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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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).
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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.
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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:
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(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?
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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.
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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
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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).
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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
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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.
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