China's Reach and Europe's Money Meet in Balkan Outpost

(Bloomberg) -- A short hike from the fishing village of Brijesta, where the Croatian mainland’s rocky coastline across the bay melts into the Adriatic, a four-story concrete pier scrapes the blue horizon.

The hulking eyesore is part of an abandoned bridge project, an ever-present reminder of how the forces of history and squabbling politicians failed a region of about 100,000 people. It now has become a new symbol: where the benefits of European Union membership converge with China’s expanding influence.

Thanks to Croatia’s EU entry, the 526 million-euro ($621 million) plan is being revived. State-owned China Communications Construction Group Ltd. plans to restart the project halted in 2007 this year. The 28-nation bloc agreed to provide 85 percent of the financing, with the Croatian government pitching in the rest. The four-lane bridge, which will cut travel time by several hours to some parts of the Peljesac peninsula, is set to open in 2021.

“The bridge is our salvation,” said Zdravko Lazic, 38, as he tossed freshly harvested oysters into salt-encrusted buckets on Brijesta’s small stone dock. “It’ll probably be less quiet once the bridge is built, but it will bring tourists and keep people from leaving.”

China is already deeply embedded in Europe, owning everything from ports in Spain, Greece, and Belgium to a German airport. It’s also pushing into the continent’s former Communist East, with investment ranging from wind farms in Poland and a brewery in the Czech Republic to software engineering in Bulgaria and car-part manufacturing in Hungary. Infrastructure projects have been especially popular, including the international airport of the Albanian capital Tirana, a shipping terminal in the Romanian port city of Constanta and a high-speed rail upgrade linking the Hungarian and Serbian capitals.

Read More: How China Bought Up a Swath of Europe

The bridge project focuses on the Peljesac peninsula, part of the Croatia’s southernmost county, most of which is separated from the main bulk of country by a 9-kilometer (5.6 miles) coastal stretch that gives sea access to Bosnia. What was an administrative quirk when the neighbors were partners within Yugoslavia became a pain after independence and a major headache after Croatia joined the EU in 2013.

“We’re not an island, but we do feel like one,” said Vedrana Kelleher, the owner of Savills Plc’s Croatian unit who focuses on real estate in the county. “We feel we’re not really part of the European Union, we’re so aware of this territorial disconnection.”

Difficult Access

It’s not that the entire region is a sleepy backwater. The county seat is Dubrovnik, a historic city where tourism is booming in part thanks to its role as King’s Landing in HBO’s Game of Thrones and Canto Bight in Star Wars VIII. Even the bustling world heritage site is difficult to reach by car from the rest of Croatia, through ferries and international borders -- and it’s still a sharp contrast to the 40-mile-long Peljesac peninsula.

Home to 8,000 people and some of the country’s best vineyards, it’s also the least developed part of Croatia’s winding Adriatic coast, held back by the difficulty of access. The town of Trpanj, for example, is about 10 kilometers (6 miles) from the mainland, but visitors have to drive more than 10 times as much along the coast, dipping in and out of Bosnia, or catch a ferry that runs four times daily and has limited capacity, which could mean being stranded overnight.

“Traveling through two border crossings makes it unpredictable, and in the summer it can take hours,” Dubrovnik Mayor Mato Frankovic said. “The bridge will change all that.”

Economic Boost

The oversea link will provide instant access. It will add 7.2 percentage points to the region’s economic growth over 15 years while raising employment by increasing trade and tourism, according a government study done in 2006 -- officials haven’t been able to provide a more recent estimate. Croatia’s drive to join the EU’s borderless Schengen zone will get a boost and there are benefits to the environment by diverting millions of cars each year away from the congested single-lane Bosnian border.

It will also complete a plan decades in the making. The project first surfaced in the 1990s after Yugoslavia broke up, but there was little progress because of a bloody war that devastated much of the region, including Dubrovnik. Construction finally began in 2007, with the first two support piers erected on either side. The global economic crisis started the following year, sending Croatia into years of recession, and funding dried up.

“I’m absolutely frustrated that we have waited so long,” said Nikola Dobroslavic, the head of Dubrovnik county. “But Croatia at the time didn’t have the financial abilities to build the bridge by itself.”

On the mainland, the construction is already bringing business to the village of Komarna. Restaurants are expanding, new ones are opening, ready to cater to the builders. Across the bay, it will take a while longer, though the first signs of progress have appeared.

The owners of Saints Hills bought an abandoned stone winery in the center of a lush Peljesac valley in 2006, a year before the first attempt at bridge construction began. It’s added climate-controlled cellars, oak casks and stainless-steel machinery and is now pouring money into hospitality for the time when the winery will be more accessible.

But more needs to be done. At Trpanj, the hotel next to the ferry to the mainland has barely changed since the socialist days. Up the peninsula, upscale eateries are scarce even though fresh oyster is abundant.

“Peljesac has remained undeveloped because it was out of an easy reach,” said Kelleher of Savills. “When tourists arrive, investors will, too.”

©2018 Bloomberg L.P.

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