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NEWS 04 Nov 16

Bosnian Serb Leader Hunts for Cash in China

Milorad Dodik, president of Bosnia's Serb-dominated entity, Republika Srpska, is in China, seeking investment for the entity’s struggling economy.

Maja Garaca Djurdjevic
Banja Luka
Republika Srpska President Milorad Dodik in China with Governor of Sichuan Province Jin Leah. Photo: President's website.

Milorad Dodik, the President of Republika Srpska, is on a 10-day visit to China attending the Western China International Fair, where he will stay until November 14.

With Republika Srpska in an unenviable financial position, Dodik has undertaken the trip in search of financial support.

Zoran Pavlovic, an economist in Banja Luka, said he doubted Dodik would achieve much in China because of Republika Srpska’s poor track record.

“Searching for magical systems of financing, publicizing such plans, and expecting to secure international funds while postponing obligations foreseen in the budget is very irresponsible,” Pavlovic said. No one was likely to offer serious loans to the RS given its current condition, he added.

In the past month, the RS has held two treasury auctions, raising a total of 28 million euros, to plug holes in the budget.

In September, the International Monetary Fund granted Bosnia a loan over three years of 553.3 million euros to support its economic reform agenda.

Bosnia obtained immediate access to about 79.2 million euros of this. However, the politicians are likely to have spent that cash on filling budget holes ahead of the October local elections, leaving them searching for more money.

Information released earlier this year by the Council of Ministers, the Bosnian government, put the RS’s internal debt at 664.7 million euros at the end of 2015.

Pavlovic says that internal borrowing - shuffling money between state institutions and companies - has become a big problem because while the government sees it as a quick fix, it is increasing the size of the entity’s internal debt.

“The debt that public companies owe electricity distributors is rising. The main debtors to the entity’s Pension and Disability Insurance Fund are public companies and institutions. Internal borrowing within the system is considered normal,” Pavlovic complained.

On Thursday, Dodik’s office released a statement saying the Chinese province of Sichuan was interested in setting up special economic zones in the RS.

Economic zones are areas in which business and trade laws differ from the rest of the country. According to President Dodik’s media team, the RS is set to build such a zone on a 20-square-km site, with its own internal transport system and electricity, gas, sewage and water, where Chinese investors will set up shop. One such area could employ 30,000 people, Dodik was quoted as saying.

But Pavlovic queried the likely benefits from the project, assuming it goes ahead.  “If Chinese investors agree to take 20-square-km site and build a small China in the RS, they will mostly likely employ their own people, as they normally do,” Pavlovic said.

Republika Srpska is also relying on China for support in energy sector projects. In June, the entity’s energy ministry signed a memorandum of understanding for the construction of a 300 MW thermal power plant called Gacko 2 with the Chinese companies CMEC and China Poly Group.  The work is due to be launched in mid-2017.

However, on the eve of his first day in China, Dodik announced that the Gacko plant was now a topic of discussion also with Dongfang Electric Corporation, a firm previously involved as a contractor on the 300 MW Stanari thermal power plant project.

In January, the RS transport ministry said it had signed a memorandum of cooperation with China Shandong International Economic & Technical Cooperation Group on implementing several infrastructure projects, including the first leg of the Banja Luka-Prijedor-Novi Grad motorway. 

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