The European Union has traditionally imposed strict anticorruption rules for its lending and development projects. In the Western Balkans in particular, the EU’s Western Balkans Investment Framework attaches transparency and anticorruption conditions to EU investments. Moreover, the EU has made clear that progress on anticorruption reform is a main requirement for attaining EU membership, a core goal of all countries in the region. The EU’s approach, however, is under increasing pressure given competition from China, which has steadily ramped up its investment in Southeastern Europe—especially in the energy, transport, and telecommunications sectors—via its Belt and Road Initiative (BRI). China is willing to invest heavily in the region (largely via loans) without attaching any anticorruption conditions. This approach can be more appealing to many of the region’s (corrupt) public officials, who would like to build infrastructure quickly and under less scrutiny.
Because of competition from China and its demonstrated negative effects on local anticorruption efforts, the EU needs to reevaluate its approach. While last year the EU published a strategic outlook paper labeling China a “systemic rival” and toughened its overall approach to the country, the EU should actively pursue more cooperation with China when it comes to investment in Southeastern Europe. This does not mean that the EU should relax its strict anticorruption and governance conditionalities. The EU still retains considerable leverage in the region, and can and should continue to use this leverage to push an anticorruption agenda. But the EU’s efforts would be more effective if the EU directly engaged with China on this topic. Indeed, the EU may even be able to work with Chinese companies in ways that raise the latter’s integrity standards and safeguards.Some might argue that China has little incentive to work with the EU on pursuing an anticorruption agenda in the Balkans or elsewhere. However, recent BRI scandals have forced China to re-consider its investment tactics. These scandals have led, in some cases, to the arrests of Chinese officials and the cancelation of projects, and have led more generally to a public backlash that his made an increasing number of countries unwilling to take Chinese loans. For example, in Bosnia and Herzegovina, senior government officials face graft accusations relating to the procurement of defective Chinese ventilators, and in Montenegro, citizens have become more wary of Chinese investment projects after the Chinese-financed Bar-Belgrade highway project increased Montenegro’s debt from 63% of GDP to almost 80%, triggering a credit rating downgrade. While local elites might prefer China’s no-strings-attached approach to investment, these elites still live in democratic societies where public opinion and reputation matter. As these countries grow wary of Chinese lending due to the risk of scandal, China has a stronger incentive to shore up its reputation. Last year, China publicly committed to a “Clean BRI” and China may now be more amendable to partnering with the EU on an anticorruption agenda, if only to improve project efficiency and to repair its image in the region.
Thus, notwithstanding China’s poor track record on addressing BRI corruption, the EU should capitalize on this moment to get China to take anticorruption practices more seriously and incorporate them into current and future investment endeavors. There are a couple of avenues the EU could pursue in engaging China on this issue:
- First, the EU, and EU-based companies, can work directly with Chinese companies on joint infrastructure projects. This would allow EU institutions and companies to apply more stringent anticorruption and competition standards. China would benefit because such collaboration would give Chinese firms an opportunity to learn more about European standards and practices, as well as to get concrete experience working with EU firms (experience which could facilitate working more widely in the EU). China may be particularly amenable to joint-EU projects at this time, as China has shrinking foreign reserves, and many cash-strapped Balkan governments are expressing skepticism about taking exclusively Chinese loans. There are already a few examples of this kind of partnership in the region, including the European Bank for Reconstruction and Development and China Road and Bridge Cooperation’s co-financing of Croatia’s Peljesac Bridge. It is unlikely that joint projects will completely supplant Chinese solo investments in the region, but partnerships on big, strategically important projects, such as large regional ports and railroads, would offer the EU an opportunity to work with Chinese firms that, due to reputational concerns, might choose to adopt at least some of the EU’s anticorruption standards into their solo projects as well.
- Second, while signaling a willingness to collaborate on Balkan infrastructure projects, the EU could press China to show more willingness to respect transparency and anticorruption safeguards if it wants access to EU markets; more coordination in the Balkans could be a testing ground for more EU cooperation going forward. The EU and China plan to have a summit to discuss their investment futures, with the goal of producing an EU-China Comprehensive Agreement on Investment. While this forum is primarily focused on investment in China and the EU, the EU should advocate for document language on how China and the EU can work more closely in the Western Balkans to conduct joint projects and respect anticorruption norms and practices. The 2019 BRI Forum, which led to China’s adoption of the “Green Investment Principles for Belt and Road Development,” could serve as a model here. This upcoming investment forum should produce a similar set of anticorruption principles and commitments—for example, a Chinese commitment to prosecute Chinese companies that bribe foreign officials—backed by a credible EU threat to delay or halt EU-China investment agreements if China fails to comply with these principles.
The Western Balkans still receive an overwhelming majority of investment and development assistance from EU countries, and surveys show a continued preference for a European orientation across most of the region. That said, the rising number of Chinese-backed infrastructure projects in the region is something to watch. The EU has the opportunity to leverage common interests with China to work together on key projects and establish formal commitments to anticorruption safeguards in the Balkans. The EU will face challenges in getting China to change course, but the EU can appeal both to China’s interest in getting infrastructure built more efficiently, and to China’s interest in improving its reputation as a more reliable investment partner after a spate of embarrassing BRI corruption scandals.
This is not a bad idea. Why wouldn’t we want to push it an extra-mile, and bring the discussion to the table of the World Trade Organisation, for a more multilateral and inclusive discussion?
Hi Francesco, thanks for your comment! Using the WTO isn’t a bad idea either but I believe that starting with dialogue on a more bilateral basis would be the best option to kickstart cooperation and catalyze change on the ground much quicker. Bilateral agreements in this context may also have more “teeth,” incorporating more specific benchmarks and enforceable commitments, especially when it comes to cooperation on individual projects in the region. I would also imagine that both parties (the European Union and China in particular) might prefer this type of engagement to more formalized and complex WTO discussions.
Hi Jagadish, thanks for your message. Would you mind reaching out on LinkedIn and I’d be happy to chat with your sister/share my email address. Thanks!