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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 Assoc.Prof.Dr Tran Van Tan Prof.Dr Nguyen Dang Hac Hanoi - 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 INTRODUCTION 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 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 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 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 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 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 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 Thesis structure 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 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 stateowned 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 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 Step 5:1.1 Proposing andcứu recommendations Hình Trình solutions tự nghiên Figure 1.1 Research order Chapter 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 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 characteristics Fixed capital Working capital According to the source of formation Equity Liabilities According to time of use Regular capital Temporary 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 * Classification Working assets Working assets in reserve Working assets in production Working assets in business 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 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 (Calculated for one business period) Capital efficiency = Total capital Return On Equity (ROE) = Return On Asset (ROA) Profit after tax Equity × 100 (%) (Calculated for one year) Net profit for ordinary shareholders Total assets = × 100 (%) 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: Performance of fixed capital: = Net revenue during the period Average fixed capital in the period - Performance of fixed assets: Net revenue during the period = The average original cost of fixed assets in the period Performance of fixed assets - Fixed capital content: Fixed capital content - = Average fixed capital in the period Net revenue during the period Fixed capital return: Profit before (or after tax) = Fixed capital return × 100 (%) Average fixed capital in the period - The depreciation coefficient of fixed assets: Accumulated depreciation = at the time of evaluation Hhm 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 = (rotation) Average working capital used 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 - Working capital cycle: 360 (days) (day) Working capital cycle = Working capital rotation in the period - Responsible coefficients of working capital: Average working capital in the period Responsible coefficients = (times) of working capital Net revenue during the period - A profit margin of working capital: Profit after tax Profit margin of working = 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: 11 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 12 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 CHAPTER 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 13 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 14 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