Integration for sustainability

Over 60 years of establishment and development (January 12, 1956 – January 12, 2016), the Vietnam National Petroleum Group has non-stop tried its best, asserting its size, stature and position in the market. To learn more about Petrolimex efforts, successes and contributions to the industry and trade sector in particular and in the national economy in general, the Cong Thuong (Industry and Trade) newspaper spoke to Secretary of the Petrolimex Party Committee and Chairman of Petrolimex Board of Director, Bui Ngoc Bao.

Secretary of the Petrolimex Party Committee and Chairman of Petrolimex Board of Director, Bui Ngoc Bao

Could you please provide a thumbnail description of Petrolimex milestones and remarkable achievements after 60 years of establishment and development?

Petrolimex started its business by exercising the political task, ensuring sufficient petroleum supply for the national economy and defence. From an enterprise with basic material facilities in the beginning, Petrolimex has become a multi-sectoral economic group – one of Vietnam’s leading businesses in term of turnover (with an average of VND200 trillion (US$8.9 billion) annually in the past five years) just behind PetroVietnam; and maintains around 50% of oil and petrol market share, especially in the context of increased competition in the market. Petrolimex brand name has been known across the country.

Petrolimex is a multi-sectoral economic group and was established due to historical circumstances. Besides it major business in oil and petrol, the Group is proud to contribute some among the country’s leading companies such as Petrolimex Tanker Corporation (PG Tanker) with a fleet of over 500,000 ton capacity, accounting for 7% of the country’s fleet, and 50% of liquid transport; and Petrolimex Petrochemical Corporation (PLC) - a big enterprise in the field of petrochemical, asphalt, and chemical (solven) and makes significant contribution to Petrolimex business performance. Similarly, Petrolimex Gas Corporation JSC (PGC), and Perolimex Joint Stock Insurance Company (Pjico) also stand among leading enterprises in their business operation.

Another crucial achievement is manpower. The general education level among the Group employees is high. The quality of Petrolimex human resource is increasingly improved, fully satisfying work demands without being moved from one place to another. Additionally, people are used efficiently, not only in the business of oil and petrol. For instance, previously, workers at petrol stations only sold oil and petrol but now they are able to sell other Petrolimex products including lubricants, gas, paint, and washing liquids, etc.

Material and technical facilities have been upgraded and renovated many times during the past 60 years, gradually meeting the regional standards. Storages, stations, export and import of oil and petrol are almost automated with relatively high safety standards.

With a determination to build Petrolimex into a strong and dynamic economic group, the new identity system of Petrolimex was applied in the whole Group in 2012, from the Mother company - “The Vietnam National Petroleum Group” to subsidiary companies – Petrolimex member companies in Vietnam and abroad. Till now, the Petrolimex brand name has had “a vivid position” in the mind of customers all over the country, especially under the fierce competition as present.

It can be asserted that Petrolimex is a multi-sectoral group, in which professions assist and complement each other to maintain sustainable development for the enterprise. It is worth to mention that since Petrolimex transformed from a supplier which mainly performed political task into a market-based enterprise under the State management, it has increasingly affirmed its position. Material and technical facilities, technologies as well as management mode have reached regional level. The current Vietnam National Petroleum Group was equitised and restructured in accordance with the Prime Minister’s Decision No. 828/QD-TTg, and is a public company in line with the document No.2946/UBCK-QLPH issued by the State Securities Commission.

Could you please let our readers know how corporate management has been implemented following the privatisation?

After the privatisation, the corporate management work has gradually changed. The thinking of serving political purpose no longer exists, but of the efficiency of capital. Besides, a fundamental difference is the formation of elements such as competition, brand protection, and corporate culture. The corporate value has increasingly been treasured by Petrolimex officials and labourers. The labourers understand that corporate value cannot be built up by itself or others but by each Petrolimex staff, and that corporate efficiency and labourers’ interests must be incorporate. Furthermore, the “ask and give” mechanism and dependence on the State are something of the past. Therefore, labour productivity has gradually been improved.

Of note, the corporate management has dramatically changed after Petrolimex applied the business management software, Enterprise Resource Planning (ERP). The internationally-recognised ERP was slightly adjusted to match Vietnam’s accounting standards and promptly applied in all member companies. Such change is compulsory but quite suitable with Vietnamese enterprises, especially Petrolimex which has been operating for ages. Petrolimex is the first enterprise group in Viet Nam that has completed the application of the management software.

A sound management system has helped Petrolimex feel confident in integration, and gain trust from both domestic and foreign partners.

Publicity and transparency are indispensable activities in petroleum business. How has Petrolimex performed these activities, especially after the Minister of Industry and Trade issued the Instruction No.11/CT-BCT dated April 22, 2014 on increased publicity and transparency in the trading of electricity and petroleum?

For Petrolimex, publicity, transparency are crucial because the Group is doing business in a sensitive profession, which is much different from others.

At present, publicity and transparency activities have seen big changes as compared to the past. Previously, the trading of petroleum was a national secrecy, thus, publicity and transparency depended much on then mechanisms and policies. After privatisation, Petrolimex becomes a public company. Upon demands of the securities market as well stock and the enterprise’s determination that “sound management is only realised by transparency”, Petrolimex has become one among few enterprises that have clear financial statements which are publicly listed.

In accordance with Decree No. 83 on oil trading, Petrolimex has authorised enterprises to fix price [of oil products] at a certain extent. Nevertheless, to gain trust from users, Petrolimex has also referred to the pricing standards set by the ministries of Industry and Trade, and Finance. This proves that Petrolimex has always conformed to joint pricing decisions made by the ministries.

I can say for sure that: in none business, pricing issues are concretised by decrees and circulars as in petroleum. For example, in accordance with the Joint Circular No. 39/2014/TTLT-BCT-BTC, prime price means the price used to set the petrol or oil retail price which has the following constituents and is determined as (=) {C1F price plus (+) import duty plus (+) excise tax} multiplied by (x) foreign exchange rate plus (+) value added tax plus (+) business expense norm plus (+) price valorization fund plus (+) pre-tax profit norm plus (+) environmental protection tax (+) other payable taxes, charges and payments under current law. In there, C1F price means the world petrol or oil price plus (+) freight for transportation to Vietnamese port. These constituents are estimated at the actual degree. And the world petrol or oil price is calculated on the average 15 days of reserve under Item 1, Article 31 Decree No. 83/2014/ND-CP.

Business operation of member enterprises is different but price is set according to a common formula, thus, an enterprise makes profit or loss largely depending on their own capacity.

The resolution of the Petrolimex congress for the 2015-2020 period set out a general target for this period of time: “To enhance production and business efficiency, to actively integrate into and expand trade relationship with region and the world; and to build the Vietnam National Petroleum Group into a strong economic group which will sustainably develop and make considerable contributions to the national socio-economic development”. Could you please tell about measures that Petrolimex has been and will be taking to realize the target mentioned above?

Under the country’s current intensive integration, opportunities and challenges coexist. Therefore, successful integration shouldn’t be just in name. In many past years, Petrolimex has been pre-emptive and acted on its own initiatives to reach the foreign markets. Specifically: Petrolimex set up and put into operation a system of petrol stations in Laos, opened company in Singapore, and branches in Cambodia, etc,. In the time to come, besides the traditional foreign markets, the Group will continue market expansion in other places. Even Petrolimex will do business in the markets of developed countries when deemed capable.

In addition, Tamada Industries. Inc. of Japan, JICA Vietnam, and Petrolimex signed a project using the non-refundable financial assistance from the Japanese Government to pilot the production of double-layer oil tanks (“SF” in short). Petrolimex Construction Joint Stock Company 1 (PCC-1) successfully manufactured SF oil tanks in August, 2014 and completed experiments in two Petrolimex petrol stations in Ha Noi (on August 28, 2014) and in Ho Chi Minh City (on October 24, 2014), which were appreciated by relevant authorities. Over the past five years (2010-2014), the Japan Co-operation Centre, Petroleum (JCCP) has helped train more than 180 Petrolimex leaders, managers, engineers and leading specialists in the fields of goods technique, petrol tank and depot operation, information and technology, automation, marking, distribution channel organization, human resource management, among others.

Petrolimex has applied an administration system in line with international standards and with laws of the countries in which Petrolimex is doing business. Petrolimex has also made efforts to become an international enterprise – that is the most active, in-depth and sustainable integration.

To that end, it is necessary to be engaged in advanced economies through strategic shareholders, on the spirit of mutual benefits. Shareholders are expected to share with the Group difficulties as well as opportunities. With that in mind, the Group was focused on seeking strategic shareholders after its privatisation. Until now, Petrolimex has chosen one Japanese group – that is a big enterprise with lots of similarities with Petrolimex but was established and developed long before Petrolimex and has stronger financial capability and more advanced science and technology.

The Group expects strategic shareholders to have a voice and to be involved more deeply in the management issue, which first and foremost aims to affirm partners with Petrolimex openness, transparency and open-minded attitude. Based on strategic co-operation contracts, both sides contribute human resources with the aim to enhance the efficiency of and renovate corporate management. This is really a big difference since Vietnamese enterprises usually seek for capital rather than share management work with partners.

Thank you!