Building a joint venture in an emerging market
A Burmah Castrol case study

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Page 4: Partnerships

Burmah Castrol 4 Image 4The marketing information provides a strong case for Castrol’s involvement in Vietnam. There is clearly a gap in the market for the supply of high quality, performance lubricants. Castrol’s association with Vietnam began in the early 1980s through a link with Vosco Shipping, Vietnam’s premier overseas shipping line, which, at that time, was having vessels constructed in the UK. The ongoing link between Castrol and Vosco grew from strength to strength and Castrol developed a dominant share (90%) of the Vietnamese marine market. As a result of this link, Castrol was introduced to Saigon Petroleum in 1988.

Saigon Petroleum is a former subsidiary of the Food Company of Ho Chi Minh City (Foocosa). Foocosa is one of the most successful capitalist organisations in Vietnam. It has a sales turnover in excess of 200 million US dollars per annum and is one of the largest earners of foreign exchange in the country. It therefore has the facility to provide foreign exchange for importing base oils and additives. Foocosa itself is wholly owned by the People’s Committee of Ho Chi Minh City (effectively the Municipality). The creation of the joint venture in the early 1990s was built on a number of years of close co-operation involving the distribution and test marketing of new and existing lubricants in Vietnam.

Castrol and Saigon Petroleum established the joint venture under Vietnamese law to construct and operate a lubricant blending plant and to market and sell lubricants in Vietnam, trading under the name Castrol Vietnam Ltd. Castrol owns 60% of the joint venture and Saigon Petroleum owns 40%. Both sides have a blocking vote.

Vietnamese law allows the setting up of joint ventures providing they can meet one of three success criteria:

  • bringing about considerable improvement in the appearance and quality of the products and an increase in output
  • creating products which Vietnam urgently needs or producing import substitutes
  • achieving considerable savings in terms of raw materials and energy.

Castrol Vietnam clearly met all three of these criteria.

Burmah Castrol | Building a joint venture in an emerging market