Tài liệu Corporate restructuring in state-owned construction sector in viet nam, the case of vinaconex corporation

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Thai Nguyen University Southern Luzon State University Socialist Republic of Vietnam Republic of Philippines DOCTOR OF BUSINESS ADMINISTRATION DISSERTATION CORPORATE RESTRUCTURING IN STATE-OWNED CONSTRUCTION SECTOR IN VIET NAM: THE CASE OF VINACONEX CORPORATION Adviser: Dr. Melchor Melo O. Placino Researcher: Nguyen Phuc Huong Researcher ID: SLSU-DBA12009-21 Date of birth: November 30, 1975 Course: SLSU-DBA1 (2009-2013) Thai Nguyen, November 2013 ACKNOWLEDGMENT During completion of this study, the author has received significant support and collaboration from many organizations and individuals. First and foremost, I take this opportunity to express my profound gratitude and deep regards to my guide Dr. Melchor Melo O. Placino from Southern Luzon State University for his exemplary guidance, monitoring and constant encouragement throughout the course of this dissertation. I would like to thank PhD. Nguyen Ngoc Thang from Vietnam National University Hanoi, Tran Thi Kim Thu - Assoc.Prof. PhD, Head of Faculty of Statistics - National Economics University and all my best friends who have supported and encouraged to complete my dissertation. I have to acknowledge the contributions of my colleagues at subsidiaries of VINACONEX Corporation in the process of distributing to and collecting questionnaires. Without this support, I could not have gathered such huge database for research and analysis. I also thanks go to all Vinaconex leaders, other state-owned enterprises leaders and some MOC managers. Special thanks goes to Thai Nguyen University and Southern Luzon State University for their cooperation in this training program which provides me with an opportunity to participate in and conduct the project that I have long cherished. Last but not least, many thanks go to my family. They are always beside me and encourage me through the duration of my studies. I am also indebted this achievement to my beloved wife and my children for their great help and support. Nguyen Phuc Huong, November 2013 1 DECLARATION I, Nguyen Phuc Huong, hereby submit my dissertation for oral examination, entitled “PROBLEMS AND ISSUES IN CORPORATE RESTRUCTURING IN STATE-OWNED CONSTRUCTION SECTOR IN VIET NAM: THE CASE OF VINACONEX CORPORATION”, truthfully declare that the said paper is a product of my original research investigation. Signed this 15th November 2013 at Thai Nguyen University. Nguyen Phuc Huong, DBA candidate 2 TABLE OF CONTENTS ACKNOWLEDGMENT ..................................................................................................................... 1 DECLARATION ................................................................................................................................ 2 TABLE OF CONTENTS .................................................................................................................... 3 LIST OF TABLES .............................................................................................................................. 5 LIST OF FIGURES ............................................................................................................................ 7 ABSTRACT ....................................................................................................................................... 9 CHAPTER I: INTRODUCTION....................................................................................................... 10 1.1. Background of the study .........................................................................................................10 1.2. Problem statement ..................................................................................................................13 1.3. Research Objectives ...............................................................................................................13 1.4. Research Questions ................................................................................................................14 1.5. Hypotheses .............................................................................................................................15 1.6. Scope and Limitation of the Study ..........................................................................................15 1.7. Reseach Definitions ................................................................................................................16 1.8. Significance of the Study ........................................................................................................17 1.9. Structure of the Study .............................................................................................................18 1.10. Conclusion ...........................................................................................................................19 CHAPTER II: LITERATURE REVIEW ........................................................................................... 20 2.1. International related research ..................................................................................................20 2.1. National related research ........................................................................................................22 2.3. Theoretical and analysing framework .....................................................................................26 2.4. Analysing framework .............................................................................................................27 CHAPTER III: METHODOLOGY ................................................................................................... 30 3.1. Determination of sample.........................................................................................................30 3.2. Research design......................................................................................................................31 3 CHAPTER IV: RESULTS AND DISSCUSION ............................................................................... 32 4.1. Overview of the Vinaconex Corporation .................................................................................32 4.1.1. General information ......................................................................................................... 32 4.1.2. History of Vinaconex Corporation ................................................................................... 32 3.1.3. Main characteristics of Vinaconex ................................................................................... 34 4.2. General points ........................................................................................................................36 4.2.1. Description of respondents ............................................................................................... 36 4.2.2. Verification of rating tools ............................................................................................... 39 4.3. Analysis on each issue relating to restructuring process ..........................................................39 4.3.1. Reasons for restructuring of SOEs in the construction industry of Vietnam ...................... 39 4.3.2. Competition ..................................................................................................................... 42 4.3.3. Strategy ........................................................................................................................... 43 4.3.4. Conflict ........................................................................................................................... 46 4.3.5. Ownership ....................................................................................................................... 49 4.3.6. Leadership ....................................................................................................................... 51 4.3.7. Employment .................................................................................................................... 54 4.3.8. Technological Innovation ................................................................................................ 57 4.3.9. Corporate Governance ..................................................................................................... 60 4.3.10. Finance .......................................................................................................................... 62 4.4. Analysis of differences in opinions of staffs at different ages about key issues ........................64 CHAPTER V: FINDINGS, RECOMMENDATIONS, AND CONCLUSIONS ................................ 67 5.1. Findings .................................................................................................................................67 5.2. Implications ...........................................................................................................................69 5.3. Limitation and recommendation for future research ................................................................71 5.4. Conclusion .............................................................................................................................72 REFERENCES ................................................................................................................................. 73 APPENDICES .................................................................................................................................. 77 CURRICULUM VITAE ................................................................................................................. 128 4 LIST OF TABLES Table 1: The Workforce of Vinaconex Table 2: Vinaconex’s contributed capital in subsidiaries and affiliates Table 3: Vinaconex’s contributed capital in diffirent business sectors Table 4: Description of respondents Table 5: Reliability Statistics Table 6: Reasons for corporate restructuring Table 7: Opinions of respondents about reasons for restructuring Table 8: Opinions of respondents about competition during corporate restructuring Table 9: Opinions of respondents in different job positions about Competition Table 10: Opinions of respondents about Strategy during corporate restructuring Table 11: Opinions of respondents in different job positions about Strategy Table 12: Pearson Chi-Square Tests Table 13: Opinions about Conflicts regarding corporate restructuring Table 14: Opinions of respondents in different job positions about Conflict in benefit Table 15: Pearson Chi-Square Tests Table 16: Opinion about Ownership in corporate restructuring Table 17: Opinions of respondents in different job positions about the role of majority shareholders Table 18: Pearson Chi-Square Tests Table 19: Opinions about leadership in corporate restructuring Table 20: Opinions of respondents in different job positions about the role of shareholders Table 21: Pearson Chi-Square Tests Table 22: Opinion about Employment in corporate restructuring Table 23: Opinion of respondents in different job positions about opportunity to adjust Personnel Table 24: Pearson Chi-Square Tests 5 Table 25: Opinion about Technological Innovation in corporate restructuring Table 26: Opinion of respondents in different job positions about Technological Innovation demands Table 27: Opinion about Corporate Governance in corporate restructuring Table 28: Opinion of respondents in different job positions about Corporate Governance Table 29: Pearson Chi-Square Tests Table 30: Opinion about Finance in corporate restructuring Table 31: Opinion of respondents in different job positions about Capital preservation in enterprises Table 32: Pearson Chi-Square Tests Table 33: Average score of different ages in assessment of key issues 6 LIST OF FIGURES Figure 2.1: Kurt Lewin’s Change Management Model Figure 2.2: An analyzing framework Figure 4.1: Organization Chart of Vinaconex Figure 4.2: Age structure based on job position 7 LIST OF ABBREVIATIONS VINACONEX: Vietnam Construction and Import - Export Joint Stock Corporation VINACONEX-1: Construction Joint-Stock Company No.1 (Subsidiary of VNACONEX Corporation) MOC: Ministry of Construction GDP: Gross Domestic Product CEO: Chief Executive Officer SOEs: State Owned Enterprises CIEM: Central Institute of Economic Management SPSS: Statistical Package for the Social Sciences BOM: Board of Managers PMU: Project Management Unit 8 ABSTRACT The study of corporate restructuring in state-owned enterprises has been the hot topic in the academic world. However the interests of researchers have focused on investigating the phenomena of corporate restructuring more in the developed countries than in the developing world. Little study has been done in investigating the corporate restructuring in state-own enterprises in Vietnam. This is the first study that devotes to explore the corporate restructuring in a specific construction company in Vietnam. This study aims to investigate what problems and issues arise to corporate restructuring in a construction company. A typical five-level Likert item questionnaire was designed for the data collection. We will analyze the problems and issues arising from the restructuring in construction sector, and the social impact of restructuring on the stakeholders. The findings show that majority of respondents strongly agreed with the reason that the restructuring resulted from their urgent needs which aimed to help them come out of recession, or avoid bankruptcy. In addition, the company’s restructuring decision was determined by the company’s internal and external factors. Vinaconex need to pay more attention to training on management for managers and carried out technological innovation. From the findings, we proposed some solutions to deal with problems arising from the restructuring for VINACONEX. The result of study provides more evidence for the theories about corporate restructuring and contributes to the growing knowledge in strategic management by using the specific Vietnamese case. In this study, we also draw some limitations and recommendations for future research. 9 CHAPTER I: INTRODUCTION 1.1. Background of the study Vietnam embarked on the Doi Moi (renovation) policy in 1986. Since then, the country has experienced radical changes, first and foremost in its fundamental economic thinking. The centrally planned economy a-la-the Soviet Union was replaced by a market economy, albeit of a socialist character, which started with a sweeping restructuring of the state-owned sector. This allowed the private sector to join the economy, which facilitated the process of full integration into the region and world mainstream. During 20 years of Doi Moi, the gross domestic product (GDP) of Vietnam has seen sustained growth (Central Institute of Economic Management, CIEM, 2006). The rate of increase was 8.2 per cent each year on average in the 1991–1995 period, reaching 8.5 percent in 2007 (General Office of Statistics, 2008). The Doi Moi (renovation), economics growing, competition and globalization along with tightened fiscal policies are causing both private and public sector Vietnamese enterprises to strive for greater efficiency and higher cost-effectiveness. In many cases the desired results cannot be achieved without subjecting the corporate strategy and structure to some transformation. In this context, restructuring is no longer just an option. It is a necessity for survival and growth (Cascio, 2002). The major objective of Vietnam’s reform process is to create a market economy with socialist characteristics. The enterprise reforms in Vietnam have three main components (Central Institute of Economic Management, CIEM, 2006). The first component comprises stateowned enterprises (SOE) privatization and restructuring to alleviate the problems that are impairing enterprises’ ability to compete. The second component is to improve enterprise behavior by establishing effective corporate governance mechanisms and strengthening financial discipline. The third one is provision of supporting institutions and infrastructure needed for a market based enterprise economy. Key restructuring is the development of social 10 benefit programs to deal with the economy adjustments entailed by reforms, allow enterprises to focus on their commercial objectives and long term strategy. Economic reform in Vietnam is shaped by several distinctive characteristics, reflecting policy-imposed constraints and other special characteristics of the economy. First, characteristic reflects the fundamental policy choice that significant public ownership and control of industry will be retained. This choice partly explains why enterprise reforms have been so heavily focused on SOE (CIEM, 2006; Thang & Quang, 2007). Second, competition is strong in many although not all industries (Martyn, 1995). The economic behavior of enterprises has become increasingly responsive to market forces as a result of competition, the growth of non-state enterprises, and management reforms to SOE. The scope of public ownership has been substantially narrowed in recent years while the scope for private ownership has been widened. Third, most state-owned enterprises are the relatively low level of revenues, which are partly a reflection of current structural problems (Dockery &Herbert, 2000). Restructuring and privatization are now widely seen as important instruments of government policy for creating appropriate conditions for enhanced economic growth and for redefining the role of the State (Cappelli, 1995; Morris et al. 1999; Alkhafaji, 1992). Many countries in every continent have in recent years embarked on projects to privatize and restructure their SOEs, including Argentina, Chile and Mexico in Latin America; China, Malaysia, Pakistan and the Philippines in Asia; the United Kingdom and France in Western Europe and the transition countries of Central and Eastern Europe; as well as Cote d’Ivoire, Nigeria and Togo in Africa. Some industrialized countries, including New Zealand and the United Kingdom, and several developing countries, such as China and Mexico, have pursued privatization programs that are both radical and ambitious in scale and scope (Jun Zhao, 2009 Diana et. al, 1998). 11 Privatization and restructuring of the SOE sector in Vietnam is intended to concentrate state ownership and control on a core of large enterprises in strategic industries while withdrawing state ownership and support from small and medium-sized enterprises. SOE restructuring is closely linked to the economic restructuring of the enterprise sector as a whole and to corporate governance reforms (CIEM, 2006). Creation of the strategic core of large SOE involves their conversion into modern enterprises and the formation of large enterprise groups that will be able to compete against large foreign multinationals. These groups face important challenges in overcoming the present problem of their SOE and in sustaining the efficiency and flexibility that will be needed to compete successfully in international markets. In Viet Nam, the SOEs are holding a key role in the national economy and is making an important political mission in the country. SOEs have occupied a big resource of the economy; however, their contributions to the national economy have been limited in term of contribution for GDP ratio, offering employment, Factors usage efficiency of production (land, capital, materials, etc). Specifically, the shortcomings of the SOEs and the need to carry out necessary restructuring process as follows:  Effective Business of the SOEs are more and more reduced, the financial situation of many SOEs are not safe and healthy. Profitability from state capital is limited. Many SOEs have been latent risk and disruption.  State policies of investment management have many shortcomings that limited investment performance of SOEs. Results of SOEs perform tasks are not commensurable with the scale of resources invested.  There are too few specific rules, institutions to manage the Group's state economy, state corporations. 12  Government, ministries, industries, including the construction industry has project for restructuring the economy. The construction sector corporations also simultaneously make plan for restructuring the economy of its business; but actually implementing specific process for restructuring the economy in the construction business are confused, and have not actually achieve the desired effect.  Currently, Vinaconex is a corporation headed scale construction sector in Vietnam. Vnaconex Corporation is kind of joint-Stock companies with controlled shares owned by State (> 51%) thereby Vinaconex has status as mentioned above. Vinaconex recently has been processing corporate restructuring; however in the process of corporate restructuring, Vinaconexcorporation has faced many of the problems that previous inadequacies was not fully foreseen. 1.2. Problem statement Being one of senior managers in VINACONEX, the author has recognized that research on the topic “CORPORATE RESTRUCTURING IN STATE-OWNED CONSTRUCTION SECTOR IN VIET NAM: THE CASE OF VINACONEX CORPORATION” will benefit the company in particular and construction industry in general. The study aimed to draw a portion of system problems in the process of corporate restructuring of state-owned construction enterprises, as well as to determine the practical significance to the construction industry in particular enterprises and SOEs in Viet Nam. 1.3. Research Objectives The study devotes to explore the phenomena of corporate restructuring issues in the construction sector in Vietnam, particularly, the relationship between restructuring and firm’s performance. The study tries to fill the gap of research on relationships between restructuring and financial performance in transition economies in Vietnam. The study works and explores on the following specific objectives: 13 (1) To determine the awareness of the managers of Vinaconex Corporation on the concept and the implementation of the corporate restructuring in state-owned firms in Vietnam. (2) To identify the main factors/problems and issues that affects the process of corporate restructuring at Vinaconex Corporation. (3) To examine the effects on the ownership structure on the corporate restructuring of the construction sector in the SOEs. (4) To propose the most appropriate model for Vinaconex after restructuring. (5) To formulate policy suggestion to the government's to support business sector in corporate restructuring. 1.4. Research Questions With the above objectives, the following questions are addressed to meet the objectives of this dissertation:  Q1: How do Vietnamese managers perceive and interpret corporate restructuring?  Q2: What framework (factors/problems and issues) is used in analyzing corporate restructuring in Vietnam SOEs?  Q3: How restructuring in the construction sector in SOEs affect the state shareholders and the ownership structure?  Q4: What is the most appropriate model for VINACONEX Corporation after restructuring?  Q5: What policy can be suggested in order to support a successful SOEs restructuring? 14 1.5. Hypotheses During the study and based on the research issues, the following hypotheses are outlined and tested by using statistical methods to answer the research questions and to orientate the survey and data collection. H1: Restructuring will improve the competitiveness of the company on its core business. H2: Restructuring will improve the situation on current ownership of the company. H3: Restructuring will improve the leadership and human resource management of the company. 1.6. Scope and Limitation of the Study Subjects of the study are almost Vinaconex Corporation (include head-office and all subsidiaries of Vinaconex). The total number company of Vinaconex (subsidiaries) is 58. Which are 29 Construction, Real-Estate Company; 8 Production of construction materials company; 10 Supply Power and Water company; 4 Insurance, Finance and Banking company; 7 Design consultancy and Services, trade company. The research instrument is survey with questionnaires, concentrated on leaders, managers, and experts. The actual survey data (primary) are conducted during the period from May, 2013. The secondary data are based on national statistics and company reports from 2010 to June 2013. Due to difficulties in identifying all Vinaconex company and other limitations, the sample is mostly in Vinaconex Corporation and some subsidiaries; therefore, the representativeness of the sample will be limited. 15 1.7. Reseach Definitions Corporate restructuring is one of the most complex and fundamental phenomena that management confronts. Each company has two opposing strategies from which to choose: to diversify or to refocus on its core business. While diversification represents the expansion of corporate activities, refocusing characterizes a concentration on its core business. From this perspective, corporate restructuring is a reduction in diversification. Corporate restructuring entails a range of activities including portfolio restructuring, financial restructuring, and organizational restructuring (Gibbs, 1993). Accordingly, portfolio restructuring involves the redeployment of corporate assets through divestitures of business lines that are considered peripheral to the core business strategy. Significant changes in a corporation’s capital structure are termed financial restructuring. In organizational restructuring, the focus of change is on management and internal corporate governance structures. There are three major options for corporate restructuring includes arranging a sell- off to a strategic buyer, externalizing an independent entity, and liquidating (Achleitner, 2000 and Charifzadeh, 2002). First, sell-offs as they are called, describe the sale of an affiliate company or business unit to a strategic buyer. In these cases the buyer normally purchases the whole business unit in order to exert full control. The second group of restructuring concepts involve the separation of an independent entity, and include (i) change in ownership of the affiliate company from the parent corporation directly to its shareholders; (ii) break-up of a firm into two or more independent companies; and (iii), subsidiary initial public offerings (IPOs) and equity carve-outs. Subsidiary IPOs describe the partial sale of an affiliated company via sales of shares in the stock market in which the holding corporation may lose its control over the affiliate. Equity carve-outs 16 describe the sale of a minority participation of an affiliate on the stock market. After this transaction, the holding firm remains in control of the affiliate. Finally, the third class of restructuring options is liquidation, which is different from the first two options because the individual assets of the unit are sold and the proceedings are distributed among its shareholders. 1.8. Significance of the Study SOEs have held the dominant role in the economic development. To assess truly its role within the whole economy, it has been contributing to GDP, job and income generation and national budget. Therefore, SOE reform is a key element in the Vietnamese Government’s programmed of the Doi Moi (renovation), under which mercerization and integration into the global economy are occurring. The reform was intended to improve the efficiency and profitability of SOEs by reducing excess capacity, shedding surplus labor, lowering debt loads, and upgrading productive capacity. In addition, it is to transform SOEs into market players by changing their ownership and management so as to improve the competitiveness in the global market. The economic effect of the restructuring programmed has had great impact on enterprise development and growth. It is often believed that restructuring has a positive impact on the performance of the company. However, this is not always true in practice but its social consequences are even troublesome. One of these consequences, as some scholars already note, is a rapid transfer of state assets into the hands of managers and other private individuals (Ding 2000). Another emerging consequence is that the restructuring program has been accompanied by severe measures against workers, including collective layoffs, deprivation of benefits, labor rights abuses, and unstable working conditions. Lacking effective state protection as well as organizations of their own, workers have become increasingly vulnerable by despotic managerial power (Lee 1999). 17 In order to achieve desirable economic and social results in the process of restructuring, management should always have a plan of action if restructuring becomes inevitable. At the same time, SOEs should not be left alone to carry out restructuring; governments too often feel the impact of the restructuring of enterprises, especially in situations where whole sectors or regions are affected. The study will be not only answer the research questions but also expanding knowledge and experience in the field of corporate restructuring in general and in construction sector in Vietnam through the examples from VINACONEX. Corporate restructuring has been studied in Vietnam. However, there are not many official researches on corporate restructuring in construction and Real Estate Corporation. Thus, it is expected that the study will contribute not only in restructuring process for Vietnam but also systemizing and developing corporate restructuring issues in general and restructuring of corporations in construction sector in particular. More specifically, we studies restructuring activities of SOEs in general and in the construction sector in specific. VINACONEX will be chose for case study of enterprise restructuring. The study analyzes the current structure and proposes a new structure and management model for VINACONEX in the future. The results are expected to really contribute to completing restructuring process in VINACONEX. 1.9. Structure of the Study The dissertation consists of five chapters. In chapter 1, the author introduces the research context, scope and objectives, research questions, significance of study, and provides the outline and the structure of the dissertation. Chapter 2 aims to advance understanding of the corporate restructuring and indicate articles containing related information and data have been scanned. Chapter 3 focuses on the methodology of this study. Sample of the study, research design, questionnaire design, data collection and treatment method have been addressed. I have 18 implemented a survey with sample of Vinaconex Corporation and 58 subsidiaries of Vinaconex. Chapter 4 concentrates on presenting, analyzing, interpreting the data from the survey. Finally, Chapter 5 summarized some key findings of the survey and provide implications, limitations and recommendations for future research. This chapter provides and presenting the findings of this study and suggest model of corporate restructuring of Vinaconex Corporation. This chapter also summarizes the contributions of this dissertation to theoretical and managerial implications. Subsequently, this chapter discusses the limitations and presents directions and recommendations for future research. 1.10. Conclusion The purpose of this study is to indentify “CORPORATE RESTRUCTURING IN STATE-OWNED CONSTRUCTION SECTOR IN VIET NAM: THE CASE OF VINACONEX CORPORATION”. Beside, the dissertation also indicates awareness about concept, the implementation of the corporate restructuring of the managers in Vietnam and suggest about the policy of Vietnam on Corporate restructuring. A drawback of this study is that it focuses mainly on the issues from the perspective of almost the Vinaconex Corporation; therefore the representativeness of the study is limited. This should be taken into consideration in future studies. 19
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