Government hurries to sell LISCO to Danes

  • 2001-04-19
  • Rokas M. Tracevskis
VILNIUS - The Lithuanian Privatization Commission on April 13 approved an agreement between the Lithuanian State Property Fund and the Danish company DFDS Tor Line on the privatization of 76.36 percent of the shares in the Lithuanian Shipping Company.

The privatization deal has yet to be approved by the Lithuanian government.

Despite scattered opposition from local cargo companies, the deal is receiving heavy backing from the government.

LISCO should be sold to the Danish company within weeks, said Prime Minister Rolandas Paksas on April 11. The Lithuanian government has reiterated its position that there are no legal and economic grounds to discontinue negotiations on the sale of LISCO to the Danish company DFDS Tor Line.

A break in negotiations with DFDS Tor Line over the sale of LISCO would undermine Lithuania's image in the eyes of potential foreign investors, said Ona Jukneviciene, Paksas' adviser on privatization issues.

She said that Linavos Servisas, a subsidiary of the Lithuanian national trucking association Linava, cannot participate in the LISCO privatization as it had requested because its bylaws do not list shipping as one of the company's business activities.

The carriers demand that the government break off negotiations with DFDS Tor Line, saying that the sale of the shipping fleet to the Danish company would be detrimental to the national interests of Lithuania.

Linava is one of the leading road carriers in Europe.

Algimantas Kondrusevicius, vice president of Linava, says that DFDS Tor Line will steer business toward Linava's Danish competitors.

There are also no guarantees that DFDS Tor Line will preserve lines to the German ports of Mukran and Kiel, which are the most important routes for Linava.

Kondrusevius said that DFDS Tor Line gave no answers to Linava's questions during a meeting of representatives of the Lithuanian government, Linava and leaders of Lithuanian major political parties.

"It was just a nice show," Kondrusevicius said ironically about the presentation of DFDS Tor Line to Lithuanian politicians in the government building on April 11.

Gintaras Balciunas, Linava's lawyer and former minister of justice in the previous two governments, said that DFDS Tor Line has no legal right to buy LISCO.

He said that the consortium B.B. Bredo B.V. won the tender to privatize the shipping company but failed to meet financial obligations. DFDS Tor Line did not win a tender – it was just one of the members of the B.B. Bredo B.V. consortium. On April 10, Prosecutor General Algimantas Klimavicius expressed the same personal opinion.

However, Arturas Paulauskas, the parliamentary chairman and former prosecutor general, disagrees.

"The consortium can delegate one of its members to continue the privatization process," Paulauskas said.

The Social Democratic opposition supports Lithuanian TIR drivers and is urging the government to provide various safeguards to protect the interests of local carriers in the LISCO privatization agreement.

On the other hand, DFDS Tor Line is calling on the government to sell LISCO after a year of negotiations.

"Failure of our negotiations would mean that Lithuania has lost one year and DFDS Tor Line has lost one year," said Peder Gellert Pedersen, business manager of the DFDS Tor Line.

"The deal is good for us in the political and economic sense. We don't need to spoil the investment climate, which is important for joining the European Union," Paksas said.

DFDS Tor Line intends to invest $107 million in LISCO, according to the potential investor's proposal to the Lithuanian government. DFDS Tor Line intends to pay $47.6 million for 76.36 percent of shares in LISCO and invest another $60 million in the shipping company within three years, Arunas Pemkus, managing director of Hill and Knowlton, the public relations agency representing the Danish company, said on April 12.

It was announced earlier that the government expected to raise at least $51 million through the sale of the shares in LISCO, with another $92 million to be invested in the shipping company. The planned total investment is lower than it has been announced because the state will retain control of the tramp vessel business, which could be privatized in the future, and a portion of LISCO assets.

The total value of tramp vessels that will remain in the state's hands after the privatization and restructuring processes is more than $38.6 million dollars. The government would hold around 80 percent of shares in the tramp business and some 3.4 percent of the ferry business following the restructuring. The privatization agreement requires DFDS Tor Line to maintain LISCO's headquarters for 10 years. Under an agreement with the Lithuanian government, the Danish company is also to maintain Lithuanian flags and crews on LISCO ships for a certain period.

DFDS Tor Line has also promised to take into consideration the interests of minority shareholders and buy shares from them for the same price as from the state.

On April 11, the Congress of the Lithuanian Industrialists' Confederation expressed support for Linava's wish to privatize LISCO. It also condemned the Lithuanian government's policy in the privatization of big, strategic businesses. Mykolas Aleliunas, vice president of the confederation, said that the Lithuanian government fanatically believes that any foreign investor is better than a local investor.

Aleliunas explained the primitive tactic with which Lithuanian governments do not allow Lithuanians to participate in tenders in the bank, oil, shipping sectors. They demand 10 years experience in tender regulations, while Lithuanian private business just started 10 years ago, Aleliunas said. Social Democratic MP Povilas Gylys describes such discriminatory tactics simply as "provincialism."

However, Paksas and Jukneviciene say that experience is important. "They have experience since the 19th century," Paksas said about DFDS Tor Line, which started more than 100 years ago.