Brussels – There is an investor in the Western Balkans that is largely flying under the radar in Brussels, yet could pose a significant issue for some candidate countries in their EU accession path if the nature of its investments remains unchanged: the United Arab Emirates (UAE).
Unlike China, where concerns stem from the economic support itself – often associated with so-called ‘debt-trap diplomacy’ – the UAE “is no concern per se, but the problem arises when investments do not abide by the laws in place in the country,” explains Iliriana Gjoni, research analyst at Carnegie Europe, speaking with The New Union Post.
Drawing on an analysis she led, Gjoni explores the phenomenon of “corrosive capital,” which risks undermining the EU accession prospects of even frontrunners such as Montenegro. This is despite the existence of a legal framework that “should prevent” the negative effects of such problematic investments. While Podgorica “needs investment” to sustain its progress towards EU membership, she stresses that such investment “must be fully aligned with both Montenegrin and EU law.”
EU standards should be upheld “even before this or any other candidate country in the region becomes part of the Union,” the research analyst emphasises. When a company such as Eagle Hills Properties – a real estate developer headquartered in Abu Dhabi, active for years in Serbia and now involved in projects in Albania and Montenegro – operates within the EU, “the level of scrutiny it must undergo is much higher.” In some cases, this leads to projects being halted or scaled back when “aligning them with EU law presents a challenge.”
The UAE corrosive capital in Serbia, Albania, and Montenegro
As explained by Gjoni, corrosive capital refers to investment that is negotiated centrally at the state level, involving only a limited number of stakeholders and usually “announced with great spectacle in order to gain public support.” One of the defining characteristics of this type of investment is that the rule of law is tilted in its favour, enabling it to access designated markets within the host country. This effectively creates a legal exception around the project, allowing it to bypass procedures that would normally apply under procurement, planning, or environmental law.
Two crucial factors are introduced by the host country: the concept of a “strategic investor” and the use of a lex specialis, which is intended to “accommodate direct investment without it being questioned or scrutinised through normal procedures.” In other words, such investments do not go through standard procurement and tender processes but “are granted preferential treatment,” she points out.
The Western Balkans has in recent years become one of the most targeted regions in Europe for this kind of UAE investment, for several reasons. First, it is currently “an undervalued and much cheaper asset” than comparable opportunities in Croatia or Greece. Second, investors see greater opportunities “not only because of the lower costs but also because the rule of law is less robust.” Third, the region is seen as a backdoor for entering the European market “more quickly, mostly through real estate projects.”
Compared to more opaque investments from China, those from the UAE are “more structured and more deliberate,” the research analyst at Carnegie Europe explains. She notes that Balkan leaders and business figures have been travelling to the Emirates to conclude deals and direct contracts, while the European Union itself is also seeking closer cooperation. “The UAE is pursuing a more direct strategy towards the region and Europe overall,” she adds.
Eagle Hills Properties, represented by Mohamed Alabbar, is a key player in the analysis of projects already implemented, currently underway, or recently agreed in the Western Balkans. Comparable Eagle Hills-linked projects in Budapest and Zagreb were ultimately halted by municipal resistance, planning law, and political turnover – showing that the decisive factor is institutional resilience rather than the investor itself.
In Serbia, the Belgrade Waterfront project illustrated the effects of corrosive capital more than a decade ago. Built on the right bank of the Sava River, the development has had a significant environmental impact, while apartment prices have reached around €11,000 per square metre. “This means that many of these apartments remain empty to this day, creating a real risk of a ghost town of high-rise buildings where nobody actually lives,” Gjoni warns.
A similar dynamic can be observed in Albania, where the existing port in Durrës – one of the largest on the Adriatic Sea – is set to be transformed into a luxury resort. The Durrës Yachts and Marina project promised around 12,000 jobs, which “have yet to materialise.” On the contrary, taxpayers’ money would be required to build a new port in Durrës’ Porto Romano area, “essentially performing the role of the existing one, while leading to environmental degradation.”
None of these projects has sparked significant concern in Brussels. However, the EU has been aware for years of both the investor and the broader phenomenon, even as “the most acute sign” of corrosive capital has emerged in recent months.
While Montenegro was closing Chapter 5 (Public Procurement) of its EU accession negotiations in June 2025, the Velika Plaža/Plazhi i Madh project raised serious concerns in Brussels about the government’s commitment to the process.
In the southernmost part of the country, plans were put forward to build luxury resorts along the 13-kilometre beach of Ulcinj/Ulqin. “This was agreed centrally between the government of Montenegro and the UAE without any consultation – neither at the political level nor with the mayor, NGOs, experts or the local community,” the research analyst explains.
For a town with a distinct minority identity, that depends almost entirely on summer tourism and has largely been left outside the country’s economic planning, the project could “displace the resident Albanian minority and fundamentally alter the local economic model.” The environmental assessments and spatial planning procedures normally required for this type of investment have either been “carried out post factum or in ways widely viewed as inadequate or politically pressured” to suggest there will be no environmental impact, or land previously designated as non-buildable is suddenly recategorised as “suitable for construction.”
The project is currently stalled following a large-scale mobilisation by the local community. However, media investigations report that Eagle Hills has intensified its activities through donations and sponsorships in an effort to build support for the project.
The risks for the EU accession process
It is precisely Montenegro, in its race towards EU membership, that offers Brussels the opportunity to “make a mark on the legal and business environment,” Gjoni argues. By preventing these kinds of deals from going forward, “it can create the fiscal discipline and legal certainty that would make European investors feel more comfortable about stepping in.”
So far, however, the response of the European Union to this phenomenon has been “rather vague,” even though it has acknowledged that such deals “can jeopardise the accession process.”
The need for greater attention from EU institutions to corrosive capital in the Western Balkans stems from the risks it poses to the accession process, including regulatory backsliding and the creation of loopholes in the application of existing laws. “The implications are significant,” she adds, noting that the rule-of-law chapters – grouped under Cluster 1 – ‘Fundamentals’ – are monitored “throughout the entire negotiation period” and are only closed at the very end of the process.
Gjoni also highlights the complex nature of the lex specialis. Once such a law is introduced for a strategic investor, “on paper, the law is not being directly broken.” However, when public procurement law in a given country does not apply to a specific economic cooperation agreement, “it effectively amounts to the legalisation of something that would otherwise be illegal,” she warns.
Another major issue concerns Chapter 27 (Environment and Climate Change). Experts have already warned that the environmental implications would be significant if this type of development were to proceed. However, the governance challenges could be reframed from an accession risk into an opportunity. Gjoni suggests that “the two frontrunners [Montenegro and Albania, ed] could create a training hub in Ulcinj, focused on environmental governance” – in effect, building a bridge between the two countries and “establishing something akin to EU-style cross-border cooperation in practice.”
To ensure that foreign investment aligns with EU standards of transparency, sustainability, and fair competition, the analysis led by Gjoni proposes several mechanisms to be explored.
For instance, the research analyst at Carnegie Europe suggests that local NGOs and experts establish “a corrosive capital watchdog” – a network of organisations that would consistently exchange best practices and be consulted when the EU engages with the region, in order to “help raise awareness before problems reach a stage where it becomes much harder to reverse course.”
Deploying on EU experts within the various ministries of candidate countries – “at least in the chapters that are currently being worked on and are expected to be closed” – could represent another positive step. While the broader context and the progress made by frontrunners must be taken into account, “the EU should deploy experts who can provide support and signal when developments are moving in the wrong direction,” Gjoni notes.
Above all, despite the growing importance of UAE investment in the Western Balkans, the main goal of both Montenegro and Albania remains EU membership. They are therefore unlikely to jeopardise what are increasingly realistic prospects. As Gjoni makes clear, “the EU has considerable leverage and should use it more boldly and decisively.”
