EU Accession Will Challenge North Macedonia’s China Deals

Ivan Nikolovski

Originally published by Balkan Insight

May 13, 2019

As Skopje moves closer to opening membership negotiations with the European Union, the trade deals it has struck with Beijing are likely to come under heavy scrutiny.

In its commitment to resolving all the obstacles blocking its Euro-Atlantic path, North Macedonia’s new government, appointed in 2017, signed two historic treaties with Bulgaria and Greece, closing the major open issues with its neighbors that long bedeviled its Euro-Atlantic membership aspirations.

 

This has resulted in North Macedonia signing an accession protocol with NATO and unblocking its long stalled EU accession process.

 

These events have caused shifts in the positions of global powers toward North Macedonia.

 

Moscow, which fiercely opposes NATO expansion, has started to openly challenge the country’s Euro-Atlantic integration processes, especially the so-called Prespa Agreement with Greece – ending the dispute over the country’s name – which had not been the case before.

 

Turkey, on the other hand, has restated its traditional support for North Macedonia’s NATO membership, but has also demanded that it take action against local supporters of exiled Turkish cleric Fethullah Gulen, who Ankara calls a terrorist leader.

 

China, however, has not changed its pragmatic position toward North Macedonia and remains interested in deepening economic cooperation with the country, regardless of the government in power.

 

In that context, relations between Skopje and Beijing are important to analyse.

 

Apart from a brief termination of bilateral relations between 1999 and 2001 as a result of Macedonia’s recognition of Taiwan, China-Macedonia political and economic relations have been friendly and stable.

 

China is one of the four permanent members of the UN Security Council, together with the US, the UK and Russia, which recognised the country under its old constitutional name of “Republic of Macedonia”, and it has supported the country’s Euro-Atlantic aspirations.

 

Bilateral relations between the two countries have mainly focused on economic cooperation.

 

Between 2009 and 2014, China rapidly increased its investments in the country. In 2017, China was ranked Skopje’s third trading partner.

 

The most obvious example of this economic cooperation is the 17+1 format – a Chinese initiative to further economic cooperation with 16 ex-communist countries from Eastern and Southeastern Europe plus Greece, including North Macedonia.

 

Within the 17+1 initiative, Beijing established a credit fund of 10 billion US dollars for infrastructural projects.

 

North Macedonia rapidly made use of these funds to construct two new highways, from Miladinovci to Shtip and from Kichevo to Ohrid, costing 580 million euro.

 

However, the contact that the authorities signed with Sinohydro Corporation LTD, the Chinese state-owned company chosen to construct the two highways, did not accord with legal procedures for public bids.

 

The then largest opposition party, the Social Democrats – which is now the main party in government – published wiretaps accusing the government of corruption.

 

As a result, a newly established prosecutorial body, the Special Prosecution Office, SJO, filed charges against then Prime Minister Nikola Gruevski and his transport minister, Mile Janakievski, alleging abuse of office.

 

According to the charges, Gruevski, and Janakievski gained unlawful financial benefits from the deal with Sinohydro Corporation, violating the Law on Public Procurement.

 

After the government changed in 2017, the Ministry of Transport disclosed major errors that had prolonged the construction of the highways and had increased the costs by 120 million euros.

 

Despite this, the new government under Zoran Zaev has continued cooperation with China as part of the 17+1 initiative.

 

During the 17+1 summits in Sofia, Bulgaria, in 2018, and in Dubrovnik, Croatia, in 2019, Prime Minister Zaev expressed strong support for the initiative and for the opportunities it provides, which he sees as complementing the country’s Euro-Atlantic goals.

 

During the Dubrovnik summit, Zaev stated North Macedonia’s willingness to upgrade cooperation with China in different fields.

 

China is the world’s fastest growing economy and its generous-looking funds have a strong appeal in the Western Balkan region, as well as among some EU member states.

 

But China’s pragmatism-driven practices of economic cooperation, including direct dealing, or demands for preferable contracting legislation, often diverge from EU directives and regulations.

 

The European Union has major concerns relating to the lack of transparency and competitive and law-based public bidding procedures, but also about reciprocal market access.

 

The EU generally perceives China’s projects in the Western Balkans as a threat to the Copenhagen criteria, and to its pro-reform agenda in the region.

 

The EU fears China’s potential political influence in the region as well. Brussels has raised concerns that some governments in the Western Balkans may find China’s authoritarian capitalism appealing.

 

If North Macedonia finally opens accession negotiations with the EU this year, its legislation, including trade laws, will have to fully harmonise with the body of EU law known as the acquis communautaire.

 

In the context of trade relations, it will have to fully comply with the Maastricht criteria on national debt and on Chapter 5 of the acquis communautaire, which regulates public procurement.

 

This will limit the possibility of concluding contracts by bypassing regular legislation and procedures, as happened with Sinohydro.

 

It will also prevent North Macedonia from signing costly and lucrative deals based on appealing loans offered by Beijing, and thus avoiding the danger of increasing the national debt.