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MINISTRY OF EDUCATION AND TRAINING
NATIONAL UNIVERSITY OF CIVIL ENGINEERING
Tran Ngoc Phu
RESEARCH ON COMPLETING THE CAPITAL AND
ASSET MANAGEMENT IN CORPORATIONS
UNDER THE MINISTRY OF CONSTRUCTION
THESIS SUMMARY
Specialty: Construction management
Code: 9580302
SUPERVISORS
1. Assoc.Prof.Dr. Tran Van Tan
2. Prof.Dr. Nguyen Dang Hac
Hanoi
1 - 2020
The work is completed at the National University of Civil Engineering
Superviors
Assoc.Prof.Dr. Tran Van Tan
Prof.Dr. Nguyen Dang Hac
Reviewer 1: Assoc.Prof.Dr. Nguyen Ba Uan
Reviewer 2: Dr. Nguyen Pham Quang Tu
Reviewer 3: Dr. Nguyen Anh Dung
The thesis defended in front of the Thesis Assessment Council of the school
level at the National University of Civil Engineering.
At ……hour…… day …… month …… year ……
The thesis can be found at the National Library and the Library of the
National University of Civil Engineering
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INTRODUCTION
1. The urgency of the subject
Being aware of the importance of business capital and asset management, the
author focuses on corporations under the Ministry of Construction, where using a huge
amount of these resources in business and production with low-efficiency levels.
Aiming to solve the problems in business capital and asset management of the
corporations under the Ministry of Construction, there is a need to conduct adequate
scientific research with objective assessment. Currently, although there have been
some previous studies on each related aspect, the literature still lacks sufficient and
systematic studies, including both theoretical and practical assessment, to propose
solutions to improve business capital and asset management in Corporations under the
Ministry of Construction. As a result, the author chose the subject “Research on
completing the capital and asset management in corporations under the Ministry
of Construction” as the doctoral thesis title.
2. Research purposes
The research objective is to propose feasible and scientific solutions to improve
capital and asset management and enhance the efficiency of capital and asset
utilization in Corporations under the Ministry of Construction.
3. Object and scope of the research
- Object of the research: Capital and asset management of Corporations.
- Scope of the research:
+ Regarding research content: Research on the capital and asset management of
Corporations under the Ministry of Construction, mainly focusing on the management
of capital and asset utilization, other aspects of capital and asset management are
discussed to a certain extent.
+ Regarding research space: The research centered on the capital and asset
management of 10 Corporations under the Ministry of Construction, representing three
main business fields, including construction and installation business, real estate
business, and construction materials production. In the selected corporations, six
corporations representing the construction and installation business group are Song
Hong, COMA, VIWASEEN, HANCORP, LILAMA, CC1; two corporations
representing the real estate business group are: HUD, IDICO; VIGLACERA and FICO
are two corporations representing Building Materials Business Production. The current
situation that these corporations also implement the policy of product diversification,
so each corporation participates in many business fields but still maintains its core
business. For instance, VIGLACERA runs a real estate business, but its main business
is building materials. Therefore, the dissertation classifies these corporations based on
the main business field. These are major corporations under the management
responsibility of the Ministry of Construction before equitization. After equitization,
the state capital still accounts for a dominant proportion, and the Ministry of
Construction still holds responsibility for managing the business capital.
+ Regarding research duration: The research targeted the above corporations'
capital and asset management from 2016 to 2019, proposing solutions to improve the
capital and asset management for Corporations for 2020 - 2025 with a vision to 2030.
4. Basic principle of the research
To solve the research problems, the dissertation used the following scientific basic
principle as:
Theoretical principle: The dissertation clarifies the definition, classification, and
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description of the corporations' capital and assets. The dissertation systemizes and
collects the evaluation criteria on the efficiency, and the capital and assets utilization
management level of the construction corporations to assess the results of managing
and using capital and assets.
Legal principle: The thesis has gathered relevant legal documents in the capital
and asset management to evaluate the implementation and compliance of the law and
State policies in corporations' capital and asset management under the Ministry of
Construction.
Practical principle: Through practical assessment of organizations, the research
identifies the shortcomings, limitations, causes in the capital, and assets management
problems in corporations under the Ministry of Construction.
5. Approach and research methods
- Approach: The thesis clarifies the theoretical basis for the capital and asset
management of construction corporations, applies this theory to analyze and evaluate
the current situation of capital and asset management of ten selected corporations,
points out limitations and weaknesses in the capital and asset management of
corporations, analyzes the causes of these limitations and shortcoming. The analysis
and assessment of the current situation are combined between the author's actual
survey with the analysis of financial statements over the years of corporations. The
analysis of financial statements plays an important role because the actual survey
encountered many difficulties. From the results of analyzing and evaluating the actual
status combined between of the capital and asset management of corporations, the
thesis proposes solutions to complete this management for corporations and
recommends several solutions to the Ministry of Construction and the State to improve
the capital and asset management of corporations efficiently, to meet the requirements
of restructuring these corporations and improve the efficiency of capital and assets
utilization of the corporations.
- Research methods:
+ In terms of methodology: The thesis uses the methodology of Marxist-Leninist
Philosophy that consists of dialectical materialism methodology and historical
materialism methodology.
+ In terms of theoretical research methods: The thesis uses the method of
collecting, analyzing, and synthesizing theoretical problems from domestic and foreign
documents and scientific works.
+ In terms of practical research method: The thesis uses the method of conducting
a direct survey of the current situation at corporations, collecting relevant figures, data,
financial statements of corporations, combining qualitative and quantitative analysis of
collected reports, figures, data, and synthesizing, generalizing the problem
6. The scientific and practical significance of the subject
The scientific contribution: The research findings contribute to supplementing
and enriching the theory of construction corporations' capital and asset management.
- The practical contribution: The chosen research subject stems from the practice
of capital and asset management in corporations under the Ministry of Construction,
with shortcomings leading to the loss and waste of state capital and assets. Therefore,
the research findings contribute to enhancing the efficiency of capital and asset use,
thereby improving corporations' production and business efficiency, joining a hand to
prevent the loss and waste for the State and corporations.
7. Thesis structure
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The main content of the thesis, in addition to the Introduction and Conclusion,
includes four chapters:
Chapter 1: Overview of previous research works related to the thesis subject.
Chapter 2: Theoretical, legal and practical basis of the capital and asset
management of construction enterprises.
Chapter 3: Current situation of the capital and asset management in corporations
under the Ministry of Construction in 2016-2019.
Chapter 4: Solutions for completing the capital and asset management in
corporations under the Ministry of Construction.
The thesis has also attached an Appendix, including collected figures, data,
financial statements of corporations, calculation and analysis tables.
Chapter 1. OVERVIEW OF RESEARCH WORKS RELATED TO THE
THESIS SUBJECT
1.1. Overview of domestic and foreign research works
The thesis has reviewed scientific research projects, including books, doctoral
thesis, scientific articles, domestic research subjects (24 works), and foreign research
subjects (12 works) related to capital and asset management at businesses in general
and in construction enterprises in particular. However, there are no research works that
mention and conduct in-depth studies on the capital and asset management at
corporations under the Ministry of Construction.
1.2. Identification of research gaps and issues requiring in-depth research
1.2.1. Identification of research gaps
There has not been specific research on capital and asset management at
corporations that implement construction activities, especially corporations under the
Ministry of Construction. Corporations performing construction-related activities have
common characteristics in terms of capital mobilization, fixed assets, inventory
assessment, capital investment mechanisms in subsidiaries, consolidated financial
statements, and so on. With the corporations under the Ministry of Construction,
because of the characteristics of the construction industry, in which they have to use
huge amount of capital and assets, accordingly, the capital and asset management at
these corporations also has their characteristics about the state capital in enterprises
and this capital management principle in the current period of restructuring and
divestment.
1.2.2. Identification of issues requiring in-depth research
Inheriting general research results, the subject “Research on completing the capital
and asset management in corporations under the Ministry of Construction”
concentrates on research aspects to avoid duplication with other studies as follows:
- Focusing on research with ten corporations under the Ministry of Construction as
identified in the subject research scope.
- Researching the situation mainly focuses on four years from 2016 to 2019, which
was the implementation period of Decision 58/2016/QD-TTg on the classification
criteria of state-owned enterprises, enterprises with state capital and the list of state-
owned enterprises implementing the reorganization for the 2016-2020 period.
- Researching general theories of the capital and asset management of enterprises
and specific studies for construction enterprises. Research on the current situation of
capital and asset management at corporations under the Ministry of Construction to
find out shortcomings, limitations and their causes to own enough scientific and legal
basis to propose solutions to improve capital and asset management in corporations
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under the Ministry of Construction.
1.3. The thesis research objectives
From the identification of research gaps, the author designs the thesis research
objectives as follows:
- Systematizing and further clarifying the theoretical basis for the capital and asset
management of enterprises in general and construction enterprises in particular as the
basis for analyzing and evaluating the current status of capital and asset management
of corporations.
- Analyzing, evaluating the current situation of capital and asset management of
corporations, and then clarifying the achieved results, shortcomings, limitations and
their causes in the capital and asset management of corporations under the Ministry of
Construction.
- Proposing solutions to improve capital and asset management of corporations
under the Ministry of Construction.
1.4. Research order
After identifying research gaps and research objectives, the thesis process includes
the following steps:
Step 1: Defining the research question
Step 2: Constructing research theoretical basis
Step 3: Collecting data
Step 4: Analyzing and evaluating data
Hình Trình solutions
Proposing
Step 5:1.1. tự nghiênandcứu
recommendations
Figure 1.1. Research order
Chapter 2. THEORETICAL, LEGAL AND PRACTICAL BASIS OF THE
CAPITAL AND ASSET MANAGEMENT OF CONSTRUCTION
ENTERPRISES
2.1. Capital and assets of construction enterprises
2.1.1. Capital of construction enterprises
2.1.1.1. Capital of construction enterprises definition
Through analysis, the thesis unanimously uses the concept of the capital of
construction enterprises for the subject as follows:
Capital of the construction enterprises is the value of business assets such as
materials sources, fixed assets, human resources, information, and enterprises'
reputation for production and business to make a profit.
- To conduct production and business activities, construction enterprises have to
own essential factors, such as labor materials, labor objects, and labor capacity. To get
those factors, construction enterprises must spend a certain amount of money,
following the size and business conditions of construction enterprises. Thus, the
construction enterprise's capital is the total amount of the deposit that spent to invest in
establishing necessary assets for the enterprise's production and business activities. In
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other words, it is the monetary value of assets that the enterprise has invested and used
in production and business activities to make profits;
2.1.1.2. Capital classification of construction enterprises
There is a wide range of ways to classify capital of construction enterprises; however,
this thesis mainly researches capital according to three classification methods as
follows:
Capital classification of construction
enterprises
According to rotation According to the According to time of
characteristics source of formation use
Fixed Working Regular Temporary
Equity Liabilities
capital capital capital capital
Figure 2.1. Capital classification of enterprises
2.1.2. Assets of construction enterprises
2.1.2.1. General concept of assets of an enterprise
From the study, analysis, the thesis gives the concept of assets of construction
enterprises as follows:
Assets of an enterprise are business resources of an enterprise, controlled by the
enterprise, existing in a material or non-material form, and are valuable and profitable
for the enterprise in the future.
Assets should be divided into two categories to suit the research of the subject, so
the author classified them into fixed assets and working assets.
2.1.2.2. Fixed assets of construction enterprises
* Definition
Fixed assets are all assets of an enterprise with high value, with the time of use,
rotation, or recovery over one year or more than one business cycle (if the business
cycle is greater than or equal to one year).
The concept of fixed assets includes assets that are in use, have not been used or
are no longer used in the production and business process because they are in the
process of completion (machinery and equipment have been purchased but not
installed yet, the factory is under construction but has not been completed yet, etc) or
they are still valid but have not been put into use.
* Classification of fixed assets
Fixed assets are divided into two categories: tangible fixed assets and intangible
fixed assets.
2.1.2.3. Working assets of constructing enterprises
* Definition: According to statistics and accounting perspectives, working assets
include all assets used for business purposes for less than one year. In general, working
assets have a higher level of liquidity (the ability to convert into cash) than fixed
assets.
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* Classification
Working assets
Working Working
Working
assets in assets in
assets in
reserve business
production
circulation
Figure 2.2. Classification of working assets
Working assets are divided into three categories: working assets in reserve,
working assets in production and working assets in business circulation.
2.1.3. The relationship between capital and assets of construction businesses
Capital and assets are essentially two sides of the same issue. Capital is an asset in
terms of value, or other words, capital is expressed through an asset.
Total assets = Total capital
Total capital = Liabilities + Equity
2.2. Capital and asset management of construction businesses
2.2.1. Definition of capital and asset management of construction businesses
The capital and asset management of construction enterprises is the sum of
planned and systemic impacts on the process of organizing, operating, controlling and
assessing the formation and the use of capital and assets of construction enterprises
through the application of appropriate management forms, tools and methods to
achieve the set-out objectives in the production and business process of enterprises.
2.2.2. Content of capital and asset management of construction businesses
In this thesis, to improve consistency with the data on corporations' financial
statements, the author only studies in-depth capital and assets according to the rotation
characteristics. Therefore, the management content is classified into two categories as
well, which are fixed capital, fixed assets management, and working capital, working
assets management, considering based on financial perspective, and concurrently,
mainly focusing on research on the management and use of capital and assets,
evaluating the efficiency, capital and assets use level of construction enterprises.
2.2.2.1. Content of fixed capital, fixed assets management
a. Fixed capital management
- Exploiting and creating fixed capital sources
- Preserving and improving the performance of fixed capital
b. Fixed assets management
- Managing the investment in fixed assets
- Managing the use and repair of fixed assets
- Managing the depreciation of fixed assets
- Managing the inventory and re-evaluation of fixed assets
2.2.2.2. Working capital, working assets management
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Figure 2.3. Content of fixed capital and fixed assets management
2.2.3. Evaluation of efficient capital, capital and assets use level of construction
enterprises
a. The concept of capital efficiency
Capital efficiency is an economic terminology, reflecting the level of using
available capital resources of enterprises to achieve the highest results in the business
at a reasonable cost. Capital efficiency compares inputs and outputs, the cost of raising
capital and the obtained results.
b. Indicators to evaluate the efficiency of capital and assets in general
To evaluate the efficiency of enterprises' capital use in the most general manner,
several general indicators are often used, such as capital efficiency, return on equity
(ROE), return on asset (ROA), etc.
Revenue
Capital efficiency = (Calculated for one business period)
Total capital
Return On Equity Profit after tax × 100 (%) (Calculated for one
=
(ROE) Equity year)
Net profit
Return On Asset (ROA) for ordinary shareholders
= × 100 (%)
Total assets
c. Indicators for evaluating the performance and use level of fixed capital and
fixed assets
The criteria for evaluating the performance of fixed capital and fixed assets in
the thesis include:
- Performance of fixed capital:
Net revenue during the period
Performance of fixed capital: =
Average fixed capital in the period
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- Performance of fixed assets:
Net revenue during the period
Performance of fixed
= The average original cost of fixed assets
assets
in the period
- Fixed capital content:
Average fixed capital in the period
Fixed capital content =
Net revenue during the period
- Fixed capital return:
Profit before (or after tax)
Fixed capital return = Average fixed capital in the × 100 (%)
period
- The depreciation coefficient of fixed assets:
Accumulated depreciation
Hhm = at the time of evaluation
ΣNG
d. Indicators for evaluating the performance and use level of working capital and
working assets
To assess the performance and the level of working capital utilization may be used
different criteria can be used in each stage: production stage, payment stage, and
reserve stage. In this thesis, the author presents several principal indicators to evaluate
the performance of working capital and working assets:
* General evaluation criteria group:
- Working capital rotation:
Net revenue during the period
Number of Working
= Average working capital used (rotation)
capital rotation
during the period
In which:
Working capitalat the beginning of the period +
Average working capital used
= Working capitalat the end of the period
during the period
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- Working capital cycle:
360 (days)
Working capital cycle = (day)
Working capital rotation in the period
- Responsible coefficients of working capital:
Responsible coefficients Average working capital in the period
= (times)
of working capital Net revenue during the period
- A profit margin of working capital:
Profit margin of working Profit after tax
= x100 (%)
capital Average working capital
* Evaluation criteria group in the payment stage:
- Debt coefficient:
Total debt
Debt coefficient =
Total assets
- Short-term debt payment coefficient:
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Short-term assets
Short-term debt payment coefficient =
Short-term debt
- Fast payment coefficient:
Total value of working assets - Inventory
Fast payment coefficient =
Short-term debt
- Instantaneous payment coefficient:
Instantaneous payment Money + Money equivalents
=
coefficient Short-term debt
* Evaluation criteria group in the stage of circulation: Inventory rotation,
Average days per inventory rotation.
- Accounts receivable rotation:
Net revenue
Accounts receivable rotation = (rotation)
Average accounts receivables
- Average collection period:
Average collection 360 (day)
= (day)
period Accounts receivable rotation
- Inventory rotation:
Inventory Cost of goods sold
= (rotation)
rotation Average inventory
In which:
Average Inventoryat the beginning of the period + Inventoryat the end of the period
=
inventory 2
- Average number of days of an inventory rotation:
The average number of days of an 360 (day)
= (day)
inventory rotation Inventory rotation
2.2.4. Factors affecting capital and asset management of construction enterprises
Subjective factors internal construction enterprises: The enterprise's management
apparatus and organizational structure; Type and production and business structure;
Scope of activities of construction enterprises; Production technical level and
organization and management qualification level; Business development and
investment strategies.
Objective factors external construction enterprises: State policies and regulations;
Market and business environment; Scientific and technological progress.
2.2.5. Several characteristics of the capital and asset management in corporations
2.2.5.1. Organizational characteristics of corporations
The organizational and management model of corporations in Vietnam is subject
to the Law on Enterprises 2014, Decree No. 69/2014/ND-CP dated July 15, 2014, of
the Government on state economic groups and state corporations. A corporation is a
group of companies, including the holding company, subsidiary (member) companies,
and associated companies, meeting the conditions specified in Clause 4, Article 9 of
this Decree.
From the above provisions of the law, the organizational and managerial structure
of the corporations usually structured following the type of Joint Stock Company
(JSC) (as shown in Figure 2.4) or one member limited liability company (as shown in
Figure 2.5).
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Figure 2.4. Organizational structure model of corporations - JSC
Figure 2.5. Organizational structure model of corporations - Company Limited
2.2.5.2. Characteristics of capital and asset management in corporations
Due to the characteristic of the construction industry is that works, real estate
projects, etc. need a large capital source, as a result, the process of capital and asset
management also has differences:
- Forecasting capital needs, mobilizing capital, investing in purchasing machinery
and equipment: During this period, corporations must answer the question “what to
do” to determine how much funds they need. From there, corporations must think
about capital and how to exploit funds.
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Utilizing capital, managing capital, assets: The characteristics of the capital and
asset turnover process of this stage are greatly influenced by the characteristics of
construction products and the construction process's features. Capital in this period lies
in the phase of reserve, production and circulation.
2.3. Legal basis in the capital and asset management in Corporations
Over the years, policies related to capital and asset management have been revised
to meet the needs of economic movement and development. Corporations are not out
of the scope of these policies as well. Mechanisms and policies are relevant to the
following contents: the exploitation and creation of capital and assets; the management
and use of capital and assets.
- Corporations have to develop regulations on management, preservation and use
of State-funded assets. They should clearly define responsibilities of each department
and individual in case there is damage or loss of the assets. An inventory of all existing
assets and capital must be conducted periodically and at the end of a fiscal year to
accurately determine the number of assets in excess, shortage, and stagnant assets,
specify causes and solve responsibilities, and obtain bases for creating the unit's
financial statements. At the same time, it is necessary to open a detailed monitoring
book of all debts receivable inside and outside the corporations. The receivable debt
situation is necessarily compared, synthesized and analyzed periodically, especially
due debts, overdue debts and uncollectible accounts.
In term of the state capital portion in corporations, the Government and ministries
have issued and implemented a large number of financial monitoring mechanisms and
policies to preserve and develop state capital in corporations, typically as follows: Law
No. 69/2014/QH13 of the National Assembly dated November 26, 2014 on the
management and use of state capital to invest in production and business in
enterprises; the Decree 91/2015/ND-CP of the Government dated October 13, 2015 on
state capital investment in enterprises and the management and use of capital and
assets in enterprises, the Decree 32/2018/ND-CP on the amendment of the Decree
91/2015/ND-CP on state capital investment in enterprises and the management and use
of capital and assets in enterprises; the Decree 87/2015/ND-CP of the Government
dated October 6, 2015, on the supervision of state capital investment in enterprises,
financial supervision, performance assessment and disclosure of financial information
of state-owned enterprise (SOE); the Circular 200/2015/TT-BTC of the Ministry of
Finance dated December 15, 2015, guiding some contents on supervision of state
capital investment in enterprises, financial supervision, performance assessment and
disclosure of financial information of SOEs.
2.4. International experiences in improving the performance of the capital and
asset management of construction enterprises and lessons for Vietnam
The thesis has referenced some capital and asset management methods in
enterprises in some countries over the world, such as China, Singapore, and France.
On that basis, some lessons are suggested for Vietnamese construction enterprises,
such as:
Firstly: From the experience of China and Singapore, it can be seen that: The State
plays the role of developing the financial market, creating opportunities for businesses
to have more choices, diversifying funding sources and minimizing financial risks for
enterprises.
Secondly: Based on China's experience, accelerating the divestment process
outside the industry and reducing state capital is necessary to both ensure increased
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autonomy for enterprises in mobilizing capital sources and reduce the pressure on
capital for the state budget.
Thirdly: In China and Singapore's experience, it is necessary to separate the
functions and powers between the representative of the capital owner and the legal
representative of the enterprise. Shareholders that are capital investment owners in the
enterprise perform the function of enterprise operation supervision by performance
indicators (comprising planned targets and the implementation status of these targets);
hold responsible for debt and asset obligations within the scope of the capital amount
invested the enterprise. As for enterprises that are legal entities, they take
responsibility for other debts and assets obligations by its all assets; hold responsible
for preserving business capital, increasing equity capital, and completely and timely
providing information.
Fourthly: From the experience of China, a lesson can be drawn that the State can
invest in holding dominant or non-dominant shares; nevertheless, the State will
exercise stricter control over enterprises such as:
+ Decision on establishment, goals, tasks, and development orientation of the
enterprise.
+ Right to appoint leadership positions of the enterprise.
+ Right to have shares and capital contribution ownership.
+ Right to assign, transfer.
+ Right to receive information and monitor enterprise activities.
+ Right to enjoy the profit.
Fifthly: The owner's supervision (Government) towards construction enterprises is
focused on evaluating enterprise growth targets' performance. The enterprises'
operations monitoring and evaluation and the use of business capital in enterprises are
carried out in a wide range of different forms and methods. Enterprises are obliged to
disclose and provide sufficient information for the owner's supervision activities,
enhance autonomy and self-responsibility implementation; to strengthen strict
supervision of financial statements, and develop a system of analyzing criteria for
solvency, forecasting risks and operating efficiency of enterprises. This experience has
been successfully deployed by China and Singapore in recent years.
Sixthly: In terms of corporate governance, it is essential to improve the publicity
and transparency in corporate management, enhance the accountability of members of
the Administrative Council, Board of Members, and Board of Supervision and to
expand business areas, apply science and technology in corporate governance. Also,
enterprises need to focus on investment in human development with objectives such
as: improving professional qualifications as well as awareness of corporate
governance, concurrently creating salary and bonuses, remuneration regimes that are
suitable to capacity and work performance of each staff. This requires many case
studies from Colas Group in France that has learned and extremely effectively applied.
These previous lessons are suggested to provide complete solutions for the capital
and asset management at the Corporations under the Ministry of Construction
mentioned in Chapter 4.
CHAPTER 3. CURRENT SITUATION OF THE CAPITAL AND ASSET
MANAGEMENT IN CORPORATIONS UNDER THE MINISTRY OF
CONSTRUCTION IN THE PERIOD 2016-2019
3.1. Overview of Corporations under the Ministry of Construction
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The thesis has given the most general overview of the construction corporations
under the Ministry of Construction from their formation and development process to
their major operation, production, and business fields. The thesis also synthesizes and
presents the results of the equitization and restructuring of corporations at present,
along with the capital proportion that the State still holds in these corporations. In
addition, the thesis gives an overview of the business results of corporations in the
period 2016-2019, which is the background for analyzing the following sections of the
thesis.
3.2. Situation of capital and asset management in Corporations under the
Ministry of Construction
3.2.1. Situation of applying the mechanism and policy on capital and asset
management
Over the years, based on regulations and legal documents of the State,
corporations have implemented the capital and asset management at corporations
according to each level's functional scope, which has been specified. Simultaneously,
they issued a system of documents on financial policies and mechanisms following
organizational and managerial characteristics right from its establishment. The system
of financial and accounting policies are applied according to the State's regulations for
SOEs in Vietnam. Currently, this system has proved a positive effect and has always
been updated and modified to meet general economic development.
3.2.2. Situation of business capital management at corporations
3.2.2.1. Situation of capital mobilization at corporations
a. Equity source
In general, the construction corporations have not preserved its equity and the
development of equity has not been proved effective. In particular, some corporations
have negative equity due to business losses, facing numerous risks and financial
autonomy, such as Song Hong Corporation, with its equity continuing to be negative in
2016-2019.
b. Liabilities
Due to a lack of equity, to maintain production and business activities,
corporations have to use the main capital source, which is loan capital. Thus, the
liabilities of corporations account for an extremely high proportion of the total capital.
The main reason is that the corporation's production and business activities are
ineffective, and the corporations are weak at capital management, leading to equity
decline.
From the analyzed criteria above, it can be concluded that the main capital source
of construction corporations is loan capital. As a result, corporations’ financial
autonomy is low, in another way, it will be passive in corporations’ capital source. If
corporations desire to expand their production and business, they must use loans. This
is a risky factor in unstable finance, currency, and stock market context.
3.2.2.2. Situation of capital efficiency in corporations under the Ministry of
Construction
a. Capital efficiency
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Figure 3.1 Fluctuation inefficient capital of corporations in the period 2016 - 2019
Thereby, it can be seen that corporations had relatively low capital efficiency,
almost all <1. Significantly, several corporations have extremely low efficient levels
such as Song Hong Corporation with an efficient level was only 0.11 in 2017, 2018
and down to 0.05 in 2019; HUD was 0.07 in 2017.
b. Profitability
- Return on equity (ROE)
Through the synthesis and analysis of data from the financial statements of
corporations, it can be found out that some corporations had low rates of ROE,
especially corporations in the construction and installation services. Moreover, several
corporations had pretty high rates of ROE, which were the groups of corporations in
the construction materials production and real estate business areas. In terms of the
general industry level, the ROE of most corporations was lower than the industry
average over the same period.
- Return on Assets (ROA)
Through the synthesis and analysis of data, it can be seen that corporations
presented expressly low rates of ROA, most of which were below the industry average
in the period 2016-2019. This reflects the fact that the business and production
situation of corporations was ineffective.
3.2.3. Situation of fixed capital and fixed assets management at Corporations
3.2.3.1 Fixed capital and fixed assets management
a. The increase or decrease in fixed assets value management
An outstanding feature in construction corporations is that fixed assets always have great
value. However, almost all corporations often have a common situation such as: Fixed assets
are invested with great value with high capacity but used in small-scale projects. The
corporations have not used those machines' maximum operational capacity, leading to a
waste of capital. Many purchased equipment is not to serve the significant activity lines but
mostly serve other investment activities. Thus, it can be seen that the increase in fixed assets
is not necessarily a good signal for these enterprises. Because the assets with such a large
amount of capital, if the corporations do not know how to make use of them, will wear out
(both intangible and tangible assets) very quickly, after a few years of use, it will be difficult
to liquidate, leading to a situation in which it is unable to collect full capital recovery, causing
to waste of resources. Simultaneously, the data in the statements show that owning a great
number of fixed assets that are not practically used for the construction of works will reduce
the business efficiency of corporations.
b. The fixed assets use and depreciation management
By assessing the depreciation of fixed assets at corporations, an alarming fact can
be found out at construction corporations, in which the fixed assets have a large
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quantity, large capital amount but have poor quality (a lot of outdated assets), low
productivity and sometimes even out of business.
c. The fixed assets liquidation and replacement management
Since most of the fixed assets purchased exceed required capacity, corporations
are unable to exploit their full operational capacity, resulting in extremely fast
depreciation. Therefore, the liquidation of such fixed assets encounters many
difficulties; even if it can be liquidated, the recovered capital is not worth much
compared to the investment in assets. This is reflected in the corporations' financial
statements when the amount from the liquidation, sale of fixed assets, and other long-
term assets are small.
3.2.3. Evaluation of fixed capital and fixed assets performance in corporations
- Fixed assets performance
In the studied corporations, the performance of the fixed assets has fluctuated over
the past years. Several corporations have relatively high fixed assets performance and
mostly higher than the industry average in the same period. This may lead to a mistake
in thinking that enterprises use fixed assets effectively. Nevertheless, by combining
with the analysis of the increase and decrease of fixed assets in the previous section,
the reason why this figure is gained is mainly that the fixed assets have been fully
depreciated, making the average fixed asset low, not because the corporations take
advantage of the assets’ operability.
- Depreciation coefficient of fixed assets
The depreciation coefficient of fixed assets shows the majority of these fixed
assets are currently getting more and more depreciated, leading to a rapid decline in
corporations' operational capacity, indirectly creating pressure on the solvency (mostly
because of loans for establishing the assets).
- Fixed capital content
When comparing the fixed capital content over the years, it can be seen that in
general, the fixed capital content of corporations tends to increase, which means that
more and more corporations have to use more equities to earn an amount of revenue.
In other words, fixed capital performance is low.
- Fixed capital return
In general, the fixed capital return of corporations in the period 2016 - 2019 was
relatively low and tended to decrease when most corporations had lower fixed capital
returns in 2019 than in 2018; this was an alarming signal in the management and use
of fixed capital.
3.2.4. Situation of working capital and working assets management in Corporations
3.2.4.1 Evaluation of working capital and working assets management in general
a. The allocation situation of working assets of construction corporations
The synthesis data shows that, in general, the structure of the working assets of
corporations is still mainly inclined to two items, which are inventory and receivables
(these two items account for the largest proportion of the total working assets).
However, for corporations in the construction and installation area, the proportion of
short-term receivables accounts for the largest proportion. This reflects the true
characteristics of construction units when short-term receivables are the volume that
has been constructed but not yet accepted for payment. For corporations in real estate
business and construction materials production, the inventory proportion always
accounts for a larger proportion.
b. Working capital rotation and working capital cycle
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The number of working capital rotations:
The synthesis and analysis of data show that the number of working capital
rotations in corporations in the construction area tended to decrease in 2018 and
continued to decrease in 2019, making the working capital cycle in corporations
decrease and increase accordingly. In comparison with the average number of working
capital rotations of the industry, the average value of corporations in the same period
was far lower.
Working capital cycle:
The data tables and analysis results prove that the number of working capital
rotations of the corporations in 2016-2019 was mostly <1, leading to a too-long
working capital cycle. This was due to poor management and the use of working
capital, which made capital stagnation time increase and production process slow
down. Besides, the corporations' working capital cycle is currently quite long, while
most working capital is short-term loans, making the payment pressure of corporations
increasing day by day, thereby also putting pressure on the profitability.
c. Responsible coefficients of working capital
In general, almost all corporations have a relatively high value of the responsible
coefficients of working capital. This proves that these corporations are managing and
using working capital ineffectively.
d. Profit margin of working capital
The analysis results give the truth that the use and management in capital turnover
are relatively inefficient. The improvement of working capital performance will be the
basis for corporations to have a strong source of working capital, thereby creating a
premise to expand the scale of production and business, to invest in technique and
technology improvement in business and economic management, to boost the
competitiveness of enterprises in the market. Thus, the profit margin of the working
capital of corporations at such a low level will reduce their competitiveness with other
enterprises and reduce the influence of these corporations.
3.2.4.2. Evaluation of working capital and working assets performance and use level
of corporations in the payment stage
a. Debt coefficients of corporations
The synthesis and analysis of data present that corporations' debt coefficients in
the period 2016-2019 were broadly higher than the average debt coefficient of the
construction industry in the same period. Due to being too dependent on loans,
construction corporations have been facing significant challenges from debt
repayment, extensive inventories, lack of capital to complete projects, which cause the
unfinished construction, the inability to continue construction works, especially when
banks tighten the disbursement.
b. Solvency criteria of Corporations
* Short-term debt payment coefficient
The data analysis proves that corporations in the construction and installation area
generally had short-term debt payment coefficient in the period 2016-2019 lower than
that of the industry average in the same period. Simultaneously, there was no high
difference in the short-term debt payment coefficient of corporations over the past
years. For the construction materials production area, the average short-term debt
payment coefficient was not much different from that of the industry average.
However, it seemed to have a downward trend which tended to be lower than that of
the industry average in the same period. Besides, corporations in the real estate
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business area had pretty high short-term debt payment coefficients such as IDICO -
always at more than 200% in 2016-2019.
* Fast payment coefficient
The data of corporations shows that in 2016-2019, the fast payment coefficient of
the corporations compared to that of the industry average was similar to the short-term
debt payment coefficient. The most notable area was still the group of corporations in
the construction and installation sector when their short-term debt payment coefficient
was always lower than that of the industry average in the same period. Thereby, it can
be seen that the short-term financial situation of these corporations was not healthy.
* Instantaneous payment coefficient
The instantaneous payment coefficients of all corporations were relatively low and
lower than that of the industry average in 2016-2019. It showed that corporations'
ability to pay short-term debts immediately was deficient.
3.2.4.3. Evaluation of working capital and working assets management in the
circulation of corporations
a. Accounts receivable management situation
The synthesis results present that the receivables account of customers’ accounts
for a large proportion in the receivables, even for corporations in the field of
construction and installation, construction materials production, or real estate.
b. Accounts receivable rotation
The data analysis affirms that most corporations have fluctuated the number of
accounts receivable rotation over the years. Compared with the industry average, for
corporations in the construction and installation area, the average accounts receivable
rotation of the corporations is lower. In contrast, for corporations in the field of
construction materials production and real estate business, the average accounts
receivable rotation of corporations was higher than that of the industry average.
However, in general, the number of accounts receivable rotation tended to decrease in
the period 2016-2019.
c. Inventory management situation
Through the financial statements of corporations, it can be seen that the cost of the
production and business which are in progress accounts for an enormously high proportion
in the total value of the inventory, usually over 70%. In fact, for construction corporations,
these are construction products that have not been completed or have not been accepted
and handed over to investors.
d. Inventory rotation
The data analysis of corporations shows that the average number of the inventory
rotation of corporations in 2016-2019 was lower than that of the industry average for
the construction and installation area. Especially, for corporations in the real estate
business area, the average number of inventory rotation was much higher than that of
the industry average in the same period.
3.2.5. General evaluation of the capital and asset management situation
incorporations under the Ministry of Construction
3.2.5.1. Obtained results
It can be seen that corporations have implemented the capital and asset
management with all steps and according to the general theoretical order, which
follows the characteristics of each corporation and the State's regulations.
In terms of finance, the obtained results by the capital and asset management of
corporations shown by the average short-term solvency are considerably stable
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between years and are around 1.0. It proves that construction corporations generally
have short-term assets value that is enough to pay off short-term debts.
3.2.5.2. Shortcomings and limitations
Firstly, low fast solvency and instantaneous solvency.
Secondly, the ROA and ROE coefficients of construction corporations in four
years from 2016 to 2019 were extremely low; even some corporations had ROA and
ROE coefficients <0.
Thirdly, the performance of the fixed asset of corporations in the period 2016 -
2019 was relatively high; however, the depreciation coefficient of fixed assets was
exceedingly large, which showed that corporations mostly utilized old machines
whose depreciation value was trivial. Corporations’ not paying attention to investing in
fixed assets will affect their competitiveness, especially for corporations mainly
operating in construction and installation and construction materials.
Fourthly, the proportion of account receivables and the inventory is exceptionally
large.
Fifthly, corporations' capital structure is exactly unreasonable when temporary
capital accounts for a substantial proportion.
3.2.6.3. Causes of shortcomings and limitations
a. Subjective reasons
Firstly: The restructuring of corporations has not been comprehensively
implemented
Secondly: Fixed capital and fixed assets management are ineffective.
Thirdly: The working capital and working assets management are ineffective.
Fourthly: The qualifications, capacity, awareness of capital and asset management
of officers and employees at corporations are still limited.
Fifthly: The application of information technology in the capital and asset
management in corporations is still limited.
b. Objective reasons
First: There have been no specific regulations, guidelines, or standards on the
capital and asset management in construction enterprises.
Second: The financial market, especially Vietnam's stock market, has not been
stable and developed yet.
Third: Due to the construction industry’s peculiarity, it has single products with
great value and long construction time.
Fourth: The Ministry of Construction has not adequately shown its role in the
capital and asset management in corporations.
CHAPTER 4. SOLUTIONS FOR THE COMPLETION OF CAPITAL AND
ASSET MANAGEMENT IN CORPORATIONS UNDER THE MINISTRY OF
CONSTRUCTION
4.1. Development orientation of Construction Corporations to 2025, with a vision
to 2030
Development orientation of the construction corporations to contribute to the
implementation of the science and technology development strategy in the
construction industry to 2020, with a vision to 2030, was issued together with the
Decision No. 527/QD-BXD dated May 29, 2013, of the Ministry of Construction and
the action plan of the construction sector, implementing the national action plan to
complete the 2030 agenda for sustainable development.