Research and Opinion

Policies of Budapest’s Summit “16 plus 1” and Croatia’s deliverables





Natko Plevnik, foreign policy expert on China's policies towards Europe



“16 plus 1” and the Belta and Road Initiatives has risen influence of CEE countries in the EU – China relations and gave  them more knowledge about China trade and investment conditions and plans than they had before 2012.None of these countries think to abandon the "16+1" format.

Croatia is interested to transform itself in an active partner of the both Initiatives, but yet has to indicate more closely own long-term interests with China. In Budapest Plenković proposed to scale up Croatia’s relations with China through the multilateral platform the „16 plus one “and the BRI. Though regional approach „16 plus 1“was established before the BRI, after Suzhou summit 2015, it has become a key part of BR strategy and that approach has been again confirmed in Budapest. On the other hand, it is weird to me that the countries of South East Europe are not on the map of the Belt and Road's main economic corridors.

Croatia needs long-term policies  for cooperation with China

China is very much attentive to planning long-term relations with Croatia and other 16 countries but Croatia has no a long-term policies  for big infrastructure projects and that is cardinal reason why relations between China and Croatia cannot be long-term planned. 

At the „16 plus 1“Budapest 2017 summit one commercial agreement was signed by Croatian and Chinese sides, will be discussed later, and was no signing of new memorandum of understanding.

Croatia's PM Andrej Plenković, accompanied by Croatian Tourism Minister Gari Cappelli, and National coordinator for China- CEECs cooperation Zdravka Bušić, attended 6th China-CEEC Summit of Heads of Government that is amain decision-making instrument. He expressed strong interest in long-running economic relations between the two states.  The government issued very optimistic press releases on Budapest Summit, but Croatia   will have to do a lot more if it wants to rise its influence in these initiatives after almost four years of passivity. 

Budapest „16+1“summit gave Croatian PM an opportunity to talk with China's PM, and it seems the meeting could deliver some tangible benefits for Croatia. It could become perhaps a little better visible, with its small market, among Chinese investors, specially to those interested to invest in tourism.  

In the meeting with Chinese PM Li Keqiang, PM Plenković stressed Croatia's ambition to post itself as an unavoidable spot for tourism inside „16 plus 1“framework.  That was accepted with understanding and Croatia will, in March, 2018, in Dubrovnik, host the 4the China – High Level Conference on Tourism Cooperation.Croatia hopesDubrovnik summit of the ministers of tourism will rise interest of potential China investors for the country's tourist capacities and radically increase number of Chinese tourists in relation to 2017. 

The Prime Minister welcomed, in Budapest, the China Road and Bridge Corporation's bidding for the Peljesac bridge, the biggest Croatia’s infrastructure project.

It's new that Croatia has withdrawn some moves to „specialise “itself inside the „16 plus 1 “.as a center for small and medium enterprises. The center will cover all the countries of Central and Eastern Europe and their relations with China in that area. Croatia plans to organise and run these activates by its Ministry of economy focusing on SME development and job creation. Croatia has so far not hosted such institutions like centers or secretariats. It has been only a member of the Business Council. This will be the first 16+1 mechanism in Croatia.   

Group 16 consists of very heterogeneous countries

Though institutionalisation process of the „16 plus 1“has been slow it is possible to see that using that kind of mechanisms like establishing centres and secretariats could move development of „16 plus 1“faster into multilateralism. Now, bilateralism prevails because Group 16 consists of very heterogeneous countries. China's Ministry of Foreign Affairs has managed the Secretariat of the „16 plus 1“in an interaction way but an intra Southeast Europe regional pragmatic approach for diplomacy towards China is still missing. 

Croatian Government explains Budapest meeting important in political terms too. It is interested in intensification of political dialogue on the lower level: ministers and local authorities.In 2018, the „16+1“format will be focused to develop local levels of cooperation.

The Croatian government is interested is an expansion of exports to China and inflow of Chinese foreign direct investment to Croatia.  China is on the way to become the biggest importer in the world. It is estimated that China will import products worth of 6.7 trillion euros from overseas in the next five years. Croatia's exports to China have increased, but the trade balance is in favour of China.

Croatia accounts on a bigger food exports to China but so far has failed to export more agricultural and food products beaucse Croatia needs to get certificates   from Chinese side. The Action Plan between the Ministry of Agriculture of the Republic of Croatia and the Ministry of Agriculture of the People's Republic of China on Cooperation in the Field of Agriculture for the 2017-2018 was accepted in March 2017, but only Serbia in the Region has obtained Chinese safety certificates for its agricultural exports. 

 All these “16 plus 1” years there was a lot of talk about China's financing a new railway Zagreb – Rijeka, but nothing has come of it yet. However, PM Plenković discussed it at the meeting with the Chinese Premier how China's ports in Greece could be used for the economic development of Croatian ports Rijeka, Split, Zadar and Ploče.

Chinese FDI in South East Europe remains limited to Serbia

Croatia is eligible for the  EU structural funds, but anyway it is interested in Chinese sources of funding to upgrade its outdated sea infrastructure and transport links. The cumulative amount invested in Croatia from 2011 to 2016 is low, the most of investment in Croatia arrived from the EU countries and the United States, not China. Chinese FDI in South East Europe remains limited to Serbia.

PM Plenković, unlike the previous government, does not perceive the „16 plus one “as controversial or being in conflict with EU laws and EU norms, values and unity. PM Plenković said in Budapest the cooperation of the 16 CEEC countries and China should not worry Brussels. It could mean, that five years on from „16 plus one “creation, China has succeeded in presenting the cooperation as friendly towards the EU, transparent and in coherence with public procurement procedures. Since 2014, China has putting a question of „compliance “ with the EU’s norms and standards even before trade not only to calm its 16 partners (11 of them are EU members and 5 of have candidate status), but also to protect Chinese companies that not having enough experience and expertise to assess legal risks abroad.

On the sidelines of „16 plus one “Budapest summit, Croatian company „Energija Projekt “signed an agreement on selling to Chinese company NORINCO the rights of construction and management of a 156 MW wind power plant Senj – Brinje. NORINCO has announced the agreement on bought of 76% stake in the Croatian company Energija Projekt, worth 32 million euros. The investor from China is interested in construction of 49 turbines within two years. Produced wind energy should be sold in Croatian market.The equipment for the wind power plant should be manufactured in Taiwan. Chines company NORINCO International Cooperation Ltd is owned by the state and behind it is a large number of successful projects in the field of energy, environmental protection in China and abroad. 

„Energija Projekt “was established in 2010 and has only one employee so it is ranked as a „micro employer “that is a business with 9 or fewer employees.  

This commercial agreement is announced in Budapest with a big optimism but it will not be sealed without approvals of both: Croatian and Chinese authorities, and it seems to me that due-diligence reports on the company has to be made. Besides, Croatia does not yet have a clear and long-term defined legal rule for making business in this area. The changes are constantly present in that sector. 

The Energija projekt company has a construction permit for wind power plant Senj – Brinje but The Croatian Society for the Protection of Birds and Nature, BIOM has filled, in April 2014, a lawsuit challenging the construction of wind power plants and the hearings are in progress. This association's lawsuit stopped construction of the wind farm Bila Ploča on Pelješac.

Here it is worth to mention that an agreement on direct investment in Croatian technology sector was signed in Zagreb,on 18th September, 2017. Chines private company Camel Group Ltd, Asia’s largest battery manufacturer for electric vehicles, will invest 30 million euros in Rimac Automobili, d.o.o, and its company Greyp Bikes, d.o.o to finance development of new products and improve their capacity for mass production of Heavy-Duty Batteries for electric vehicles.