Determinants of business householdsperformance in rural areas of vinh phuc and bac ninh provinces

DETERMINANTS OF BUSINESS HOUSEHOLDS’ PERFORMANCE IN RURAL AREAS OF VINH PHUC AND BAC NINH PROVINCES _ 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 _ In Partial Fulfillment of the Requirements for the Degree Doctor of Business Administration _ By PHAM NGOC YEN (NANCY) December 2013 i APPROVAL SHEET The Dissertation of PHAM NGOC YEN entitled DETERMINANTS OF BUSINESS HOUSEHOLDS’ PERFORMANCE IN RURAL AREAS OF VINH PHUC AND BAC NINH PROVINCES Submitted in Partial Fulfilment of the Requirements for the Degree DOCTOR OF BUSINESS ADMINISTRATION A program offered by Southern Luzon State University, Republic of the Philippines in collaboration with Thai Nguyen University, Socialist Republic of Vietnam has been approved by Oral Examination Committee WALBERTO A MACARAAN, EdD Expert CONRADO L ABRAHAM, PhD Expert JOANNA PAULA A ELLAGA, DBA Expert EDWIN P BERNAL, DBA External Panel CECILIA N GASCON, PhD Chairman Endorsed by: Recommended by: NELLY I MENDOZA, DBA Adviser APOLONIA A ESPINOSA, PhD Dean Accepted in Partial Fulfilment of the Requirements for the Degree Doctor of Business Administration _ Date WALBERTO A MACARAAN, EdD Vice President for Academic Affairs ii CERTIFICATE OF ORIGINALITY This is to certify that the research work / dissertation entitled “DETERMINANTS OF BUSINESS HOUSEHOLDS’ PERFORMANCE IN RURAL AREAS OF VINH PHUC AND BAC NINH PROVINCES” 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 acknowledgment were made PHAM NGOC YEN Researcher/Candidate Date Orally Defended: Noted: DR TU QUANH HIEN Director, Center for Research and Education Cooperation, Thai Nguyen University Date: iii ACKNOWLEDGMENT The researcher would like to express her gratitude to the following who made this study possible: Professors of the Post-Graduate Department of Southern Luzon State University – Philippines and the teachers of International Training Center – College of Agriculture and Forestry - Thai Nguyên University, especially to Dr Nelly Mendoza, her dissertation adviser, for their generous encouragement and support to finish this work; Statistics Department of Vinh Phuc province and Bac Ninh province, for their enthusiastic support on collecting and processing the data; Business households in these two provinces, for their participation and informative responses they have provided; Management and colleagues at the University of Labour and Social Affairs and General Statistics Office, for their emotional support and encouragement; and Family and Friends, for the unconditional love and support Pham Ngoc Yen iv TABLE OF CONTENTS PAGE TITLE PAGE ……………………………………………………………… i APPROVAL SHEET ……………………………………………………… ii CERTIFICATE OF ORIGINALITY ……………………………………… iii ACKNOWLEDGMENT ………………………………………………… iv TABLE OF CONTENTS ………………………………………………… v LIST OF TABLES ………………………………………………………… vii LIST OF FIGURES ……………………………………………………… ix ABBREVIATIONS ………………………………………………………… x LIST OF APPENDICES ………………………………………………… xi ABSTRACT ………………………………………………………………… xii CHAPTER I II III INTRODUCTION …………………………………………… Background of the Study ………………………………… Statement of the Problem ………………………………… Objectives of the Study …………………………………… Significance of the Study ………………………………… Scope and Limitation of the Study ……………… ……… Definition of Terms ………………………………………… REVIEW OF LITERATURE ……………………………… 10 Conceptual Framework ………………………………….… 39 Research Paradigm ……………………………………… 40 METHODOLOGY ………………………………………… 42 Locale of the Study ………………………………………… 42 Research Design …………………………………………… 42 Data Gathering Procedure ………………………………… 43 Sample and Sampling Technique … ………………… 43 Research Instrument ……………………………………… 44 Statistical Treatment ……………………… …….…… 45 v IV V RESULTS AND DISCUSSIONS ………………………… 50 Analysis of Situation of Business Activities and Business Environment of the Business Households in Rural Area of Vinh Phuc and Bac Ninh ………………… 50 Determination of Formality Indexes ……………………… 86 Factors Influence to Decisions in the Expansion, Development of the Business’ Households and Influence to Business Performance of Business Households ………………………………………………… 97 SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Summary …………….……………………………………… 117 Findings …………………………………………………… 119 Conclusions ………………………………………………… 121 Recommendations ………………………………………… 122 REFERENCES ……………………… ………………………………… 126 APPENDICES …………………………………………………………… 128 CURRICULUM VITAE …………………………………………………… 160 vi LIST OF TABLES TABLE PAGE 4.1 Gender, Qualification, Experience of the Managers ……… 51 4.2 Number of Laborers in Sectors/ Provinces ………………… 52 4.3 Business Capital, Working Capital in Sectors/ Provinces … 53 4.4 Revenue, Profit in Sectors/Provinces ……………………… 54 4.5 Rate of Households with Intention of Business Expansion 55 4.6 Quality, Recruitment and Training of Laborers …………… 57 4.7 Quality and Accessibility of Inputs ………………………… 58 4.8 Accessibility to Bank Loans ………………………………… 61 4.9 Value of Loans and Rate of Loan Sources ………………… 62 4.10 General Assessment on Bank Loans ……………………… 63 4.11 Land Area and Rate of the Households in Form of Land Use ……………………………………………………………… 64 4.12 Capacity of Business Space Enlargement ………………… 65 4.13 Land Use Right Certificate …………………………………… 66 4.14 Main Reasons for Obstruction of Business Space Development ………………………………………………… 67 4.15 Market Access and Competition …………………………… 68 4.16 Importance of Infrastructure ………………………………… 69 4.17 Assessment on the Quality of Infrastructure Services …… 71 4.18 Rate of Households Accessing and Using Other Services 73 4.19 Taxes and Tax Inspection …………………………………… 77 4.20 Assessment of the Households on State Officers and Authorities ……………………………………………………… 80 Accessibility to Information, Documents …………………… 82 4.21 vii TABLE PAGE 4.22 Role of Local Authorities in Product Sale ………………… 84 4.23 Average Value in Score Range of Component Indexes 87 4.24 Contribution of Component Indexes for Variance of the Four Factors …………………………………………………… 88 Average Value of Variables Reflecting the Households’ Business Performance ……………………………………… 89 4.26 Regression Analysis ………………………………………… 90 4.27 Weight of Component Indexes ……………………………… 91 4.28 Formality Index (FI) of Provinces and Districts …………… 92 4.29 Average Statistic Value of Variables Used in the Econometric Models ………………………………………… 99 4.30 Impacts of Business Environment on Profit and Revenue 100 4.31 Conversion into Enterprise Business of the Business Households …………………………………………………… 104 Factors Affecting the Households’ Decision to Converse into Enterprise Business ……………………………………… 106 4.33 Business Registration of Sole Business Households …… 110 4.34 Awareness of Benefits from Business Registration and Reasons Provided by the Households Without Business Registration …………………………………………………… 112 Factors Affecting Households’ Decision to Get Business Registration …………………………………………………… 114 4.25 4.32 4.35 viii LIST OF FIGURES FIGURE 1.1 PAGE Number of Non-Agricultural Business Household and Employees in Non-Agricultural Business Household in 20042012 Period ……………………………………………………… Emulation and Analysis of Business Environment of Business Households ………………………………………… 20 Determinants of Business Households’ Performance in Rural Areas of Vinh Phuc and Bac Ninh Provinces ………… 40 Nine Factors which creates Business Results of the Households ……………………………………………………… 41 4.1 Business Situation in 2012 Compared to 2011 ……………… 55 4.2 Capital Source Structure of the Business Households …… 60 4.3 Informal Costs for State Employees in Total Income of Business Households ………………………………………… 81 Assessment on Attitude of the Authorities to Operation of Business Households ………………………………………… 83 4.5 Assessments of the Households on Local Authorities ……… 85 4.6 Confidence of Business Households in the Court System … 86 4.7 Provincial Formality Index (PFI) and District Formality Index (DFI) ……………………………………………………………… 93 The Business Results of the Households and Formality Indexes ………………………………………………………… 97 2.1 2.2 2.3 4.4 4.8 ix ABBREVIATIONS GDP : Gross Domestic Product FI : Formality Index DFI : District Formality Index PFI : Provincial Formality Index PCI : Provincial Competitiveness Index VCCI : Vietnam of Chamber of Commerce and Industry VNCI : Vietnam Competitiveness Initiative GSO : General Statistics Office IPSARD MOLISA : Institute of Policy and Strategy for Agriculture and Rural Development : Ministry of Labour, Invalids and Social IRC : Indochina Research and Consulting Company x 146 13 Do you have difficulty buying production input? (Check for your selection) Inputs No difficulty (1) Not much (2) Great difficulty (3) Machinery and equipments Production materials Goods Others 14 Within the last months, does price of inputs (materials, goods,…) change? Yes No ( skip to Section G) 15 How the price changes affect consumption of the product or service of the business establishments? Better Worse No impact G Access to output market Main customers consume products produced by your business? (There may be multiple choice, Check ) Individual consumers Other business establishments Governmental agencies Foreign-investment enterprises Domestic enterprises Foreign customers Where are the main customers (There may be multiple choice, Check Inside the commune Inside the district Inside the province Other provinces ) (Specify):… The output market (sale) of the product is: Very convenient Fairly convenient Difficult Very difficult How the income of local people affects the operation of your business? Increasing income have positive influence on the operation Increasing income have negative influence on the operation Income change does not have any influence on the operation 147 Does your business face competition from other business establishments/ enterprises operating in the same business? Yes No ( skip to No 11) Competition level? Very stiff Stiff Average Not significant Competitors of your business is of which kind of business? (There may be multiple selection) Business establishments of the same size or smaller size Business establishments of bigger size Private enterprises State-owned enterprises Foreign-investment enterprises Unknown Major competition strategies of your rivals? (multiple selection) Price Quality Design and packaging Promotion Other Specify:…………………………………………… In the commune, there are how many competitors competing with your business? Less than 5-10 10-20 Over 20 Do not know 10 In the district, there are how many competitors competing with your business? Less than 5-10 10-20 Over 20 Do not know 11 Have business establishments operating in the same industry as yours formed associations or any kind of cooperative model to support the production and consumption of products? Yes No Do not know 12 In your opinion, is it necessary to establish associations or cooperatives of business establishments in the same industries? Yes No 13 Does your business get any support from the authority or associations in selling your products? Yes No 148 14 In last one year, was there any product promotion fair held in your district? Yes No ( skip to No 19) 15 The fair was organized by: District authority Association of business establishments Professional trade fair organizer Other, specify ………… 16 Did the business establishments in the district take part in the trade fair? Yes No 17 Did your business establishment take part in trade fairs in the district, province/city? Yes No ( skip to no 19) 18 Did the participation in the trade fairs in the district, province/city help your business to approach more customers? Yes No 19 Do communal/district authorities often provide information on output market of your business? Yes No ( skip to No 21) 20 Is the provided information helpful to your business? Yes No 21 Does your business establishment get any other kind of support in introducing and selling products? Yes No H Business registration Interviewer re-check No.2, Section B, • • If the establishment has business registration certificate: No to No 23 If the establishment does not have business registration certificate: No.24 to the end of Section H The questions for registered business establishments Did you apply for the registration certificate before operating or after operating for a period of time? Before After a period of time How long did it take to get the certificate from the date of application? days Is your business establishment a business with conditions? Yes No 149 In order to acquire the business registration certificate, what type of documents is required? (multiple choice) Business registration application form, justified by the communal People Committee Notified photocopied ID card Notified photocopied household registration Notified photocopied land use permit Business tax Certificate of compliance with security regulation Certificate of Guarantee of fire prevention and fighting Work permit Certificate of qualification for business operation by the communal department of culture and information 10 Other documents (specify): 11 Do not remember 12 Have someone done the documents Can the documents be replaced by other type of document to complete the protocol in case of lacking? Yes No Did you need to bribe the involved officers to get the required documents? Yes No Actual cost to complete the registration procedure? …………… thousand dong Expected cost calculated based on governmental regulation for business registration? ………… thousand dong (put “KB” for “do not know”) Why did you apply for the business registration certificate? (multiple choice) Complete the legalization process of the business establishment To make bank loans More convenience when dealing with customers Others Specify:……………………………………………… None So there will be no fine and penalty 10 Do you think that the registration process is troublesome? Yes No 11 When doing the registration, did you get enthusiastic guide from the officers? Yes No 12 Did you come back to complete the documents? Yes No 150 13 How often you have to re-apply for a business registration certificate? …Per year 14 In the last time you apply for the certificate, how much was the cost? …………… thousand dong 15 Have you ever amended/supplemented the registration certificate? Yes No ( skip to No 20) 16 How long did it take to amend/supplement? days 17 Was the amendment/supplement protocol troublesome? Yes No 18 How much did you have to pay to the amendment/supplement? ……………… thousand dong 19 The amendment/supplement was: Necessary, based on the establishment’s demand Due to new regulation, the establishment find it reasonable and voluntary amend/supplement the certificate Due to new regulation, the establishment was forced to adjust accordingly 20 Do you plan to switch to enterprise in the near future? Yes No 21 In your opinion, what are the advantages of enterprise business form compared with business household? (multiple choice) Easier to make bank loans Easier to expand business site, rent land Easier to purchase machinary and hire labour Get better support from associations and the government More convenient in dealing with customers Other advantages Specify:…………………………………………… No advantage 22 In your opinion, what are disadvantages in switching from business household form to enterprise form? (multiple choice) Complicated administrative process High cost to switch forms Higher land tax Bigger equity More complicated and difficult management Others Specify:………………………………… ………………… 23 What are the benefits that your business will enjoy in case of remaining the current household business form? (multiple choice) Lower operational cost Not much capital Avoid administrative protocols Less tax Easier management Others Specify 151 The questions for business without business registration 24 What level of authorities you usually have to work with? Communal District Provincial 25 Did you have to run through the authorities’ administrative protocols before operating? Yes No ( skip to No 29) 26 What type of protocols? (multiple choice) Registration with communal/ward Committee of People Registration with communial/ward police Business tax payment Others (specify) 27 How long did it take you to complete all the procedures? days 28 Total cost to prepare all protocols permit? thousand dong to get operation 29 Do you intend to get a business registration certificate? Yes No 30 In your opinion, what are the benefits of having a business registration certificate? (multiple choice) More support from the authorities Easier to make bank loans More credit from customers/suppliers Easier to get business site Less troubles with the authorities Others Specify:……………………………………………… 31 Why haven’t you got the business registration certificate? Complicated converting procedures High cost More tax No better conditions Others Specify:……………………………………………… 152 I Formal cost and informal cost Governmental budget contributions Annual business tax: ……………………………….thousand dong Unit: thousand dong months/2011 Payable Estimated payable amount in last months/2011 Paid Total tax amount: a VAT (tax on sales) b Special consumption tax, export tax c Other tax (specify) d Other state budget contribution items (specify) In your opinion, your tax amount payable is: High Low Reasonable In your opinion, your tax payable, compared to other establishments of the same size, is: Higher Lower Equal Do the local authorities put you into troubles when dealing with administrative procedures in selling products (eg Permit certificate; quality check, etc…) Yes No How many times did you get inspected within last year? ………… times (If there was no inspection, put down “0” and skip to No.14) In those inspections, you have to make payment to the officers? Yes No ( skip to No 12) Why did you pay the officers? (multiple choice) Pay the fine to the state budget due to regulation violation Bribe the officers to avoid being fined Bribe the officers to avoid troubles Other (specify):…………………………………………………… 8.1 In your opinion, the amount you are fined is: Based on the law correctly Not according to the law Do not know 153 8.2 Did you get the receipt with the right amount you were fined? Yes No Why did your business establishments violate the regulations? Do not know about the regulation Know about the regulation but cannot implement Do not see the importance of implementing Others (Specify): …………………………………………………… 10 Total amount you have to pay for the inspection officers in last one year? ………………………… thousand dong 11 Did the inspection officers write receipts after receiving money from your business establishments? Yes No 12 From the list bellowed, pick most regular of the inspection agencies within the last recent year: Market management agencies Police (fire inspection, security market) Economic police (anti-smuggling, counterfeiting, ) Department of tax Department of health (hygiene reassurance, etc) Department of animal health/ plant protection Department of standard and quality measurement Department of Culture and Information Others (specify)……………………………………………………… 13 How many times did your business get inspected by the Tax department in the last one year? (estimated numbers) times 14 In the recent year, how many times you have to see the governmental entities to settle the administrative protocols? …….……times 15 Average meeting …… .minutes time to settle administrative protocols: 16 In your opinion, how many percentage of your total income has to be spent on unofficial payment to the governmental officers? 0% Less than 2% 2% -