As it stands, questions about import tariffs, production quotas, restive workers, old factories, and budgetary problems are threatening the industry's overall stability. Danisco, which has large stakes in all four of the country's sugar refineries, Kedainiai, Panevezys, Pavenciai and Marijampole, is unhappy with the latter two, claiming they are outdated, inefficient and lose money.
Danisco wants to see Pavenciu Cukrus and Marijampoles Cukrus closed, and claims that it was strong-armed by the government into buying them when it initially invested in the country's two largest refineries in Kedainiai and Panevezys. The government says Danisco is applying too much pressure, and the workers at Marijampole, who so far have successfully resisted their plant's closure, are claiming victory.
Persson says that Marijampole and Pavenciai were already bankrupt in practice and too small to be worth saving.
"Marijampole was supposed to close last year and Pavenciai was supposed to close in two to three years from now," he said. "Kedainiai would be doubled in capacity, Panevezys would be increased by 40 percent.
"We said that our intention in investing here was to modernize the industry and modernization could not be done with four factories. Some factories would have to close and some would have to be expanded. So it was quite clear for the authorities that some of these factories would have to close down," Persson added.
Persson calls Marijampole an "unresolved situation," which could block additional investments in the sugar industry from Danisco indefinitely.
Last spring, authorities declared Marijampole bankrupt as it owed 30 million litas in back taxes. The Marijampoles Cukrus factory appeared to be doomed. But with the help of a Marijampole fertilizer company, Arvi, a rehabilitation plan was developed, allowing the debts to tax authorities to be postponed for up to seven years.
Danisco was astounded. "Seven years postponement of taxes is, of course, a completely ridiculous solution," Persson said.
Characteristically, the trade unions got involved with sharp rhetoric. In late February, Aldona Balsiene, head of the Lithuanian Workers Union, accused Danisco Sugar of "an illegal liquidation" of the factory's workforce. "When they privatized our sugar factory, Danisco fired all of its regular employees. They violated our laws and now the majority of the employees are on the job again but only for short-term agreements."
After a demonstration in Marijampole on March 4, Marija Danieliute, chairman of the Marijampole region coordination council of trade unions, attacked the government too.
"We were fighting for Marijampole Sugar Factory and now we have it. If we would be silent in the past the government, which is ready to kiss certain body parts of foreigners, would do with us whatever it wants," she said.
Also annoying Danisco is Marijampole's insistence to increase sugar production quotas for itself. The factory implored the Agricultural Ministry to change white sugar production quotas set for 1999 and 2000 – Marijampole has the lowest quota, 20.3 tons, compared to 34.6 tons for Paneveziai, 31.7 tons for Kedainiai and 25.4 tons for Pavenciai.
"In principle we all want to increase our share of the Lithuanian quota, but reducing the quota of our factories and increasing Marijampole's would create an intolerable situation," Persson said.
He claims that the current condition of the industry makes Lithuania unfit for eventual competition with the European Union.
"The sugar industry consists of four very small factories, according to European Union standards. The average sugar factory in the EU is as big or bigger than all four sugar factories in Lithuania put together. And these are the kind of companies we will have to compete with once Lithuania becomes a member of the EU."
A government-sponsored working group on the sugar industry's problems concurs with the Danish investor's concerns.
"Danisco Sugar behaves in the Lithuanian market as it is necessary to behave for an investor who cares not for short-term profit but for long-term sugar sector perspective and the harmonious entrance into future European Union sugar market while Lithuania is integrating into the EU," said Vygantas Paulikas, head of the working group.
Paulikas agrees with the imperative to modernize the industry.
"The main problem of the sugar industry is it is technologically out-of-date, which doesn't allow it to satisfy all the needs of the interior market for all kinds of sugar and standards for sugar industry production," he added.
Also a big issue with the Danish investor is the well-being of the country's sugar beet growers, who, until this week were owed proceeds from the sugar excise tax, which is supposed to be channeled back to them. These were reduced because of large surpluses of sugar when the excise duty was implemented.
However, on March 6 the government transferred 60 million litas to the Rural Support Fund – money that could go to the sugar beet growers. "There is no conflict with the government and the sugar beet growers. There is a dialogue and wish of both sides to collect taxes for sold sugar and to give it to sugar beet growers as soon as possible," said Paulikas.
The bottom line is that Danisco, which has already invested roughly $35 million into the Lithuanian sugar industry, doesn't plan to abort its mission to modernize the sugar industry. Lithuania, says Persson, has good potential for "the long-term viability of the sugar industry."
"It has good soil conditions for sugar beets and we already produce sugar in almost all the countries around the Baltic Sea," he said. "We certainly intend to stay in Lithuania. Our whole purpose in coming here was to modernize the industry and make it competitive."