Chinese Company paid a private firm from Banovići 900,000 KM for a feasibility pre-study for a Tunnel

The city of Istočno Sarajevo allocated 20,000 KM for the preparation of a feasibility pre-study for the renowned “historical project for Istočno Sarajevo”, as it has been dubbed, which involves the construction of a tunnel that would connect the municipalities of Istočno Novo Sarajevo and Istočna Ilidža with the municipality of Pale, in a city lacking an efficient urban transportation system. After two years, a dubious Chinese company paid a firm from Banovići 900,000 KM for the feasibility pre-study. What is the interest of the Chinese company in investing money in Istočno Sarajevo, and what has the city committed to in return?

In June 2022, the city of Istočno Sarajevo announced a procurement notice for the preparation of a feasibility pre-study. The brief description of the contract mentioned a road section from Istočno Sarajevo to Pale, including a tunnel under Trebević. The procurement value was 48,500 KM without VAT. Regarding technical specifications, bidders were required to have at least one similar contract worth no less than 40,000 KM in the last three years before the tender application.

The criterion for awarding the contract was the lowest price.

The award notice is no longer available on the city’s website, as it has been deleted along with some older documents. However, we obtained the contract, which shows that the top-ranked bidder was the firm “RADIS” doo Istočno Sarajevo, with a price of 16,900 KM without VAT. This amount reduced the estimated cost of the works by 65.15%. The other two firms that submitted acceptable bids, “Institute for Construction” Banja Luka and “INK Construct” also from Banja Luka, similarly reduced their prices by a significant percentage.

However, RADIS is a frequent collaborator with the city of Istočno Sarajevo, often winning tenders, as our portal has reported multiple times.

The question is whether the city sought an explanation for these unusually low bids, considering the tender documentation stated:

“The contracting authority will obligatorily request an explanation for an unusually low bid in the following cases, among others: if the bid price is more than 50% lower than the average price of the remaining bids. Symptomatically, the other bids were also low”.

Damjan Ožegović from the anti-corruption association Transparency International told SPIN Info that when it comes to an unusually low price, if the contracting authority determines such a thing, it is legally obliged to request an explanation in writing from the bidder.

“Only if the bidder does not provide an explanation, which can include a comparison with market prices, will the contracting authority reject the bid. Other explanations can be the economy of services, technical solutions, originality, and similar. Therefore, an unusually low price must have an explanation and is not necessarily a reason for rejection if justified. Only the selected bidder or the contracting authority can provide the reasons for this”, concludes Ožegović.

The City Lacks Funds for the Study, But the Chinese Have Them

After the preparatory study for the tunnel in the summer of 2022, a second, more detailed and significantly more expensive study followed in April this year. This was financed by a Chinese company mentioned as a potential contractor, namely Synohidro. The mayor of Istočno Sarajevo, Ljubiša Ćosić, mentioned that the feasibility pre-study costs 900,000 KM. He also noted that, based on a previously signed Memorandum with the Chinese, the city administration was neither involved in the study’s creation nor did they have the money for it.

The reason why this Chinese company chose the firm “AIK Engineering” from Banovići remains unknown, as does how the collaboration with this particular Chinese company, which undertakes large energy projects in Bosnia and Herzegovina and is on the African Bank’s blacklist for suspected corruption, was established with the City of Istočno Sarajevo.

In this case, it is again shown that a lack of transparency is one of the main characteristics of Chinese deals in Bosnia and Herzegovina, where almost all contracts are hidden, and the public has no insight into what the Republika Srpska or Bosnia and Herzegovina has committed to in contracts with the Chinese. In this case, it remains unclear what the City of Istočno Sarajevo will offer in exchange for the paid feasibility study.

Additionally, as previously reported by Inforadar, Sinohydro Corporation Limited Banja Luka is registered in the building of the RS Tax Administration on Trg Republike Srpske Street. According to data from the Akta.ba portal, no other information has been provided since its founding in 2014, such as revenue or the number of employees. Companies change names, and open business units, and the public has no insight into their operations in Bosnia and Herzegovina. It is also noteworthy that the name of the person who signed the Memorandum on the construction of the tunnel on behalf of the Chinese company is not mentioned anywhere. The mayor explained the lack of media presence during the signing, saying, “Without much media pomp and big announcements”.

We asked the mayor about the unusually low bids related to the first feasibility study and whether the pre-study funded by the Chinese was presented to the RS government, which has supported these projects from the beginning. The mayor could not provide explanations as he was on an official trip to Russia. However, he promised to show us both studies next week.

Although he announced in February that the study would be presented to the City Assembly councilors, the presentation was attended by the mayors of the municipalities within the city and some business people interested in the project.

After a detailed analysis, the chosen option includes constructing a tunnel approximately six kilometres long, starting in the Miljevići neighbourhood in Istočno Novo Sarajevo and ending in the Radonjići neighbourhood in the municipality of Pale.

The mayor of the Istočna Ilidža municipality, Marinko Božović (SDS), who has previously talked about the neglect of municipalities by the RS government led by opposition mayors, told SPIN Info that he commented on this project during the study presentation. He suggested that the starting point should be planned at Klek, along the new road towards Jahorina, as it is equally positioned towards Istočna Ilidža and Istočno Novo Sarajevo, and the exit at Lapišnica to capture traffic coming from Sokolac while also connecting Pale, which was part of an earlier study from the Yugoslav era.

“Generally, it is a very expensive project for our conditions, and I would always prioritise solving the roundabout at Kula and expanding the four lanes from Kula towards Vraca as the backbone of the two municipalities in terms of traffic”, Božović concluded.

There are still no concrete details about the project’s implementation, deadlines, or other specifics, except that this project has been announced in the media since 2021.

“The future of the tunnel will depend on us. If we don’t talk about it, everyone will say it is famous, but if we believe it will be built in the next 10, 15, or even 20 years, it will be done. I recently passed through an eight-kilometre tunnel between Bologna and Florence, which looks very nice and resembles this possible tunnel. I will continue to believe it will happen, and you keep writing the best texts about the famous tunnel”, the mayor told us at one of the press conferences where we asked about this project.

The project value reaches up to 200 million euros.