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Circumspect Asian Market: Rules of Long Distance Race

Circumspect Asian Market: Rules of Long Distance Race
19.08.2015

To implement this ambitious plan, they are constructing new mines and planning to fit them up with machinery and equipment. They will require a lot of machinery, especially if we make allowance for the fact that currently “black gold” is still mined by hand.


In 2012, Corum Group signed an agreement for construction of shafts with Vinacomin, the Vietnamese largest mining corporation. This summer, they have already completed sinking of the linear parts of two vertical shafts at Nui Beo Mine situated in Quang Ninh, the country’s coal basin. The second stage, mining assembly work, is expected this autumn; the project is planned to be completed in 2017.


The three years’ cooperation with the Vietnamese businessmen taught a number of lessons for Corum’s Ukrainian management. Companion Online has found out what the representatives of the machine-building sector managed to know about the Vietnamese and what nuances any business should take into account. Ildar Saleyev, Director of Corum Group’s Underground Mining Division, offers his own recommendations of what should be accounted for when penetrating into the Vietnamese market if you do not want your project to be occasional.


Risks Not for Vietnamese


The Vietnamese prefer a business model, which suggests minimising any of their risks. For example, if a Ukrainian builds something, he actually creates a new business and, in majority of cases, buys construction machinery, which he will probably not need in the future, hires people… But a Vietnamese hires a company, which can implement his project turn-key. People and machinery are what this contractor should be concerned about, who should bear responsibility for quality and commissioning of the facility. The Vietnamese invest, determine the expected result and earn money. They apply the same method to motorway construction, for instance: the contractor should care for and provide machinery, workers, project documentation. The customer invests and then earns money on its operation. They even do not invest at all in large-scaled facilities, instead attracting the companies that can become investors and gain profits after the project has been completed.  


The same refers to mines. For a long time, the Vietnamese have been extracting coal in mines by hand; they simply do not know how to do it mechanically and, moreover, they cannot construct them. They need a partner able to settle this issue by involving its own machinery, equipment, knowledge and skills. Our Group has all required resources, such as qualified specialists in various sectors, fr om design to construction, and our own machinery. Vietnam’s mining and geological conditions are very difficult, as the country is situated on the conjunction between tectonic plates, though Ukraine’s conditions are not at all easy, too. Therefore, the problems that we faced with were not unusual for us. Now we have already completed sinking of the linear parts of two vertical shafts at Nui Beo Mine; later, we are going to provide our mining machinery and equipment, teach their specialists to operate it and provide technical support. By applying such a systematic approach to conduct business in the market, our Group is convinced in long-term cooperation. The fact that the level of mechanisation at Vietnamese mines is very low, as they rather look like what we are used to call “pits”, will work towards this. Even if we supplier equipment to those miners, which can be operated at their mines in theory, everything will go down the drain without proper staff training. They will not be able to operate this equipment correctly. Finally, it will be the partner to blame, not them. Of course, no one will lay claims, but the way to their market will be closed for the equipment manufacturer. So, we have come close to the second peculiarity of the Vietnamese. 


They Do Not Speak of Their Failures


I remember a story, when a European leading manufacture supplied 40 (!) heading machines to Vietnamese miners. The miners’ poor qualification resulted in the equipment getting out of order due to incorrect operation, and the contract did not provided for any service maintenance.  The machines were completely worn and were taken on the surface. The Vietnamese did not see any result; the investment was not paid back. However, if one visits the mine, where this equipment used to be operated, and asks them what the situation with those machines is, they will answer that everything is alright.


After studying the market and accepting several rules as a guide for action, our Group developed an optimal method of cooperation with the Vietnamese miners: we provide them with the opportunity to be trained by using our equipment and Corum’s specialists willingly share their experience. Thus, when the Vietnamese operate our equipment themselves, the risk, as it was with the 40 heading machines, will be eliminated.


Way to Vietnam’s Subsoil Resources Lies through “Prove and Show” Approach


Today, Vietnam does not buy our equipment, but a sinking service. We demonstrate our equipment’s efficiency. In a year, they will see that the equipment functions well and then, I am sure, they will be ready to buy it. Of course, the price will be depreciable; we understand it and are ready to accept these conditions. This market may only be penetrated through a “prove and show” approach, but this approach means investment in a strong and long-term partnership, because once the Vietnamese became sure that their partner is reliable, they prefer not to alter it. 


Find “Mentality-Familiar” Interpreter


The market of Vietnam is complicated and strange, with its own rules, which a European cannot understand. To inculcate your own rules, even if you are an employer, is a road to nowhere. This is why, I recommend that when you are penetrating into the market, find an interpreter. I do not mean a specialist with a good command of the local language. The interpreter should rather be a person familiar with the country’s mentality, who has been living there for a long time. In our case, the availability of such a “mentality-familiar” interpreter had a positive impact on the duration of negotiations, for example. The matter is that the Vietnamese may exhaust the Europeans by a long period required to take a decision: you will be receiving an answer “yes, we are working on it” for six months and then you will be signing a contract for another six months’ period… What are their arguments? The contract has to “rest”; we had better conclude it next year, because December is an unfavourable month…


We call it a superstition, but as a matter of fact, everything is simpler: the Vietnamese like long negotiations, they like merchandising and chaffering. When Corum was penetrating into the market, our key offer was to train Vietnamese miners. I cannot say that this enabled us to reduce the duration of negotiations considerable, but it surely influenced the final decision. Of course, we understand that the miners will learn something after some time and, theoretically, they will probably decline our services. But it is not that simple. We teach them to use our equipment, thus tying them to it. By the way, we are planning to develop a wide educational programme for Vietnamese miners to be trained at Ukrainian educational facilities. The programme is only being planned, as their specialists do not hustle to visit our country.


We have already had pilot and rather successful experience in this sphere. When we were only beginning to construct mine shafts, we brought 35 mining specialists from Vietnam to Ukraine, wh ere they underwent training at Dnipropetrovsk Mining University. There was a special programme developed for them. Every week, they attended mining facilities, mines and pits. It was a pilot project, which enabled us to become outlined against other offers in the market.


This is not a new approach, but it is efficient. If you can remember, the Soviet Union received many students from Vietnam. Nowadays, that generation came to the government; they treat us rather decently, know Russian and recall their stay here with nostalgia. Why cannot we lead the same way and make a contribution to developing our business? Vietnam is actively developing; therefore, here is my message to everyone who is beginning or is already operating in the Vietnamese market: have courage, because it is worth it.



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