by the EU."

Chen San'an expressed guarded optimism toward the possible Serbian EU membership.

"Unless the EU has adopted the retaliatory legislation, I don't think there will be any negative impact if Serbia joins the EU," he said.

"If Serbia joins the EU, the experience we have accumulated in Serbia can help us advance toward the EU market. On the other hand, we can further enhance our core competitiveness through learning from the business technologies and regulations of a well-developed market," he said.

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