The leaving of the giant Shell group from Vietnam has been attributed to the mismanagement of the gas market, where there is no room for authentic investors.
The Dutch Shell Group has confirmed its decision to transfer all of its stakesin a gas joint venture in Hai Phong City and a 100 percent Shell investedcompany in HCM City to Thai Siam Gas.
This is the third global oil and gas brand leaving Vietnam. Following the USMobile Unique Gas and the UK’s BP Gas. Why do the foreign giants leave Vietnam,if this is believed to be a potential market with the annual growth rate of 10percent per annum?
In the document to distributors, Shell Gas Vietnam said the decision to leaveVietnam comes in line with the group’s strategy on focusing on key markets,under which, it would make investment in downstream sectors in fewer, butlarger-scaled markets.
Gas has not brought the desired profits to Shell over the last decade. ThoughShell is always considered a giant in the market, its investment costs proved tobe much higher than the profits.
At first, Shell Gas developed its distribution network comprising of the retailshops where there were only Shell Gas products available. However, the networkthen got narrowed, thus forcing Shell Gas to allow the shops to sell theproducts with other brands as well.
However, the compromise of the group could not help improve the business. Twoyears ago, the offices in Hanoi were merged into the company in HCM City, a moveto cut down the management costs. And now, it has decided to leave and giveplace to another player.
Tuoi tre newspaper believes that the big shell gas group leaves the marketbecause of the unhealthy competition in Vietnam, where illegal gas trading oflow quality products cannot be controlled. Foreign brands like Elf, Total, BPand Shell spent a lot of money to protect their brands, but the mismanagementcould not ensure their success.
Some years ago, in the minds of Vietnamese people, red tank meant Elf Gas’product, green tank meant BP, blue Shell and grey Saigon Petro.
However, the market got chaotic when all gas firms tried to print their tankswith green or blue colors. As a result, the big gas firms had to spend big moneyto persuade consumers to order products not in accordance with the color, butwith the brands.
However, 40 percent of gas tank covers, about several millions, do not come backto their owners, which means that the foreign firms have to compete with illegaltraders.
In October 2010, the Decree No. 107 on gas trade management took effect, whichwas hoped to restructure the gas market. However, the problems still have beenexisting. Prestigious gas firms have to send their staff to the marketmanagement agencies to get back their gas tank covers, which were onceappropriated to contain the products of other manufacturers.
The problems not only make the gas market chaotic, but also discourage authenticcompanies, which according to Tuoi tre, is the main reason that promptsforeigners to say goodbye to Vietnam.
However, commenting about the leaving of Shell Gas, Nguyen Si Thang, Chair ofthe Vietnam Gas Association, said on VnExpress that the leaving of Shell Gasshould be seen as a normal decision of a business.
Thang said the decision of one or several businesses should not be blamed on thebad business environment with unhealthy competition and illegal gas trading.