Abandoned Sawmill in Ponikve: The Chinese Struggle for Bosnian-Herzegovinian Raw Materials

Abandoned Sawmill in Ponikve: The Chinese Struggle for Bosnian-Herzegovinian Raw Materials

With the announcement of multi-million dollar investments and the creation of several hundred jobs, the Chinese company "Bluhend Wood" attempted to ex

ŠG “Borja” kao poligon za SNSD-ove kandidate za odbornike
The former director of the Health Center in Gradiška paid herself over 100 thousand KM outside the law
Šta je epilog afere „Kiseonik“?

With the announcement of multi-million dollar investments and the creation of several hundred jobs, the Chinese company “Bluhend Wood” attempted to extract scarce raw materials—beech logs—from Vareš between 2011 and 2014. Like many cases in Bosnia and Herzegovina, the investors were welcomed with open arms despite being interested solely in raw material exploitation, for which Vareš, as the most underdeveloped municipality in the Zenica-Doboj Canton (ZDK), was a suitable ground.

The Chinese firm “Bluhend Wood” purchased the devastated sawmill from “AR Zvijezda” Ltd. at the end of 2011 with the ambition of processing wood and employing the local population. In the spring of 2012, equipment was installed in Ponikve near Vareš, and by the end of the same year, the plants were operational. During meetings with representatives of the cantonal government, then headed by Fikret Pljevljak, the Chinese investors made grand promises—from expanding “Bluhend Wood’s” capacity to employing an additional 200, and ultimately up to 500 workers. This was a beacon of hope for Vareš, a small central Bosnian town once known as a strong industrial centre in the previous state, but now labelled the poorest municipality in the Zenica-Doboj Canton.

PHOTO: (Meeting of “Bluhend Wood” representatives and the ZDK Government in June 2013)

When asked how serious the Chinese investment was and whether it could be expected that “Bluhend Wood” would at least partially revive Vareš’s economy, former director of the Public Forestry Company of the Zenica-Doboj Canton (JP ŠPD ZDK), Alija Hadžiabdić, twelve years later said, “They didn’t come to stay. I can responsibly claim they never even removed the plastic from the factory hall windows”.

PHOTO: ABANDONED HALL

On the akta.ba portal, it can be found that the owner of “Bluhend Wood” is Zhao Kecheng and that the paid-in capital was 2,110 KM. The company was founded in March 2011 with its headquarters in Sarajevo.

PHOTO: AKTA BLUHEND WOOD

According to media reports from 2012, the Chinese invested around two million euros in the former sawmill and employed 20 workers from the Employment Bureau. In 2013, they announced the possibility of 500 jobs. However, just a year later, they laid off workers and locked the doors. The reason they cited: they did not receive enough beech wood.

“Bluhend Wood’s” manager Nermin Milić and expert associate Tarik Ahmedspahić claimed in November 2014 that the Public Forestry Company ZDK did not meet the needs of this Chinese company for logs, resulting in the company having to lay off workers. But judging by everything, the Chinese investor embarked on a failed adventure to procure beech wood—beyond the forest capacity strictly prescribed by the state.

PHOTO: PONIKVE 02

In the first years of its operation (2011 and 2012), “Bluhend Wood” worked with fir and spruce as wood assortments. Coincidentally or not, after meetings at “higher levels”, the Chinese investor’s requirements expanded to include the delivery of beech wood, eventually seeking contracts for the delivery of only this endangered wood through exploitation.

The fact that something in the Chinese mathematics in Vareš was seriously off is evidenced by data showing that between 2012 and 2014, Bluhend Wood’s profits significantly increased, but so did the losses.

PHOTO: BLUHEND WOOD REVENUES

In 2014, the company concluded its operations in Vareš with a total revenue of 1.8 million KM, but also with a comprehensive loss of around 660,000 KM and laid-off workers. Alija Hadžiabdić recalls that the Chinese firm, before leaving in 2013, exclusively requested beech wood, and the JP ŠPD provided as much as it could according to the valid parameters at that time.

“The public company has certain rules that must be followed according to the Forest Law—the annual quota by assortments. Then these Chinese appear who had the ambition to trade the entire quota themselves, even beyond the company’s quota—which is nonsensical. I don’t know the background, details, whether anyone promised them anything… But they entered the wood market without any analysis, and the outcome was such. Now, someone needs to find the culprit”, says Hadžiabdić, who doesn’t understand why Chinese investors didn’t investigate the possibilities for raw material supply according to the annual quota. They would have received the answer at the very beginning of their operation and would have avoided laying off workers.

Nermin Milić, the former manager of Bluhend Wood, says that the lack of beech logs was part of the reason for the Chinese withdrawal from the Vareš sawmill.

“But it was also an election year, so it wasn’t in someone’s interest for 350 people to work, and only 120 were working. Capacities were supposed to be expanded to drying and final processing, but there was no political interest or support from the local community. So we couldn’t sustain working in Vareš while bringing logs from Konjic, Mostar, Šuica… and passing by us, and we couldn’t get them”, says Milić.

Unlike Alija Hadžiabdić, some workers saw the Chinese company as a serious investor. R.S., a former employee who lives in Vareš, told Infoveza that the Chinese regularly paid contributions to employees. After that, he says, the sawmill was rented to other companies that didn’t pay the workers’ pension contributions.

“They came and built the hall, wanted to expand. When they were here, they gave workers a salary of 500 euros and contributions on top of that. They were 100% correct”, says this former worker of the Chinese company who believes the Chinese left because they weren’t ready to bribe officials to get larger quantities of beech wood.

PHOTO: PONIKVE 01

Companies that rented the sawmill after the Chinese left outstanding contributions to workers, so it’s no surprise that compared to them, “Bluhend Wood” looked like a serious company driven out of Vareš by politics.
However, an Infoveza source from the wood industry in ZDK reminds that it is a known practice of Chinese companies to open or buy wood industry companies that were state-owned, claiming large investments and employment, which essentially amounts to nothing.

“Behind this is usually the interest of obtaining as much wood raw material as possible, preferably beech quotas, because beech is a high-demand, high-value technical raw material that is increasingly scarce on the market due to over-exploitation”, says S.K., an economist employed in forestry, who believes that the investment in Vareš is precisely one such example.

To support this, he explains, is the fact that the company initially worked with fir and spruce, and when unable to procure large quantities of beech, the “allegedly large investment suddenly shut down, clearly indicating the intentions of the Chinese investors”.

“The way wood raw material is traded and exported is particularly problematic, and the Chinese noticed this and unfortunately exploit it by minimally processing logs—literally stripping only a small part of the bark, and then these logs are transported and exported as semi-finished or finished products, depending on the purpose. The Chinese have realised our shortcomings in the laws and skillfully use this to the detriment of all citizens of Bosnia and Herzegovina”, claims S.K., who has been working in the forestry industry for years.

Former JP ŠPD director Alija Hadžiabdić shares a similar opinion, recalling that the Chinese company did not have a final product.

“They literally wanted to cut the plank and who knows where to transport and deal it further. However, this couldn’t be packaged, it didn’t work”, says Hadžiabdić.

After shutting down the plant, laying off workers, and leaving Vareš, “Bluhend Wood” continued to exist, and data on the company’s activities were recorded until 2021. Their revenue at that time was around 46,000 KM, losses 53,000 KM, and they had three employees. Perhaps the best testimony to their business is the fact that the Government of the Sarajevo Canton, in February 2021, made a Decision to approve and pay funds to finance part of the minimum monthly net salary (in FBiH) for June and July 2020. According to this decision, Bluhend Wood was awarded 406 KM for the 6th and 7th months.

PHOTO: DECISION OF THE SARAJEVO CANTON GOVERNMENT

In March 2015, “Bluhend Wood” advertised the sale of the sawmill in Ponikve, officially ending the Chinese odyssey in Vareš.

Nine years later, the abandoned sawmill in Ponikve stands as a testament to failed Chinese ambitions. Situated amidst fairy-tale nature, it is now a devastated monument to another ravaged privatised company. There is no trace or sound of Chinese investors.
“I don’t worry about them. That aggressive policy continually finds impoverished areas from which to extract raw materials and pays cheap labour. Vareš is just one in a series of examples. It is high time that state authorities seriously address their activities in Bosnia and Herzegovina, especially in light of the sanctions imposed on China”, concludes our source from the wood industry.

Written by: Stefan Blagić