What is hidden behind the job worth 200 million

It was Monday, April 25 this year, when we headed to the Banja Luka settlement of Novi Varoš, at 5 Svetozara Markovića Street. Since 2020, the Chinese company Sinohydro Corporation Limited, represented by Liu Zhidong from Beijing, a man with absolute power and authority to conclude business contracts, has been registered at that address. However, we did not find anyone at the address.

On the eve of the attempt to visit by the Inforadar team, we already knew then that many of these contracts (or almost all of them), according to available data, were harmful and were concluded on the basis of propaganda fraud.

The reason for our visit (which was attempted) to the representative office of this company was the signing of a Memorandum of Cooperation in connection with the construction of a tunnel that would connect the municipalities within Istočno Sarajevo. The memorandum was signed three and a half months ago (February 21st) by Istočno Sarajevo Mayor Ljubiša Ćosić and representatives of the Chinese company Sinohydro.

This company should break through and build a tunnel through Trebević within the project of connecting Istočno Sarajevo and Pale. The project itself is more than ambitiously conceived and will cost between 150 and 200 million KM, which in the beginning, and given the mutual past of the co-signatories, indicated possible irregularities and corruption.

As far away as possible from the eyes of the public and the media

Especially since the Chinese company was favoured and was favoured in concluding the deal, and it is planned to make a feasibility study of the project after the city of Istočno Sarajevo itself offers a pre-study. Breaking the tunnel through Trebević is conceived as a multi-year project that should connect Istočno Sarajevo and Pale with traffic. The length of the tunnel would be about eight kilometres and it would follow a part of the old railway, and it would go through Trebević, which would bring the two municipalities closer from the current 40 to only ten minutes of driving. The beginning of the works has been announced for the spring of next year.

Coincidentally or not, the day after our attempt to visit the Sinohydro headquarters at 5 Svetozara Markovića Street, we learned that the Chinese company’s headquarters had been registered at a new address. No less and no more – than in the building of the Tax Administration of the RS, on Trg Republike Srpske at number 8 / XII. It is impossible to enter the building without notice, and the only possible contact with Sinohydro and the public trace they left is the one in the photo below, so without an e-mail address and contact phone number.

Namely, everything points to the fact that the main partner in the concrete business is the political top of RS, and the additional doubt that individuals will be well “embedded” in the astronomical price of breaking through and building tunnels is fueled by the fact that in question is a company on the blacklist of the World Bank and the African Development Bank for corruption, fraud and bribery of politicians around the world!

Thus, one of the latest analyzes of the Institute for Security Research of the European Union (EUISS) points out that Chinese investments in infrastructure in the Western Balkans encourage already widespread corruption. The institute, based in Paris, whose analyzes are monitored by the European Commission and other EU bodies, supports this claim with data that the previous 5.5 billion euros of Chinese investments in roads and railways came to Northern Macedonia, Bosnia and Herzegovina, Montenegro and Serbia because Chinese companies received contracts directly from the governments of those countries, and not through tenders that require more companies to bid.

Such bargaining with Chinese partners is in conflict with EU standards and laws. Namely, in this Report, it is specified that some contracts with Chinese companies, including Sinohydro, are accompanied by illegal payments, but also by complete non-transparency of the procedure of concluding contracts and procurements. These are large projects that are harmful to the state’s economy, and very profitable for investors.

In this particular case, given the company’s poor CV, BiH and the Republika Srpska entity will do more harm than good. As a warning to Bosnia and Herzegovina in the EU analysis, they cite examples from the region, such as Macedonia, that the Chinese company that won contracts and works in Macedonia – Sinohydro, “one of many on the World Bank’s blacklist“, pointing to the corrupt Chinese investment model in infrastructure in the Western Balkans.

How sinohydro is favored

Most of these processes take place through the Chinese Exim Bank, which financed 206 million euros, among others, the Skopje-Stip highway. These projects are constantly accompanied by allegations of corruption, and 38 different videos have been released.

What is additionally indicative in the case of BiH, ie Republika Srpska, is that during the registration of Sinohydra at the original address in Svetozara Markovića Street, it was entered in the register that they could conclude contracts worth up to 40 million euros – without the knowledge of the founders, which was undoubtedly made possible by the entity government.

Synohiydro is thus favoured by the domestic partner and the work has already started without transparency of spending money and details of the tender, ie public procurement. The member of the Presidency of BiH and the President of the SNSD, Milorad Dodik, joined the PR of the future business, through one regime TV, stating:

“The construction of the tunnel is one of the biggest investments in the city, which we will start next year. The tunnel, which will take less than ten minutes from Lukavica to Pale, would also shorten the route from the south of Republika Srpska to Serbia via Trebević. ”

As he pointed out, Ćosić’s primary trump card for choosing this company is “experience” in breaking through a 45-kilometer-long hill, although until a few months ago, this company was not even on his mind. But more on that later.

The answer for Inforadar from Ćosić’s cabinet states the following:

“Please understand that at this moment we cannot answer the questions of who will build the tunnel, who will provide the money, that is, how much is the total investment, as well as the time limit until the full realization of the project.”

Let’s go back to February 21, the day the memorandum was signed. On the same day on social networks, Mayor Ćosić, among other things, wrote:

“The memorandum obliges us as the City Administration to finance the preparation of a feasibility study for this project, for which we have already found partners within the Faculty of Civil Engineering, University of Sarajevo and the Institute of Transport, and all procedures related to this work will be completed in the coming days.”

Ćosić emphasized that the Chinese partners have committed to performing a feasibility study for this project, after the pre-study, which should be completed within a period of two months.

In the meantime, the two-month deadline has expired, and Mayor Ćosić did not tell the truth at the beginning, to put it mildly, which is best illustrated by the answer we received from the Institute of Traffic:

“We, as the Institute for Traffic and Communications Ltd. Sarajevo, are not involved in the preparation of a feasibility study for the construction of a tunnel between Istočno Sarajevo and Pale. We have not heard or cooperated with Synihidro from China so far”, it is stated in the answer to our portal.

Inforadar also received an answer from the Faculty of Civil Engineering, University of Sarajevo:

“In the initiated procedure for the procurement of the subject services, which is still not completed, the City of Istočno Sarajevo is the contracting authority for the service of Performing a feasibility study for the construction of the road section Istočno Sarajevo – Pale with a tunnel under Trebević. For all information related to the mentioned project, please contact the designated contracting authority, because the University of Sarajevo – Faculty of Civil Engineering has not signed a contract or provides any services under it”, they said in response.

An important fact in regards to the whole story of the job worth about 200 million is that looking at the list of companies and individuals with temporary and permanent bans on World Bank-financed projects around the world is noticeable and that this Chinese company also has received on several occasions – a permanent ban. It is also noticeable that they often change their names, such as Sino Hydro, or Sino technology, etc., and that they often merged with a holding company and thus committed fraud.

Monument to corruption

Transparency International in BiH reminds Inforadar that the branch of Transparency working in Malaysia has characterized the project of building a large Bakun dam on the Balui River in Sarawak as a monument to corruption.

“The works on the construction of the dam were entrusted to the company Sinohydro, and this company even publicly admitted that the works were carried out carelessly. Numerous officials and workers warned that too much water was added to the cement during construction to reduce costs and speed up production, which ultimately weakened the structure of this largest dam in the country, which, incidentally, is located in an earthquake-prone zone,” they told us from Transparency International BiH.

So, Sinohydro is a company with a bad reputation in the world. Even the African Development Bank (AfDB) put the company on a “black list” and banned them from participating in all Bank of Africa-funded projects. The company has been involved in several dubious projects in Zambia, Kenya, Zimbabwe, and others, where it has won $533 million (it has been found that the value of the tender has been artificially doubled), or in Uganda, where Sinohydro has ignored project requirements in road construction.

The Office for the Fight against Corruption of the Bank of Africa stated in its report that these were illegal contracts and that they were proof of the corrupt connection between this company and the politically powerful people there. Years ago, many governments of several countries and representatives of organizations accused the company of corruption, fraud, misappropriation of budget funds, low-quality construction work, unfair partnership and more, as stated in the reports of this Office of Corruption.

However, such a company is obviously consciously acceptable to the RS authorities.

Commenting on the fact that Sinohydro, as a company from the black list, has become very popular in our area, TI BiH told Inforadar:

“Unfortunately, there are no effective mechanisms in Bosnia and Herzegovina to prevent companies with such a past from participating in tenders. The public authorities in the state conducting public procurement procedures are left with the discretionary power to determine the qualification conditions for the participation of all interested bidders and to check whether the bidders are reliable and capable of performing contracts, and to seek guarantees for good contract performance. ”

Sinohydro has tried to impose its influence in several projects. It is more dominant in the RS.

The deadline given by the RS government to a consortium to build the Ulog hydroelectric power plant on the upper Neretva River recently expired. This is the EFT group of Vuk Hamović, whose consortium was joined by the Chinese Sinohydro. We remind you that the construction contract with Hamović was signed in 2012. Needless to say, the work never started. It is unknown at this time what he will do after leaving the post.

Also, seven years ago, Sinohydro offered to build the Banja Luka – Mlinište highway. They even submitted a Feasibility Study, which was necessary to start credit negotiations, but their proposal was rejected by the BiH Council of Ministers. They were also unlucky in building a new Doboj hospital, where they lost in the tenders. They also appeared in the competition for the construction of HPP Dabar. The work is worth 430 million KM and has not been completed yet due to the course of lawsuits from potential contractors, but, to our knowledge, an epilogue is expected soon.

Sinohydro is also part of the Azvirt Limited Liability consortium, which is engaged in the construction of the VC Corridor, more precisely in the construction of the Počitelj bridge. This deal is worth more than 28 million euros.

However, in the project of building a tunnel through Trebević, the name of the company was kept secret.

It is interesting that two months before the signing of the contract, that is, on December 22, 2021, Ćosić mentioned a completely different company in the media, emphasizing that the RS Government is behind everything:

“We have the Chinese company ‘Power China’, which employs over 300 people and has its representative office in Republika Srpska. We have already entered into talks with them, and we have the readiness of the highest authorities in RS about this project,” Ćosić pointed out.

What has changed overnight in choosing a partner for a grandiose job for which it is not yet known whether it will cost 150 or 200 million KM – it is not difficult to guess, since Sinohydro is on the black list precisely because of corruption and bribery.

“Experience tells us that public authorities often do not ask for enough conditions or, on the contrary, overload them by allowing only a pre-preferred bidder to participate in the procedure, regardless of their business history. In addition, the problem with performance guarantees is that they can only be required up to a maximum of 10% of the contract value, which in the end is often not enough to make up for omissions, especially not for large infrastructure works, such as the previously mentioned dam,” they state for our portal from TI BiH.

When it comes to BiH and RS, that is, Istočno Sarajevo, it is not a dam, but it is an equally complex job of breaking through and building tunnels through Trebević. Apart from the issue of corruption, what we can hope for is that the RS authorities and the mayor of Istočno Sarajevo are aware of the risk involved in giving work to a company that does not respect the strict rules for building the largest infrastructure projects. Inforadar