Executive Summary

• Corridor XI (E70/761/763) is a regional motorway project planned to connect Timisoara in Romania and Bar in Montenegro passing through Serbia and with a maritime link to Bari in Italy;
• The project is also known as the Belgrade-South Adriatic motorway, because the northernmost part, from Timisoara to Belgrade, is repeatedly being delayed;
• Multiple sections are currently in development in Serbia and Montenegro simultaneously;
• The entire project is highly fragmented, because almost every section is funded by different financier, which in return had a right to choose the contractor for that section.

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Project Key Facts

Regional and Local Context

Corridor XI (E70/761/763) enters in Serbia at Vatin, near Vrsac, passes by Belgrade, and exits at Boljare. The northernmost section Belgrade-Vrsac (E70) is repeatedly being delayed. The part south of Belgrade with a local road designation A2, and known as the Belgrade-Boljare (E761/763) motorway, is under construction. Summarizing bellow are the most important aspects connected to the project:

1. The Belgrade-Boljare motorway project is planned with a total length of 270 km. It passes through Western Serbia connecting Belgrade with Surcin, Obrenovac, Ub, Lajkovac (Lazarevac and the expressway towards Valjevo (E70)), Ljig, Preljina (Cacak and the Morava Corridor (E761)), Pozega (Uzice and the motorway towards Sarajevo), Arilje, Ivanjica, Duga Poljana (Sjenica and Novi Pazar) and Boljare;
2. In 2006, the Government of Serbia signed a 25 years-long Build-Operate-Transfer (BOT) contract with the Alpina-Porr consortium, worth EUR 1.5 Billion. The agreement included the construction and maintenance of the northernmost part of Corridor X (E75), Horgos-Belgrade, alongside the central part of Corridor XI, Belgrade-Pozega (E761/763). The contract was terminated in 2008, the whole thing went to the arbitration and the Government decided to build the freeway from its own resources;
3. The part stretching from Obrenovac to Preljina near Cacak, which is named “Milos the Great”, upon the prince of Serbia Milos Obrenovic from 19th century, has only just opened in August 2019. That part consists of the following sections: Obrenovac-Ub, Ub-Lajkovac, Lajkovac-Ljig, and Ljig-Preljina;
4. The first section of Corridor XI to be built was Ub-Lajkovac, in the length of 12 km and financed by the government, the total cost of the project amounted to EUR 73 million. This section, built by the Putevi Uzice-Planum consortium from 2010 to 2014, suffered from huge delays and was completely remade by the Shandong Hi-speed Group and made operational with other sections. The second section was a 40 km long Ljig-Preljina section, built from 2013 to 2016 by the AzVirt and financed with a EUR 308 million loan given by the Republic of Azerbaijan;
5. The sections Obrenovac-Ub and Lajkovac-Ljig, of 26 km and 24 km respectively, were simultaneously built by the Shandong Hi-speed Group, with the Italiana Costruzioni and the Enеrgoprojеkt Niskogradnja as subcontractors, for EUR 333 million. The 17 km long section Surcin-Obrenovac is being constructed by the China Communication Construction Company (CCCC), while the construction of the 10 km long Beograd-Surcin and the 31 km long Preljina-Pozega (E761/763) sections, has also been commenced by the same company;
6. The most difficult section, Pozega-Boljare, which is 110 km long and with an estimated cost of more than EUR 1.5 Billion, is going to be built by the China Road and Bridge Corporation (CRBC). On the other hand, the expressways Belgrade-Vrsac (E70), worth EUR 570 Million, and Valjevo-Lajkovac, worth EUR 55 Million, are planned as subprojects of this project.

Actors and strategies

Project insights

Corridor XI (E70/761/763) is a major road infrastructure project which is financed mostly through loans, and because of that it puts a lot of 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

• Arbitration - After the termination of BOT contract with Alpina-Porr consortium, the Government of Serbia faced an arbitration lawsuit. Final ruling from 2013 was in favour of the Serbian Government.

Economic

• Indebtedness - Corridor XI (E70/761/763) project will definitely induce the economic development in the Western Serbia and import transport links with neighboring countries, but it also represents a EUR 3 Billion burden to the Serbian already indebted economy.

• Involvement of local companies - Although local construction companies mainly participate in the projects as subcontractors, except for one section, their economic benefit is very small.

Construction/Engineering

• Fragmentation of the project - The whole project is highly fragmented, because almost every section is funded by different financier, which in return had a right to choose the contractor for that section. “This will almost certainly cause operational problems in integration and synchronization of different sections with a completely different accompanying equipment” suggested one of the local experts.

• Unfit engineering solutions - One particular problem has been noticed on the Ljig-Preljina section, built by AzVirt. The concrete floors in two tunnels, Brdjani and Sarani, are not covered with asphalt. Some engineers, supported by the Serbian opposition, are arguing that the tunnels had been too low for the high vehicles, like trucks and buses, to pass through, so the asphalt was scrapped.

• Poor quality of the construction - This problem was present at the section Ub-Lajkovac, built by the Putevi Uzice-Planum consortium with huge delays and it was needed to be completely remade by the Shandong Hi-speed Group and opened with the Obrenovac-Ub and Lajkovac-Ljig sections.

Forecast

We can expect the project to move further given its political support and beneficial influence to the economy. Some of the sections are already constructed and operational, while others are on the way.

In 2014, the construction of the section Ub-Lajkovac was completed, which was followed by the Ljig-Preljina section, opened in 2016. In August 2019, the sections Obrenovac-Ub and Lajkovac-Ljig, alongside the Ub-Lajkovac section and the previously opened Ljig-Preljina section, were inaugurated as the “Milos the Great” Motorway. The construction of the Preljina-Pozega is in progress, while the Surcin-Obrenovac section is scheduled to be opened on December 19. The works on the Beograd-Surcin section is set to begin in 2020, whilst the most difficult section, Pozega-Boljare, is planned to be built in the upcoming years.

While not directly related to the construction, we can also foresee the new foreign direct investments (FDIs) along the Corridor XI (E70/761/763), as the same had happened along the Corridor X and it has already started to happen in Western Serbia.

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 - whilst the financial construction for the project seems to be completed with the bulk of funds provided by the Exim Bank of China, when it comes to financing other infrastructure projects in Serbia, the financial opportunities are still open for European banks; also EU actors can consider further development of additional infrastructure along the corridor, such as local roads, connectivity nodes with railway, etc.

• Construction - there is a clear opportunity for European construction companies to participate in Serbia’s infrastructure development, not only as subcontractors on this project, but on other major infrastructure projects as main contractors. The first steps have been already taken by Italiana Costruzioni, a subcontractor on the Obrenovac-Ub section, and Strabag, a contractor on the Ostruznica Bridge, which represent an integral part of Belgrade Bypass, as well as JV Aktor and Terna, the main contractors on the Southern and Eastern part of Corridor X. Given the importance of this corridor we can expect further construction projects to occur along it. Starting with fuel stations up to logistic complexes, all these construction projects could represent a potential niche where EU companies could participate.

• Consultancy and further support - Serbian Government looks to interconnect with all of its neighbors, in this effort, the government will require both financial and knowledge assistance. EU companies could provide both, either by suggesting local credit lines (an opportunity for EU banks) or by mediating a potential partnership with EU construction companies and extending EU transportation corridors.

For all of the above, it is important for EU companies to account for the specific local context. Specifically to consider the political implications of the project, offers beyond the immediate product a potential line of credit, or suggestion of  potential crediting partners. Technical support on a high quality level can be a differentiator. Beyond simply providing a service or a product, EU companies must engage with local actors and support their efforts with complete solutions.

Sources

1. Gradjevinarstvo. Valjevo uskoro dobija auto-put do Koridora 11. Available at: https://www.gradjevinarstvo.rs/vesti/16030/810/valjevo-uskoro-dobija-auto-put-do-koridora-11 (Accessed on: 14.11.2019)
2. Koridori Srbije. South Adriatic. Available at: http://koridorisrbije.rs/en/belgrade-south-adriatic (Accessed on: 14.11.2019)
3. Istinomer. Koncesija za izgradnju autoputa Horgoš-Požega. Available at: https://www.istinomer.rs/amnezija/koncesija-za-izgradnju-autoputa-horgos-pozega/ (Accessed on: 14.11.2019)
4. Dosta je bilo. Zašto tuneli na putu Ljig-Preljina nisu asfaltirani? Available at: https://dostajebilo.rs/blog/2017/05/19/zasto-tuneli-na-putu-ljig-preljina-nisu-asfaltirani/?lang=lat (Accessed on: 14.11.2019)
5. Insajder. Deo već izgrađenog autoputa Ub-Lajkovac se ponovo gradi, na delu trase nova klizišta i pukotine (VIDEO). Available at: https://insajder.net/sr/sajt/tema/12499/ (Accessed on: 14.11.2019)
6. MGSI. Corridor 11 - Obrenovac - Ub, Lajkovac- Ljig. Available at: https://www.mgsi.gov.rs/en/infrastrukturna-gradilista/corridor-11-obrenovac-ub-lajkovac-ljig (Accessed on: 14.11.2019)
7. MGSI. Corridor 11 - Surcin- Obrenovac. Available at: https://www.mgsi.gov.rs/en/infrastrukturna-gradilista/corridor-11-surcin-obrenovac (Accessed on: 14.11.2019)
8. MGSI. Preljina – Pozega. Available at: https://www.mgsi.gov.rs/en/projekti/preljina-pozega (Accessed on: 14.11.2019)

MGSI. U nеdostatku dokaza izvođači na auto-putu Ub-Lajkovac povеli kampanju protiv Ministarstva. Available at: https://www.mgsi.gov.rs/lat/aktuelnosti/u-nedostatku-dokaza-izvodaci-na-auto-putu-ub-lajkovac-poveli-kampanju-protiv (Accessed on: 14.11.2019)

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