The large Chinese company China Airport Construction Group wants to participate in the construction and financing of the new terminal at Zagreb Airport, but wants the right to select the project designDiplomatic and economic relations between Croatia and China are intensifying, with new interest of Chinese companies to invest in Croatia, which was confirmed for Nacional by sources close to the top ranks of the government. After the Chinese Embassy in Zagreb showed interest earlier for the participation of Chinese companies in the construction of the new Zagreb Airport terminal, the Chinese government went one step further and proposed a company, the China Airport Construction Group Corporation (CACGC). This company has participated in the construction of several airport terminals in China, and in Libya.

The Chinese side has also expressed its interest to participate in the financing of the new terminal on the basis of a 25-year concession. Nacional has learned from sources close to the government that an international tender is planned to be issued by year's end for the terminal construction, and that this tender will be carried out and completed in the shortest possible time period. The Chinese intend to send their representatives in order to become well acquainted with the project documentation. The same sources have revealed to Nacional that the government will likely allow the winner of the tender to select the project design, meaning that IGH could lose this lucrative deal. During 2008, IGH won the urban architectural design tender with a project design developed by Velimir Neidhardt, a member of the Croatian Academy of Arts and Science, and Branko Kincl. The tender results caused quite a public stir, as IGH has been awarded a large number of substantial projects in recent years.

Sceptics claimed that it was simply impossible for the work of the domestic architects, though renowned in their own right, to beat out global architecture stars such as Norman Foster, Zaha Hadid and Shigeru Ban, and even then it was often stated that this was a political decision, primarily due to the ties between Jure Radic, IGH director, and the HDZ. Now, IGH runs the risk of losing the deal, if the Chinese or other winner of the construction project tender decide to build the new, modernised Zagreb Airport according to some other design.

"In light of the recession and the difficulty in finding large investors for strategic infrastructure project, it seems unfair to us to bind the winner of the tender to any given construction project design. That's why we are inclined to let the winner choose their own favourite from among the offered designs. We would, more or less, consider all the designs received earlier, but we would be sure to redefine the final proposal after discussions, as every proposal needs some reworking," commented a high ranking government official for Nacional.

The Chinese are also interested in expanding the capacities of the Port of Ploce, where construction of a new container terminal has already begun, financed by a World Bank loan. Representatives of the Port of Ploce believe that the Chinese company, with the assistance of the Chinese Development Bank, has a good shot at winning the tender, to be issued in late August. The tender terms will require bidders to include equipment in the bid that can be manufactured in Croatia.

INTERESTS OF A LARGE EXPORTER The goods terminals at the Ports of Rijeka and Ploce (above) are interesting investments to the Chinese as this would allow them to move their exported goods into EuropeIt is most likely that the bidder will need to use materials that are 40 percent of Croatian origin. Thought has also been given to a broader inclusion of Chinese companies in the expansion of the Port of Ploce, in the construction of a terminal for bulk cargo and construction of warehousing facilities. Were this to happen, this would mean a much easier entry for Chinese goods onto the regional market. The Port of Ploce is not the only port the Chinese are interested in. At the end of April, Nacional learned that the Chinese shipping company Cosco was interested in taking out a multi-year concession for management of the Port of Rijeka.

The Croatian government has already begun works to modernise the Port of Rijeka. The Rijeka Gateway project is ongoing, and worth EUR 185 million. The removal of warehouses and other non-functional structures will create 17 new hectares for the construction of urban facilities necessary for the development of the City of Rijeka. The most important part of the project is the construction of a new coastline for container terminals. The Zagreb container terminal currently has a coastline 680 metres long with a surface area of 20 hectares, and should be gradually renovated in two phases. The existing Brajdica terminal will also be lengthened, and will have a coastline more than 600 metres long. The newly constructed container storage facility should be financed through the public-private partnership model.

A series of other works are also planned for the Port of Rijeka. The strategic partner for part of the Rijeka Gateway project, the Jadranska vrata container terminal, will be selected in the last quarter of 2010. A short-list of potential strategic partners was made in mid May. The list includes APM Terminals from Rotterdam, Dubai Ports World from London, Hamburger Hafen und Logistik AG from Hamburg, International Container Services Inc. from Manila and Group TCB from Barcelona. The complex works to modernize the Port of Rijeka require substantial financial resources. It is possible that this will also be a topic of conversation between Finance Minister Ivan Suker and his Chinese hosts next week. Last week, he met with a delegation of the Chinese Embassy to Croatia to discuss the final preparations for his visit to China this week. Short briefly commented for Nacional, saying that he has a very intensive meeting schedule in China, but did not want to say what would be discussed in the meetings.
"I don't think it would be fair to my Chinese partners to disclose what we will be discussing. However, I will be meeting with a number of high ranking officials of the Chinese governments, and prominent bankers. I am not going to China to look for new loans for the Croatian government. The reasons for my trip are quite different," announced Minister Suker for Nacional.

CroatiaCROATIAN FINANCE MINISTER Ivan Suker is getting ready to visit China as head of a state delegation, and will meet with a number of high ranking political officials and prominent bankers fits in with China's long-term international financing strategy. Considering that China achieves hundreds of billions of dollars in foreign trade surplus every year, the Chinese authorities have long been investing that money in projects in foreign countries. The Chinese are quite conservative in their investments, primarily investing in energy and infrastructure projects, usually in poorly developed African, Asian and South American countries. There are some limited cases of Chinese investments in developed countries, though Chinese companies have been banned from investing in the infrastructure of EU Member States and the US on many occasions, usually out of political reasons.

That is why the Chinese have decided to invest in Eastern European countries. These countries require foreign investments for future development that western investors are not always ready to finance. This opens the door to Chinese investments, which later secures China with excellent channels to place Chinese goods once those countries become members of the EU. Croatia is in such a position, due to its geographical position on the Adriatic Sea, upcoming entry into EU membership and relatively well developed transport infrastructure, and can therefore be interesting to the Chinese. If they take control over key Croatian ports and railway infrastructure, China could create a very effective logistical route for the placement of its goods on the western European markets.

In 2009, the Croatian-Chinese economic relations recorded an enormous Croatian deficit. Last year, Croatia exports goods worth US$ 41m to China, while importing goods worth US$ 1.44bn from China. In the high ranking official contacts to date, the Chinese side has agreed that such an uneven balance could be potentially harmful to the future relations of the two countries. Therefore, the Chinese have explicitly asked Croatia to offer some large infrastructure projects to the Chinese contractors and financiers. The government's initial reaction was not positive, but things have started to change. When Chinese President Hu Jintao visited Croatia last year, some claimed that the Croatian government did not offer the large group of Chinese businessmen a single concrete project.

CROATIAN TRANSPORT MINISTER Bozidar Kalmeta, whose administration is late in proposing new projects to the Chinese; the Chinese would invest in the Rijeka-Zagreb-Botovo railway line, but the project is yet to be drawn upHowever, this mistake was quickly rectified in March by Foreign Minister Gordan Jandrokovic during his visit to China. He offered the Chinese investments into the Croatian ports and other infrastructure projects, such as railways. However, the positive momentum in the bilateral relations has still not been optimally used in certain areas. Even though the first concrete Chinese offers have surfaced, in some areas, things haven't moved an inch, due to the slowness of the Croatian administration. For example, there is Chinese interest for the construction of the railway line Rijeka-Zagreb-Botovo, but the project has not yet been developed to the point where concrete negotiations can begin. It is assessed that China will willing to invest up to EUR 10bn in Croatia. However, the key issue is just how much of this money Croatia will succeed in bringing in, given the slow reactions and incompetence of the administration.