This paper analyzes the decline and restructuring of VN Steel, a state-owned steel company group in Vietnam. In the gradual transition to a market economy in Vietnam, most large-scale state-owned enterprises (SOEs) have undergone a reform process without privatization. Among them, VN Steel is important as a case where it was urged to rebuild its business as a result of defeat in market competition. This paper analyzes the following points. (1) As a steel company analysis, it reveals how VN Steel lagged behind the investment competition through the production system approach. (2) As SOE analysis, it looks at it from two angles. One is the effects of the curtailment of governmental support and execution of corporate governance reform on VN Steel. The other is the possibility that government support and intervention would be reinforced when the decline leads to a management crisis. Moreover, this paper evaluates the impact of economic reform on not only VN Steel but also the industrial organization of the iron and steel industry.
The analysis result shows the following findings. (1) VN Steel has been greatly recessed in the Vietnamese steel market, and is still in the process of restructuring even after the management crisis. (2) The reason for the decline of VN Steel is the halfway and inconsistent policy of the government. On the one hand, the government did not give subsidies to VN Steel for corporate growth. On the other hand, it did not reform the corporate governance of VN Steel rapidly. As a result, VN Steel's corporate behavior has remained characteristic of SOEs. Performance deteriorated due to the appearance of some incomplete factories as a result of quantity-oriented investments and the delay of project execution. After withdrawal of financial support to VN Steel, the government was pulled back to involvement in management reconstruction. (3) In spite of failure in VN Steel's reform at the enterprise level, the government succeeded in developing a competitive environment at the industry level. The reform of the economic institutions with the background of international economic integration promoted the rise of private and foreign-owned enterprises in the steel industry. VN Steel did not prevent that process.
The analysis of this paper shows the importance of the problem area of government involvement in SOEs in the declining process. Inconsistent combinations between the curtailment of government support and delays in corporate governance reforms could lead to a business crisis, eventually bringing the government back to involvement in management reconstruction. This paper also shows that it is necessary to evaluate at both the state-owned company level and the industrial level when assessing the impact of international economic integration on the economic reform of a transition economy.