About everyone who has a PETRONAS license (there’s another story) dream on getting onto the Vendor Development Program (VDP) or become a VDP vendor.
The VDP is meant to nurture Malaysian companies by allowing the selected company to be on a shortlist (of one, I think) of approved suppliers for different product categories. For example, Process-3 is the VDP for “upstream and downstream sectors ‘Online Toxic Decontamination’ Chemical & Services Provider”.
The selected company typically starts of being an agent or stockist for a product. By disallowing fair competition, the company is provided with the opportunity to invest in the product, either spinning off related product lines as a result of technology transfer, or by taking up the challenge of setting up a local product line.
There are a number of advantages to the VDP vendor:
- You have the opportunity to recoup your capital investment in a potentially risky decision. As everybody will have to buy from you, you a guaranteed a healthy market.
- PETRONAS will have a big interest in making you succeed, so you can be sure of guidance and oversight from Big Brother.
- You have a clean sweep of your product category, making your competitors jump through hoops to get the Production Sharing Contractors or Operating and Production Units approval to use their products. Think of it as a sanctioned blue ocean strategy, by kicking out the rest of the fish.
I can see disadvantages here:
- Sometimes it seems like whoever is first to the post, wins. I have heard of a case where the VDP promised to construct a fabrication plant when awarded the VDP. It’s still a promise.
- No garauntee of quality. A VDP product is not necessarily the best. Those in the industry complain about the quality of service from various VDPs, but what can we do about it?
- If it was you, wouldn’t you try to get VDP status to make a quick buck, after doing a SWOT analysis?
- I think it kinda defeats the spirit of enterpruenership. What happens to the small fry who has developed a local product, but it happens to be in a VDP category where a megalith company has taken root? I happen to know that there is a local mechanical seal manufacturer with patented products running a factory in Shah Alam, but he can’t even enter a VDP category because there is already someone there, and the powers that be in licensing won’t consider his application.
- If the market segment is larger than what the VPD vendor can provide, you have effectively limited the ability of the oil & gas market to respond according to the demand of market forces. The VDP vendor is free to dictate prices according to artificial purchasing pressures. “You want that screw today? We’ll sell it to you for 10,000% markup, if not come back when Mars is at its closest approach to Earth.”
Of course, not everyone is as twisted as me and Jabba. I congratulate Corro Shield for graduating from the VDP program, which gives me hope that there are people out there with the interests of Malaysia and the rakyat at heart.