Serbia secretly concluded a 57 million contract with a Chinese company connected to the military industry

23.07.2024. / 14:56

BANJALUKA – Shutting down the domains of official websites, American sanctions that make Western licensed programs and components unavailable, and the fear that their official channels of digital communication have been compromised, set off an alarm at the top of the Republika Srpska government, and a few months ago it pulled a move that it hid from to the public.

The Government of Republika Srpska signed a secret contract with the company ELINC from China, which is connected to the military industry, worth even 57 million marks for the procurement of software for digital protection in all institutions of Srpska, the portal exclusively learns CAPITAL.

The contract with the Chinese has been confirmed for CAPITAL from several credible sources, signed at the beginning of June this year, and after that it was marked with secrecy, in order to hide from the public another expenditure of tens of millions of marks on software, as well as its purpose.

It is planned to implement this software in all institutions in Srpska for a period of ten years, and ELINC got the job based on a previous agreement behind closed doors, without a tender and notifying the citizens from whose pockets it will all be paid.

All this was agreed by the Government of RS at the session in mid-May, under the “miscellaneous item” and avoided notifying the public about it and issuing a public invitation, using the possibilities of the amended BiH Law on Public Procurement to hide the spending of tens of millions of marks from the citizens.

American sanctions were the trigger for this contract, because it was previously discovered that the digital security of Serbian institutions is full of holes due to the bad work of local companies.

A long history of bad software

“Termination of the RS Government domain due to the introduction of American sanctions, hacker attacks on the Integrated Health Information System IZIS, which never even worked again, defective software in the Forests of the RS paid for in the millions, data leakage from the Tax Administration of the RS, as well as numerous other outages and dysfunctional systems in recent to all institutions with personnel who do not know how to deal with it, they have shown that what has been maintained by the companies in charge of information systems is falling apart and that a new solution must be obtained urgently“, says our source.

In the obvious predicament in which they found themselves, experts from the RS Government turned to the Chinese company ELINC, which deals with cyber security, producing, as they say, “modern digital administration” for governments, companies and research institutes in different countries, promoting the concept of “security first , development gradually”.

This project should be covered with digital protection, that is, to put it simply, create a security online “umbrella” for about 800 institutions and various other institutions, and the price of implementation has been agreed at 28.5 million euros, or 57 million darks.

And that is actually the price of leasing the software for a period of 10 years, followed by an annex or a new contract and additional money.

ELINC China specializes in the military industry and electronic warfare

Company Elinc China Co. Ltd. (ELINC) of Beijing is wholly owned by China Electronics Corporation (CEC), founded in 1989 in Beijing.

The company specializes in defense electronics, providing advanced products and systems as well as support services, including consulting and development.

ELINC focuses on delivering industrial cybersecurity solutions and services, making it a significant player in the defense sector.

In addition to operations in China, there are references to Elinc China Co. in other countries, such as Ecuador and Bolivia, where it operates in various sectors, including computers and computing peripherals.

The products and services offered by this company are related to cyber security, defense electronics and the development of advanced electronic systems for defense applications, providing the most modern technology adapted for military use.

The company’s first appearance in the Balkans was recorded at the 2023 Belgrade Arms Fair, where it presented its electronic warfare and anti-drone systems, including the CHL-906 multifunctional radar jamming and electronic intelligence station.

This event marked ELINC’s first participation in a defense fair in Europe, which indicates a strategic interest in expanding its presence on the market of Serbia and the wider Balkan region.

The company then expressed openness to cooperation with the Serbian industry, which reflects the growing interest of Chinese defense companies in the Serbian market, which is seen as an entrance to the Balkans and the penetration of Chinese companies of this type into our region.

The state of the system is catastrophic

An earlier analysis of the state of information systems in institutions (in 2023) showed that the situation is extremely bad, that protection is almost non-existent, which was used as a reason to (again) form the Agency for Information and Communication Technologies of the RS, which is called The Agency for the Information Society of the RS was merged into the Ministry of Scientific Technological Development and Higher Education of the RS in 2018.

The situation was further aggravated by the introduction of sanctions to the privileged companies that established those sloppy systems and therefore charged hundreds of millions of marks, and then the termination of support from Western software producers in maintenance and licensing, which is why they are gradually becoming unusable these days.

At the Cyber ​​Academy held in April at the Government of the RS, representatives of this agency pointed out that Srpska is in a “state of supply chain crisis, which is reflected in the possibility of interruptions in the supply of institutions with hardware and software.” It was established that the problems are very broad and that it is necessary to determine the condition of the equipment and services of risky manufacturers, which introduce sanctions.

The existing legal solutions, it was said at the time, do not sufficiently protect the domestic economy and the population from cyber threats. In addition to all that, there is an urgent need for trained personnel in this area for all sectors, and its start has been announced by the end of May.

However, although we sent questions about the new contract with the Chinese to the Agency for ICT with the intention of finding out more details, they did not respond to them until the publication of this text.

Secret payment with citizens’ money

Slobodan Golubović, editor of the portal Pratimo tenders and criminologist Slobodan Golubović, says that through the amendments to the Law on Public Procurement, the article concerning exemptions, which has been significantly expanded to several areas, is sometimes justified, but often not.

“Regardless, there is no reason for any procurement contract, including this one, to be secret. We don’t need to know the details of that software, but why hide something that is paid for with the money of all citizens? In addition to all that, the question is what is the background of this story, is it only the protection of these systems or is something else also being introduced that would relate to the control of citizens and their data“, says Golubović and adds that this may have something to do with the violation of personal data protection, as well as the government’s desire to control activists, media, journalists and others.

He adds that he wonders who will manage that data. In addition, Golubović points out, this seems to be the usual way of working with Chinese companies, that contracts are concluded non-transparently and without public participation, and then they are declared secret and hidden. We have seen this in the contracts for the Banjaluka-Prijedor highway, HPP “Dabar” and so on, and Golubović says that they are all secret and that it is very symptomatic why it is that the use of public property is declared secret.

He adds that the Government has so far spent hundreds of millions of marks on various, mostly unsuccessful, software and has shown that it treats this area very sloppily.

“In essence, they show that until now the goal was to extract money and leave us with extremely unusable or semi-usable solutions. Just look at IZIS and Šume RS, where they threw over 50 million marks and did nothing, and now it’s their excuse to fix something“, says Golubović and adds that this may be the first step towards ending dependence on Western technologies.

Damjan Ožegović, senior researcher/collaborator for legal affairs at Transparency International BiH, says that according to the changes in the law from two years ago, secrecy may be justified if it concerns procurements related to defense and security systems and services.

“Of course, at least the basics of procurement should be presented, not everything, of course, but at least the basics, so that at least certain institutions that protect citizens can get involved and know what it is all about. This law, which is presented as European, we can see from numerous examples, is actually backward compared to the previous version“, says Ožegović.

Lack of manpower

It remains to be seen how the RS Government plans to implement this work in general, given their proverbial clumsiness and slowness, but also the striking lack of capable personnel in the IT field.

It is an open secret that in the IT sector, those who know work for private companies, and those who have nowhere, work for the state. Only a few selected experts, for reasons known only to them, agree to work for the “state” and how much they hold the strings.

We have also sent questions regarding this contract to ELINC and will publish them when we receive them.

CAPITAL: Andrijana Pisarević