Corporate restructuring in state -owned construction section sector in Viet Nam The case Vinaconex corporation

iii This is to certify that the research work / dissertation entitled: CORPORATE RESTRUCTURING IN STATE-OWNED CONSTRUCTION SECTOR IN VIET NAM: THE CASE OF VINACONEX CORPORATION, orally d

i

CASE OF VINACONEX CORPORATION

_

A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines

in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam

Submitted in Partial Fulfillment of the Requirements for the Degree

DOCTOR OF BUSINESS ADMINISTRATION

A program jointly offered by Southern Luzon State University, Republic of the Philippines and Thai Nguyen University,

Socialist Republic of Vietnam has been approved by Oral Examination Committee

MELCHOR MELO O PLACINO,

Ph.D

APOLONIA A ESPINOSA,

Ph.D

Adviser Dean

Accepted in Partial Fulfillment of the Requirements for the Degree

Doctor of Business Administration _ WALBERTO A MACARAAN, Ph.D

Date Vice President for Academic Affairs

iii

This is to certify that the research work / dissertation entitled: CORPORATE RESTRUCTURING IN STATE-OWNED CONSTRUCTION SECTOR IN VIET NAM: THE CASE OF VINACONEX CORPORATION, orally defended/ presented under the DBA Program jointly offered by Southern Luzon State University of the Republic of the Philippines and Thai Nguyen University of the Socialist Republic of Vietnam, embodies the result of original and scholarly work carried out by the undersigned

This dissertation does not contain words or ideas taken from published sources or written works by other persons which have been accepted as basis for the award of any degree from other higher education institutions, except where proper referencing and acknowledgement were made

_

Researcher/Candidate: NGUYEN PHUC HUONG

Date Orally Defended: December 14th, 2013

Noted:

iv

During completion of this study, the researcher has received significant support and collaboration from many organizations and individuals

First and foremost, he likes to 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

He would also like to thank PhD Nguyen Ngoc Thang from Vietnam National University Hanoi, Asst Prof Tran Thi Kim Thu, Ph.D, Head of

Faculty of Statistics - National Economics University and all his best friends who have supported and encouraged him to complete this dissertation

He also wants to acknowledge the contributions of his colleagues at subsidiaries of VINACONEX Corporation during the conduct by distributing and collecting the survey questionnaires Without this support, he could not have gathered large database for research and analysis Also, he likes to confer his gratitude to all Vinaconex leaders, other state-owned enterprises leaders and some MOC managers

Lastly, he wants to express his special thanks to Thai Nguyen University and Southern Luzon State University for their cooperation in this training program which provides him with an opportunity to partake and conduct this study

Nguyen Phuc Huong

Most especially, to my wife, Nguyen Thi Huong, for her love and for

believing in my abilities; for her sacrifices and understanding of leaving our home every Saturday, Sunday and often come home late after official working time to attend the DBA class, especially during the conduct of my dissertation, and most importantly for taking care of our home and our family

To my friends and collaborative partners, who had always been with

me and never ceased to support me

NPH

vi

PAGE

TITLE PAGE ……… i

APPROVAL SHEET ……… ii

CERTIFICATE OF ORIGINALITY ……… iii

ACKNOWLEDGEMENT ……… iv

DEDICATION ……… v

TABLE OF CONTENTS ……… vi

LIST OF TABLES ……… viii

LIST OF FIGURES ……… x

LIST OF APPENDICES ……… xi

ABSTRACT ……… xii

CHAPTER I INTRODUCTION ……… 1

Background of the Study ……… 3

Statement of the Problem ……… 6

Objectives of the Study ……… 7

Research Questions ……… 8

Scope and Limitations of the Study ……… 8

Significance of the Study ……… 9

Definition of Terms ……… 11

II REVIEW OF LITERATURE ……… 13

Theoretical Framework ……….… 26

III METHODOLOGY ……… 31

Locale of the Study ……… 31

Research Design ……… 31

Population, Sample and Sampling Technique ………… 32

Research Instrument ……… 33

Data Gathering Procedure ……… 34

Statistical Analysis ……… …….…… 35

vii

IV RESULTS AND DISCUSSIONS ……… 37

Overview of the Vinaconex Corporation … ……… …… 37

General points……… 41

Analysis on each issue relating to restructuring process 44 Analysis of differences in opinions of staffs at different ages about key issues ……….… 65

V SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ……… 67

Summary of Findings ……….…… 67

Conclusions ……….……… 71

Recommendations ……….……… 72

REFERENCES …….……… ……… ……… 75

APPENDICES ……… 78

CURRICULUM VITAE ……… 118

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1 Financial Data of Vinaconex for the Past Three Years …… 39

2 The Qualifications of Vinaconex Employees ……… 39

3 Vinaconex’s Contributed Capital in Subsidiaries and Affiliates ……… 40

4 Vinaconex’s Contributed Capital to the Different Business Sectors ……… 40

5 Profile of the Respondents ……… 42

6 Reliability Statistics ……… 44

7 Reasons for Corporate Restructuring ……… 45

8 Perceptions of the Employees on Corporate Restructuring 46

9 Perceptions of Respondents About Competition During Corporate Restructuring ……… 47

10 Perceptions of the Respondents in Different Job Positions about Competition ……… 48

11 Perceptions of the Respondents about Strategy during Corporate Restructuring ……… 48

12 Perceptions of Respondents in Different Job Positions about Strategy ……… 49

13 Pearson Chi-Square Tests (Focus on their Core Business Areas) ……… 50

14 Perception about Conflicts Regarding Corporate Restructuring ……… 51

15 Perception of Respondents in Different Job Positions about Conflict in Benefits ……….……… 52

16 Pearson Chi-Square Tests (Conflicts in Perception) ……… 53

17 Perception of the Respondents about Ownership in Corporate Restructuring ……… 53

ix

18 Perception of the Respondents in Different Job Positions

about the Role of Majority Shareholders ……… 54

19 Pearson Chi-Square Tests (The Role of Majority

Shareholders) ……… 54

20 Perception about Leadership in Corporate Restructuring … 56

21 Perceptions of Respondents in Different Job Positions

about the Role of Shareholders ……… 57

22 Pearson Chi-Square Tests (Knowledge of BOM members) 57

23 Perception about Employment in Corporate Restructuring 58

24 Perception of Respondents in Different Job Positions

about Opportunity to Adjust Personnel ……… 59

25 Pearson Chi-Square Tests (Opportunity to Adjust

26 Perception of the Respondents about Technological

Innovation in Corporate Restructuring ……… 60

27 Perceptions of the Respondents in Different Job Positions

about Technological Innovation Demands ……… 61

28 Perceptions about Corporate Governance in Corporate

Restructuring ……… 62

29 Perceptions of the Respondents in Different Job Positions

about Corporate Governance ……… 62

30 Pearson Chi-Square Tests (Reforming the management

approach and methods) ……… 63

31 Perceptions about Finance in Corporate Restructuring … 63

32 Perceptions of the Respondents in Different Job Positions

about Capital Preservation in Enterprises ……… 64

33 Pearson Chi-Square Test (Capital Preservations in

Enterprises) ……… 65

34 Average Score of Different Ages in Assessment of Key

x

1 Kurt Lewin’s Change Management Model ……… 27

2 The Relationship between the Dependent Variable

(Corporate Restructuring) and Independent Variable ……… 30

3 Organization Chart of Vinaconex ……… 41

4 Age Structure Based on Job Position ……… 43

xi

A Questionnaire ……… 79

B Description of Respondents ……… 85

C Testing scale ……… 87

D Statistics ……… 88

E Frequency Table ……… 90

F The relationship between the position and Q1.2 ; Q2.2; Q3.1; Q4.2; Q5.1; Q5.3; Q6.4; Q7.1; Q8.1; Q8.3; Q9.1; Q10.2; Q10.3 ……… 99

G Point average - the age of the respondents ……… 113

`

xii

Title of Research : CORPORATE RESTRUCTURING IN

STATE-OWNED CONSTRUCTION SECTOR IN VIETNAM: THE CASE OF VINACONEX CORPORATION

Researcher : NGUYEN PHUC HUONG (PETER HEER)

Degree Conferred : DOCTOR OF BUSINESS ADMINISTRATION

Name and Address

of Institution

: Southern Luzon State University Lucban, Quezon, Philippines and Thai Nguyen University, Socialist Republic of Vietnam

Adviser : Dr Melchor Melo O Placino

Year Written : 2013

The study of corporate restructuring in state-owned enterprises has been the hot topic in the academe However, the interests of researcher have focused on investigating the phenomena of corporate restructuring more in the developed countries than in the developing countries There is very 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 - Vinaconex This study aimed to investigate what problems and issues arise to corporate restructuring in Vinaconex More specifically, this study would like to examine the effects of ownership structure, level of diversification, firm's size

on firm's performance of this company After that, it proposed a best model for Vinaconex after restructuring and provided suggestions for Vietnamese policy makers on state-owned enterprises restructuring

xiii

questionnaire was designed for the data collection The questionnaire was consisted of thirty five (35) statements related to competition, financial, corporate governance, new business strategies, human resource management, conflict, ownership, leadership, technology development, and company’s development This study utilized 400 respondents who gave information necessary to code all of the variables required for this study From the survey, the study analyzed the problems and issues that arise from the restructuring in construction sector, and the social impact of restructuring on the stakeholders The findings revealed that majority of respondents strongly agreed that the restructuring from their urgent needs 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

Based on the findings, solutions were proposed to deal with problems that arise from the restructuring of this company Vinaconex needs (1) to pay more attention to training on management for managers and carried out technological innovation; (2) to focus on two major business areas to achieve its vision, which is to become the leading company in the area of development, investment and management of Construction and Real Estate; (3) to develop effective management mode, transparent to avoid risks better; (4) to develop strategies for long-term financial management to ensure the sustainable development of the corporation; (5) to manage and better control

by increasing accountability for the operation of each unit member The result

of study provided pieces of evidence for the theories about corporate

xiv management by using the specific Vietnamese case In this study, limitations and recommendations were also drawn for future researchers

Chapter I INTRODUCTION

Vietnam government recently issued policies about Restructuring of state enterprises and Equitized enterprises whose charter capital is held over 50% by the State in Viet Nam focusing on economic groups and state-owned corporations in order to achieve the following objectives:

- State-owned enterprises and Equitized enterprises whose charter capital is held over 50% by the State have a more reasonable structure, concentrating on key sectors and areas, providing products, essential public services for society, security and national defense, being the hub for the state economy to perform the leading role and the important material force for the State to orient and regulate the economy and stabilize the macro-economic

- Improving competitiveness, the rate of return on equity for enterprises; completing the task of production and providing products, essential public services for society, security and national defense for public utility enterprises

Since December 2006, VINACONEX (Vietnam Construction and Import-Export Joint Stock Corporation) has implemented SOE privatization policy It is one of the first corporations that has successfully privatized in the whole Corporation and become a Joint Stock Enterprise owned and controlled

by the Government in line with Business Law of Vietnam Also, it has initially achieved great success Since the Corporation was established, VINACONEX has followed diversification strategy on production and business aspects and gained many proud achievements as well as has been highly appreciated by

clients, business community and society However, lately in the context of complicatedly and unexpected ever-changing macroeconomic such as highly increasing inflation in a long time, sign of emerging deflation, tight monetary policy, tight real estate policy and Government’s public investment cutting, etc., enterprises in the construction sector in general and VINACONEX in particular have coped with a lot of difficulties

Currently, more than ever, it is compulsory to restructure the Corporation when the Corporation has certainly developed and has been notably coping with economic instability in a long time Consequently, the old activity model is not compatible with new context VINACONEX has been confronting with serious requirements on restructuring to improve competitiveness capacity, maintain strong points and steadily overcome the crisis VINACONEX is not allowed to make mistake in restructuring because this mistake in such important task is synonymous with failure and difficulty in recovering from business activities Based on the problems for academic discussion and real requirements above, the author has selected the topic:

“Corporate Restructuring in State-owned Construction sector in Vietnam – the case of VINACONEX.” as thesis topic for DBA program Being one of managers in VINACONEX, the author has recognized that research in the topic is realistic It will help the Corporation to enhance and complete restructuring activities and helps VINACONEX Board of Management to update current knowledge and reality (case study) to make optimal restructuring strategies with high application and to be able to forecast as well

as estimate instability in the future In addition, a new structure, transparent and effective management will contribute to helping VINACONEX become

attractive to international and national investors, strategic partners That pushes VINACONEX to comprehensively develop to become one of leading strong corporations in construction section in Vietnam and orient to a construction corporation with certain trademark and share in the area

Background of the Study

Vietnam embarked on the Doi Moi (renovation) policy in 1986 Since then, the country has experienced radical changes, first is on 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 state-owned 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 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)

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

Statement of the Problem

In Vietnam, 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 terms 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 is 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 very few specific rules, institutions to manage the Group's state economy, state corporations

• 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, the corporation has faced many of the problems that previous inadequacies were not fully foreseen

Being one of the senior managers in VINACONEX, the researcher has recognized that research on the topic “CORPORATE RESTRUCTURING IN STATE-OWNED CONSTRUCTION SECTOR IN VIETNAM: 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 Vietnam

Objectives of the Study

Generally, this study aimed to explore the phenomena of corporate restructuring issues in the construction sector in Vietnam, particularly, the relationship between restructuring and firm’s performance It tried to fill the gap of research on relationships between restructuring and financial performance in transition economies in Vietnam

Specifically, this study sought to answer the following questions:

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 or 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

Research Questions

To meet the said objectives, the following questions were addressed: 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?

Scope and Limitations of the Study

This study was focused on Vinaconex Corporation (include head-office and all subsidiaries of Vinaconex) It is comprised of fifty eight (58) companies; twenty nine (29) constructions and real estate companies, eight (8) productions of construction material companies, ten (10) power and water

supply companies, four (4) insurance, finance and banking companies, and seven (7) design consultancy and services, trade companies

Then, for the research instrument, survey questionnaire was used It was primarily given to leaders, managers and experts The actual survey data were conducted last May, 2013 For the secondary data, it was based on national statistics and company reports from 2010 to June 2013 There was a limited sample in this study due to difficulties in identifying all Vinaconex company and other limitations, the sample was mostly in Vinaconex Corporation and some subsidiaries

Significance of the Study

SOEs held a dominant role in the economic development To assess 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

Furthermore, 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)

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 This study would not only answer those questions but it would also expand knowledge and experience in the field of corporate restructuring as well as in construction sector of Vietnam through the examples from VINACONEX

Corporate restructuring has been studied in Vietnam However, there are only few official researches on corporate restructuring in construction and real estate corporation Thus, it was expected that the study would 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 VINACONEX was chosen for case study of enterprise restructuring by analyzing the current structure and

by proposing a new structure and management model for the company in the

future The results were expected to really contribute to complete the restructuring process of VINACONEX

Definition of Terms

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 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

Chapter II REVIEW OF LITERATURE

This chapter presents the different related literature and studies for better understanding of the study

International Related Research

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)

In order to explore the roles different ownership structures, the joint effect of related and unrelated diversification strategies, and previous performance levels have on the restructuring strategies of such firms in China, the Author make clear understanding of restructuring strategies of Chinese business groups, by linking factors such as ownership structure, diversification strategies, and past performance to scope changes in these groups It can broaden our understanding of corporate restructuring in transitional economies, such as China and India Compared to other ownership types, government owned business groups tend to increase their business scope during asset restructuring, while private business groups tend

to decrease their scopes through divestitures and spinoffs Poor previous performance is also found to be negatively related to change in business scopes The “match” between related and unrelated diversification strategies

of the business groups leads to increase in business scopes, while

“mismatch” between these two strategies tends to lead to decrease in business scopes (Jun Zhao, 2009)

During the past decade Wall Street practitioners devised various methods for converting undervalued corporate shares into instant wealth Their tactics, however, have had highly negative consequences for a number

of companies Many companies have, in fact, restructured with substantial debt with severe operational consequences The purpose of this paper is to examine the reasoning behind such a boom in the hostile takeover activities

It will discuss the importance and implications of restructuring, causes for corporate hostile takeovers and the defense strategies that effectively resist external acquisition (Abbass F Alkhafaji, 1992)

Restructuring events, such as downsizing, can either halt a downward spiral in corporate performance or perpetuate that downward spiral (Lindsley, Brass and Thomas 1995) This dual nature of downsizing is reflected in the mixed results found by prior researchers We recognize the dual nature of downsizing by categorizing events according to the firm’s financial condition preceding the announcement of the downsizing We find a significant negative stock price reaction for firms that are financially healthy in the period preceding the announcement of the downsizing, but a statistically smaller reaction for firms that are in financial distress The results suggest that the stock market views downsizing events consistent with the theory proposed by Lindsley, Brass and Thomas (1995) (Diana R Franz, Dean Crawford, Deborah J Dwyer, 1998)

Suggests that the corporate governance (CG) systems of transition economies in Eastern Europe may differ from those of industrialized countries

and describes the governance system in Poland, which uses National Investment Funds (NIFs) under supervisory boards and the Treasury to deal with the restructuring of enterprises to be privatized Outlines the financial market environment in Poland and the NIFs’ role within it; and discusses the

CG issues arising from the relationships between the NIFs and the supervisory boards Recognizes the problems involved but doubts whether the use of UK/US or German CG systems would solve them Hope that the paper will provide a basis for further research (E.Dockery, W.E.Herbert, 2000)

National Related Research

General Secretary, Nguyen Phu Trong stated to end up 3rd Conference of Central Committee in 11th term – Communist Party of Vietnam (on Friday, October 10th 2011) and emphasized: in 2012 and coming years, Vietnam will give top priority to control inflation, stabilize macro economy and ensure social security closely associated with growth model renovation, economic restructuring, focusing on 3 important aspects including restructuring of investment especially public investment, restructuring of financial marketing, restructuring of SOEs especially State economic corporations and groups, etc

Restructuring of state-owned enterprises ( SOEs ) that focus groups and state corporations is one of three key tasks and urgent in the process of restructuring the overall economy of Vietnam In fact since the economic integration of Vietnam opened up to this point is the basic system SOE reorganization, structural adjustment is more reasonable In 2011, the country has been sorted now 5,374 By the end of 2012, 1,060 SOEs nationwide was

100 % state-owned, including 452 enterprises operating in the fields of

defense, security, public utility, 608 business enterprises SOE has focused more on the industry, key areas, important areas, from space spread over 60 sectors, so far only focused on 19 industries and sectors

In total sorted now, so far, the country has been equalization 3,976 enterprises (accounting for 74 % of all enterprises classified), including 01 of the total “Corporation 91 - Corporation was establish in 1990”, 12 of the total

“Corporation 90 – Corporation was establish in 1990”, 04 state-owned commercial banks State holds controlling stakes in 1,217 companies operating in these sectors is important Most of the post-equalization of SOEs are relatively high growth rate, business operations more efficient The birth and development of the company shares have contributed to boost the stock market and increase competition The positive outcome of equalization has strengthened the people's confidence in the Party proper way to develop a market economy, create step change in awareness, thinking about the relations of production and the role of SOEs in the economy market -oriented socialism

According to Nguyen Minh Phong (2012), restructuring of SOEs especially State economic corporations and groups shall determine to stop situation that the State economic corporations and groups invest widely in aspects out of the sector and main business aspect The Third Central Conference asked them to complete withdrawal of investment capital in the aspects out of the sector before 2015 and concentrate on developing SOEs in important aspects with key significance in the national economy The important aspects mainly belong to economic and technical specialty related

to socio-economic infrastructure structure, public service, macro economy

stability The conference studied, amended to reduce density to 10% lower and evenly early broke regulations which allow SOEs to invest maximum of 30% of total investment capital in aspects of out of the sector In the aspects

of bank, insurance and securities, investment of state companies doesn’t exceed 20% of authorized capital of beneficiary (the organization receives capital contribution); however, contributed capital of holding company and subsidiary company in the corporation and group isn’t over 30% of authorized capital of beneficiary, etc

Management and activity mechanism of SOEs is renovated into that of joint stock companies and limited ability companies in line with regulation of Business Law, equal competitiveness on the market (regarding business for profit-making), etc In a short term, it is necessary to amend inadequate regulations on business value defining, strategic partner selecting, preferred stock selling to labor, etc Moreover, specify role of the owner or owner’s representative; active production management right in the corporation required to be invested by the Government for general purpose; specify roles and responsibilities, rights of Board of Directors or Board of Members Especially, consistently and clearly decentralize management and involve individuals and organizations into taking responsibility for managing SOEs; publicize information, procedures, documents, list of projects; strengthen management, supervision, inspection, auditing of State projects Additionally,

it is necessary for the state supervision system to add public investment regulations under supervision of the community, define rights and responsibilities of the community in supervising corporate activities, study and clearly regulate banned actions and strong sanctions to deal with violations at

various levels, contribute to preventing negative actions and making legal basis to solve wrong-doings in investment of SOEs, etc

Furthermore, Thang (2010) stated that if restructuring project is set up

by a group of officials who specialize narrowly in restructuring, lack information, responsibility and are affected by short-term benefits, the project will be infeasible, inadequate and evenly will cause general loss for the economy

The Vietnam’s economy has been experiencing big restructuring period Basically, in general, Vietnam’s economy has still remained general characteristics of an underdeveloped economy with backward sector structure, product and technology; inadequate labor structure and region; low competitiveness and high vulnerability, etc As the Directive by the Government, the project is aimed to “take advantage of favorable conditions

to timely add, replace and newly equip with modern technology/machine and equipment system so as to stably develop the national economy” Restructuring consists of restructuring of economy, production structure, investment structure, product and aspect structure, SOEs rearrangement and restructuring, etc

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 SOEs 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 benefit programs to deal with the economy adjustments entailed by reforms, allow enterprises to focus on their commercial objectives and long term strategy

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 SOEs 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

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 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

In conclusion, the researches above showed that most of the local researches always approach the problem in the direction of state management, seldom in the direction of corporate management especially in the enterprises owned and controlled by the government in the construction and real estate sectors Moreover, international and national restructuring researches are plentiful in content and approach The researches clearly indicated theoretical basis for corporate restructuring considered as a strategic solution to re-establish position, role in its own competitive business environment Specifically, some restructuring researches have shown solutions in the sectors which are mainly finance, bank, etc In Vietnam, restructuring has been studied at level of state corporations, groups which are not owned and controlled much by the government

In order to improve the competitiveness and equal footing of owned enterprises (SOEs), the Prime Minister of Viet Nam on July 17 issued Decision No 929/QD-TTg to approve the scheme on restructuring SOE during 2011-2015, focusing on sate corporations and business groups

state-Under the scheme, SOEs will have more reasonable production and business structure and be compelled to concentrate on their core business lines and obliged to provide public services and products for society, national defense and security

It is expected that this move will help them play a decisive role in regulating and stabilizing the national macro-economy

Under the new regulation, the Prime Minister will classify wholly owned enterprises into three categories: (i) those in which the State holds 100% of charter capital and which operate in the sectors subject to state monopoly, national defense and security; publication; transport safety assurance; lottery; large-scale electricity generation and distribution important

state-to socio-economic development, national defense and security; management and operation of national railway infrastructure; airports; first-grade seaports; and money printing; (ii) equitized enterprises, in which the State holds over 50% of charter capital and which operate in the sectors specified in the Prime Minister’s Decision No 141/2011/QD-TTg of March 4, 2011; and (iii) those operating inefficiently and suffering from accumulated losses

The restructuring will be comprehen-sively conducted in organizational structure, governance, human resources, business lines, development strategies and market and product investment

Some business groups and corporations will also be reorganized to meet their task requirements

All ministries, agencies and localities are requested to quickly finalize and adopt plans for reorganizing and renovating SOEs, identify and list of SOEs in which the State holds 100%, over 75%, between 65% and 75%, between over 50% and under 65% of charter capital

The equitization of SOEs is the central task during 2012-2015

The Prime Minister also requests each business group or corporation established by the Prime Minister to submit its own restructuring plans to the

Prime Minister for approval in the third quarter of this year They must also withdraw investments in non-core business lines by 2015 at the latest

According to Decision No 929/QD-TTg, the solution such as: Each economic group and State-owned corporation approved for establishment by the Prime Minister shall submit the Prime Minister; each corporation and enterprise approved for establishment by the Minister, Chairman of People's Committee of centrally-affiliated provinces and cities shall submit the Ministries and Chairman of People's Committee of provinces and cities the restructuring Plan for approval in Quarter III in 2012 and deploy the implementation with the following main contents:

- Reviewing and redefining the tasks, major business lines Economic groups and State-owned corporations only carry on business of the main sectors and sectors related directly to major business lines

- Developing strategy by 2015, with a vision to 2020 consistent with the strategy sector development, market demand, capital capacity and management qualifications

- Making plan for the re-organization of business and production, implementing the restructuring of member enterprises to implement specialization, division and cooperation without scattering and dispersal of natural resources, avoid internal competition in the direction of merger, consolidation of member enterprises of the same business line

- Developing financial plans to implement the main tasks assigned and handle existing financial problems during the restructuring process

- Terminating the investment outside the main sector and area of production and business before 2015 For the following fields: banking,

finance, securities, real estate, insurance, the economic groups and owned corporations, shall follow the directions below:

state-+ Selling the capital portion of the parent company - group/Sate-owned corporations to organizations or individuals outside economic group and state-owned corporations, not selling or transferring it to other internal member units

+ Transferring capital to economic group and state-owned corporations and enterprises having appropriate main business line The capital transfer is made through the form of capital transfer or capital assignment

+ Transferring the entire enterprises whose capital is held 100% by the group and corporation to the group and corporation having business line the same as that of the transferring enterprises The transfer is made in the form

of enterprise assignment or integrity transfer

- The groups and State-owned corporations are in financial difficulties,

on the one hand it is necessary to clarify the responsibility of the relevant managers, on the other hand need to restructure capital and assets in the direction: Assessing the actual situation, determining capital need to have a handling mechanism of additional capital to continue to implement urgent projects, limit loss of capital due to prolonged project prolongation; restructure assets by assignment and merger of ineffective and low-priority projects and investments to focus resources on core business activities

- Determining the reorganization, restructuring or dissolution, bankruptcy for enterprises operating inefficiently with prolonged losses and unable to pay their debts due as prescribed

- Boosting association between member enterprises in economic groups and state corporations through economic contracts, rules and regulations on the management and co-operation between the parent company and its subsidiaries, associated companies The parent company of the economic groups and state corporations enhance their functions to study the development strategy, organizational innovation, management, technology, products, market development and training Restraining the parent company and subsidiaries from investing in one enterprise

The parent company – group/state-owned corporation must organize regular and periodic supervision, examination and inspection of compliance with the law, implementation of strategic objectives, plans and duties assigned, evaluation of operation efficiency of the subsidiaries and management staff, prompt correction of violation Fully grasping information

on activities of affiliated companies through the representatives who are the shareholders involved in decisions of the General Meeting of Shareholders, the Board of Directors as prescribed by law

- Applying corporate governance principles under international corporate governance practices; completing control mechanisms, internal audit, focusing on financial risk control to take timely measures to prevent, restrict, fix and adjust business and production plans appropriately; enhancing capacity and powers of the control board, controller and internal audit

Strengthening management apparatus, enhancing training and retraining to improve the level of business managers to meet the administrative requirements under market mechanism Placing leaders and managers and the State capital representatives with qualifications, moral

quality and professional capacity to perform their roles as representatives of state owners in the enterprises

Applying the organization of scientific labor in production and business Rearranging and improving the labor quality in enterprises; focusing on technical workers with reasonable numbers, sectoral structure and optimal worker level for each technology, line, stage, work and on that basis to enhance the productivity of each employee and general labor productivity of enterprises

- Actively deploying research, application and investment in technology, product and service innovation, gradually raising the added value for products and services to meet environmental standards; gradually replacing devices and technologies consuming much energy, raw materials; gradually removing non-environmentally friendly products to enhance business efficiency and sustainable development

- Implementing transparency in investment, financial management, procurement, distribution of income, the work of staff; signing and implementing contracts with people related to enterprise managers as prescribed by law

Consequently, most of the above studies of the determinants of restructuring have been based on sample of firms There was a very little information about why Vietnamese state-owned companies changed its structure Therefore, there is a need for restructring research studies using Vietnamese state-owned companies to provide additional insights regarding the determinants of restructuring In addition, there are no other official researches on corporate restructuring in the case of Vietnam construction and

real estate corporation in the view of a corporate manager Thus, the study was expected to contribute to build restructuring process of Vietnam construction and Import-Export Joint Stock Corporation, Vinaconex JSC, to systemize and develop corporate restructuring argument as well as corporations and groups to develop Vietnam Also, this study was designed to examine the relevance of the management theories in restructuring an organization in the specific context

Theoretical Framework

Change is a common thread that runs through all businesses regardless of size, industry and age The world is changing fast and, as such, organizations must change quickly too Organizations that handle change well thrive, whilst those that do not may struggle to survive

The concept of "change management" is a familiar one in most businesses today But, how businesses manage change (and how successful they are at it) varies enormously depending on the nature of the business, the change and the people involved And a key part of this depends on how far people within it understand the change process

One of the cornerstone models for understanding organizational change was developed by Kurt Lewin back in the 1940s, and still holds true today Kurt Lewin’s Change Management Model was consisted of three (3) stages of change His model is known as Unfreeze – Change – Refreeze, refers to the three-stage process of change he describes Lewin, a physicist as well as social scientist, explained organizational change using the analogy of changing the shape of a block of ice