Executive Summary

• Belgrade Bypass (E70/75) is a U-shaped motorway and railway project to construct an alternative section of Corridor X (E70/75/80) motorway encircling Belgrade to one which is passing straight through the city;
• Development of the motorway  segment of the project, with 3 lanes in each direction, as well as bridges over both Sava and Danube rivers, started in 1990, but has been repeatedly delayed due to years of political and economic turmoil;
• The construction of the railway segment started decades before, with only one sector left to be built alongside the motorway;
• The entire project is highly fragmented, because almost every section and even opposite carriageways in the same section were constructed in different decades and by different contractors.

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Project Key Facts

Regional and Local Context

Belgrade Bypass (E70/75) has both motorway and railway segment. The motorway project is divided into 3 sectors, and each sector is divided into several sections, many of them still under construction.The largest section of the railway project was built years ago. Almost every section was constructed in different decade, financed by different institution, and constructed by different contractors. Summarizing bellow are the most important aspects connected to the project:

1. Belgrade Bypass motorway project is planned to be over 50 km long. It will pass through most of Belgrade’s suburbs and connect Batajnica, on A1 (E75) motorway towards Novi Sad, Subotica and Horgos, with Dobanovci, on A3 (E70) motorway towards Sid and Batrovci, then Surcin, on A2 (E763) motorway Cacak and Boljare, Ostruznica on Obrenovac Highway, Orlovaca on Ibar Highway, Strazevica Tunnel which is located next to Avala Highway, Bubanj Potok on A1 (E75) motorway towards Nis and Presevo, and Pancevo on A3 (E70) motorway towards Vatin (Vrsac). The existing single-track railway stretches from Batajnica to Bubanj Potok parallelly with the motorway, but both will be extended to Pancevo, connecting all main railway corridors passing through Serbia;
2. Development of Belgrade Bypass motorway project started in 1990, when the works on the right carriageway of section B3, namely the Ostruznica Road Bridge over the Sava river, began by Mostogradnja. The construction was interrupted in 1992, due to the breakup of Yugoslavia but the works continued in 1997. The road bridge was finished two years later, but just after a few months it was severely damaged in a military conflict with NATO, together with the Ostruznica Rail Bridge, which was constructed in 1953. The road bridge was fully reconstructed by 2005, and opened alongside right carriageway of Sections B1 and B2, from Dobanovci to Ostruznica, while the rail bridge was opened one year later. The cost of this part of the project was almost EUR 50 Million and it was the first to be partly financed by the European Investment Bank (EIB);
3. Shortly after, the construction continued on the right carriageway of Section B4, between Ostruznica and Orlovaca. It was done by consortium of Mostogradnja and Planum, the first to be completely financed by the EIB, and finished in 2008. Next step was the works on the right carriageway of Section B5 from Orlovaca to Strazevica Tunnel, done by Primorje, Energoprojekt Niskogradnja, MBA Ratko Mitrovic Niskogradnja and Inter-kop, and financed by the same institution. Together with this section, the dual carriageway of whole Sector A, between Batajnica and Dobanovci was done by Strabag, and financed by EIB and the European Bank for Reconstruction and Development (EBRD), in an amount of EUR 115 Million. Both segments opened in 2012;
4. New phase of the project began with the construction of the left carriageway on Sections B1 and B2, from Dobanovci to Ostruznica, done by the consortium of MBA Ratko Mitrovic Niskogradnja and Planum, also financed by EIB with EUR 11,5 Million, and opened in 2016. The works are currently undergoing on the left carriageway of Section B3, basically constructing a twin of Ostruznica Road Bridge, which is carried out by Strabag as main contractor and Mostogradnja as subcontractor, and once again financed by the EIB with a EUR 30 Million loan. Simultaneously, the construction is ongoing on the left carriageway of Sections B4 and B5, from Ostruznica to Strazevica Tunnel, as well on the dual carriageway of Section B6, between Strazevica tunnel and Bubanj potok, both done by Sinohydro, a subsidiary of Power Construction Corporation of China (PowerChina) as main contractor and AzVirt as subcontractor. The cost of this part of the project is EUR 207 Million, and it is financed by the Export Import Bank of China;
5. The third and final sector C of Belgrade Bypass, from Bubanj Potok to Pancevo, will include the construction of the Vinca Road-Rail Bridge over the Danube river. Government of Serbia signed a Memorandum of Understanding (MoU) for this part of the project with Power Construction Corporation of China (PowerChina), and it is that the financing will be provided by the Export Import Bank of China with a EUR 500 Million loan.

Actors and strategies

Project insights

Belgrade Bypass (E70/75) is a major infrastructure project which is, similar to other motorway and railway projects in Serbia, financed mostly through loans, and because of that it puts additional pressure on Serbian economy and might result into a long-term economic burden for the country. Also because of its fragmentation, the project involves multiple actors, interests and dynamics, all of which contribute to the increased number of challenges related to the project.

Legal

• Expropriation - Even before the announcement of the construction of Sector A, between Batajnica and Dobanovnica, because the majority of the land in question was owned by people living nearby, certain businessmen have purchased it for reasonable prices, and then started asking much higher amounts from the Government, which paid around EUR 20 Million at the end.

Economic

• Indebtedness - The Belgrade Bypass project is beneficial for both the city of Belgrade and the whole country. On a local level, it will reduce traffic congestion in the city center. On a national, it will make the country's transit routes more attractive by reduced time necessary to pass by Belgrade. On the other hand, it represents a EUR 1 Billion burden to the Serbian already indebted economy.

• Involvement of local companies - Local construction companies have participated in the project both as main contractors and as subcontractors. But based on previous experience, the new development with an entrance of Chinese and Azerbaijani actors makes future involvement of local construction companies uncertain.

Construction/Engineering

• Fragmentation of the project - The entire project is highly fragmented, because almost every section and even opposite carriageways in the same section was constructed in different decades and by different contractors. This could result in operational problems with integration and synchronization of different sections.

• Consequences of military conflict - During the 1999 military conflict with NATO, both road and rail Ostruznica bridges were severely damaged. Also, both were reconstructed by 2005 and 2006 respectively. Contemporary problem for the construction of other carriageway of Ostruznica Road Bridge represents fear of residual bombs in the water next to the bridge. That is the reason why all the works are done without any form of temporary construction in the river, which makes this project unique.

Forecast

We can expect the project to move further given that it has been going on for decades and it had political support from both the Government, the Opposition and the civil society, as well its beneficial influence to the economy. Some of the sections are already constructed and operational, while others are on the way.

The first section to be opened were the right carriageway of sections B1, B2 and B3 in 2005. They were followed by the right carriageway of sections B4 in 2008, as well by both carriageways of sector A and the right carriageway of section B5 in 2012. The latest opened section was the left carriageway of sections B1 and B2 in 2016. The left carriageway of sections B3, B4 and B5, as well both carriageways of section B6, are currently under construction. An official opening of the left carriageway of sections B3 should have happened this year, but it has already been delayed twice. The construction of both carriageways of sector C are planned for the years to come.

After the completion of the Belgrade Bypass project we can expect a reduction of traffic congestion in the city center and even more foreign vehicles using Corridor X through Serbia instead of any other in the neighboring countries.

Strategy and Operational options for EU actors

There are three distinct ways in which EU companies could engage in the infrastructure development in Serbia:

1. 1. Financing - although the financing for this project seems to be completed with the loans provided by the Export Import Bank of China, when it comes to providing funds for other infrastructure projects in Serbia and especially in Belgrade, like the continuation of constructing the Internal Highway Semi-Ring and External Highway Tangent, the financial opportunities are still open for European banks;
   2. Construction - additionally, there is a clear opportunity for European construction companies to participate in other infrastructure development in Serbia and Belgrade, like Strabag, a main contractor on both carriageways of sector A, from Batajnica to Dobanovci, and on the left carriageway of Ostruznica Road Bridge;

• Consultancy and further support - the Government of Serbia looks to further develop infrastructure in Belgrade and the whole country, and in this effort, it will require an expert help and support. EU companies could provide their know-how from similar projects they have already done.

While searching for ways to engage in construction market of Serbia, all interested actors from the EU should take into account that the dominant player in the development of local infrastructure are Chinese construction companies supported by the Export Import Bank of China, followed by the Russian and Azerbaijan supported by their Governments, while the Serbian ones are mainly involved as subcontractors and lack significant support from the Government of Serbia.

Sources

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