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Whether Montenegro should have invested in highway

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on 17 December 2016

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Transcript of Whether Montenegro should have invested in highway

General facts about the project
Name:
Highway Bar - Boljare
The most significant project since Montenegro gained independence (2006)
Total cost: 2.5 billion $
Total length: 169 km
It is planned to be built in three sections
Max projected speed: 100 km/h
Positive impacts of the highway
Negative sides of the project
2009. - EU Commission gave negative opinion about the project
Government actions
Ministry of Finance signed contract with CRBC before the Parliament of Montenegro approved the law about investment!!!
Consequences
Exceeding of debt over Maastricht's level resulted in credit rating B1 with a negative outlook, which leaded to higher interest rates
Whether Montenegro should have invested in highway?!
Veselin Todorović (vt16014)
Nemanja Radonjić (nr16010)

Contractor: CRBC; Chinese company
Financing: 85% credit, 15% government of Montenegro
In 2014. construction of the main and the hardest section of the highway(Smokovac - Matesevo) has started:
- Length of the section: 41 km
-
17 km are tunnels, 3 km are bridges, 2 km viaducts
- Total cost of section: 809 mil $
Strategic point of development -
tourism
Estimated: 30% more tourists
Part of the big project:
BBBB
(Bar-Boljare-Belgrade-Budapest)
Forecast predicts increasing of number of cars on roads by 27% till 2020
Project significantly contributed to the Montenegro's economical growth - 3.4% in 2016
61 domestic companies are hired in construction of the highway - reducing unemployment!
Improved the position of the main port in Montenegro, Bar, in international trade
Main purpose
- increasing of competitiveness and foreign investors
Increasing of national debt - 64.5% to
66%
One of the highest prices of highway in Europe -
19.7 mil $ per km
Scott - Wilson study has shown that investment is not economically sustainable (-300 mil $)
Opinion of many Montenegrin economists - government made a harmful contract for our country
All companies that were hired on project, including CRBC are free of VAT?!
Main and hardest section which amounted approximately 809 mil $ was mainly financed with 690 mil $ credit from Chinese National Bank
Credit was taken in DOLLARS?!
Currency protection measures were not taken into consideration?!
Result:
In 2015. real debt increased from 809 mil $ to 900 mil $
This investment made significant burden to our fiscal budget
Forecast: DEBT BONDAGE (In next five years our debt will exceed 70%)
Tara River Canyon
- One of the deepest river canyons in Europe and indeed the world (UNESCO Heritage) -
VICTIM OF THE PROJECT!
Our opinion
Montenegro would definitely benefit from construction of highway, but not in this moment, under these contract conditions and high national debt
Instead of building a highway, our country should invest in other economic activities which could encourage economical growth more than this project
Process of making a decision and contract for a crucial project like this one should be clear and transparent, not like in case of our country
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