Montenegrin Croatina: How the Deal of the Century Bar–Boljare Failed

Exactly 16 years ago, on March 8, 2010, Croatian construction signed a sort of capitulation regarding competitiveness in foreign markets.

On that day, the IGH Institute and Tehnika informed the Zagreb Stock Exchange that they were exiting the consortium with Split’s Konstruktor, which was competing for the construction of the Bar – Boljare highway from the Montenegrin coast to the border with Serbia.

A deal worth 2.77 billion euros

It all started idyllically. The consortium submitted the lowest bid – 2.77 billion euros and won the tender. In the contract signed on June 9, the Konstruktor consortium committed to securing funding for construction within six months.

‘Based on signals from the financial market, it will be much sooner,’ said the then head of Konstruktor Engineering and the Consortium Željko Žderić.

Three prime ministers inaugurated the works

On October 15, 2009, a ceremonial opening of the works was held, which turned into a political manifestation of good neighborly relations.

In the village of Gornje Mrke in the hills above Podgorica, the ribbon was jointly cut by three prime ministers – host Milo Đukanović, Mirko Cvetković from Serbia (to whose border the road leads), and Jadranka Kosor, considering that the contractors were from Croatia.

No guarantees for a risky job

However, it turned out that the guarantees from Zaba and Unicredit provided by the Consortium to the Montenegrins were not sufficient. A new creditor was sought.

Meanwhile, the investment public buzzed about the riskiness of the contracted job. The sustainability of the project at a price that was even one billion euros cheaper than the Greek-Israeli competitor was questionable!

All risk on the Consortium

Moreover, it was a sort of public-private partnership, where additional construction costs would fall on the shoulders of the concessionaire, i.e., the banks. The rejection from the EBRD was a serious signal about the unsustainability of the model.

Prime Minister Kosor tried to save the deal in February 2010, but returned from a trip to Podgorica empty-handed.

The Chinese started building the road

In the end, the tender was canceled, and the job was later awarded to the China Road and Bridge Corporation (CRBC). Work began in 2015, and the first section of the road, 41 kilometers long (out of a total of 169), was opened on July 13, 2022, less than two weeks before the opening of the Pelješac Bridge, built by the same Chinese company.

Even on home ground, in Pelješac, the Konstruktor failed in that same distant 2010, then in a consortium with Hidroelektro and Viadukt. The investor, Hrvatske ceste, could not close the financial structure in that attempt.

Godfathers terminated all jobs

Despite already losing the job in Montenegro, members of the Consortium kept the stories about ‘found investors’ alive for some time. This, in turn, led to a rise in the stock prices of the IGH Institute and Tehnika.

Therefore, the Zagreb Stock Exchange requested these companies to clarify their positions, to which they announced that they had withdrawn from the Consortium. Soon, other joint business ventures of Konstruktor and the IGH Institute, which were arranged by Željko Žderić and Jure Radić, who were also godfathers, were terminated.

Croatia without an export institution

In the whole story, Croatia’s deficit was also the absence of an export bank, or at least a company specialized in financing business, especially exports. Such were once Astra, and in construction, Ingra. However, it is a big question whether such institutions would engage in the dubious Croatian ‘deal of the century’ in Montenegro.

The case of the failed construction of the Montenegrin Croatina reflects the state of the entire sector. Construction has almost completely closed itself within state frameworks in recent decades. That is why it has suffered so much from Croatia’s prolonged recession.

Dependence on domestic demand

The situation is not better today – Croatian construction companies together generate less than five percent of their revenue from exports. They remain in the domestic market because they are not competitive abroad. As a result, foreign companies win almost all major Croatian projects (that they are interested in) in tenders.

Dependence on the domestic market could come back to haunt them in a few years – when the reconstruction from the earthquakes ends and the influx of money from EU funds decreases, which is the source of financing for most infrastructure projects that require construction operations.

Fate of the Consortium members

This best illustrates the fate of the Consortium members. Konstruktor – engineering’s account was blocked as early as June 2010. That company has been in bankruptcy since 2017 and exists only on paper. The remaining members of the Consortium saved themselves through pre-bankruptcy settlements – IGH Institute in 2013, and Tehnika in 2021.

As for international aspirations, the IGH Institute generated seven percent of its revenue from exports in 2024, while Tehnika earned not a single euro.