tóm tắt tiếng anh quản lý tài sản tại các công ty cổ phần ngành xây dựng niêm yết ở việt nam

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CHAPTER 1
STUDY METHODS OF ASSET MANAGEMENT
IN LISTED CONSTRUCTION JOINT STOCK COMPANIES IN VIETNAM
1.1. Qualitative study
The qualitative study in this thesis is used to find out the approaches of asset
management currently practiced in the companies under research, which cannot be
described in details or measured or quantified, such as models of cash flow forecast,
material needs, tracking of liabilities, inventory, fixed assets, etc In addition, it provides
more specific evidence to explain (or to find out the cause of) this situation, which involves
perception of the management board, appoaches of capital management, business structure,
mechanism and policy of the State, etc The data in the study came mainly from
businesses selected for research, including a system of files, reports, websites or opinions
given by the staff interviewed The collection of data was done in three ways: In-depth
interviews, direct observation and desk research. The participants consisted of 15
enterprises randomly selected by cluster.
1.2. Quantitative study
Through the quantitative variables clearly determined, the researcher could find out
general rules of asset structure, asset management, capital structure, etc of the listed
construction joint stock companies in Vietnam. Sequentially, the researcher produced
objective conclusion and assessment on achievements and drawbacks of asset management
in these companies. The main source of data included the audited financial reports of 104
listed construction joint stock companies from 2006 to 2010 and the data from the General
Statistics Office, Ministry of Construction and the State Securities Commission. When the
variables were sufficient, the reasercher was able to apply the analysing techniques of
descriptive statistics and correlative regression.
CHAPTER 2
THEORETICAL BASIS OF ASSET MANAGEMENT
IN CONSTRUCTION COMPANIES
2.1. Overview of asset in construction companies
In this thesis, asset management was analyzed with focus on forms of the existing

property, including cash, accounts receivable, inventory and tangible fixed assets. Each of
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these assets had specific characteristics reflexing particular products and operation of the
construction industry.
2.2 Concept and objectives of asset management in construction companies
Based on various management perspectives, it can be understood: "Asset
management in the construction companies is the process of forming and administrating and
using the assets of construction companies in order to maximize the asset value for business
owners."
2.3. Contents of asset management in construction companies
2.3.1. Cash management in construction companies
Scientifically, cash management can be broadly understood as fund management in
enterprises, including such specific items as forecasting cash flow, determining optimal
budget, monitoring and maintaining optimal funds. In particular, the determination of
optimal budget can done based on the model of Baumol or Miller - Orr.
2.3.2. Management of accounts receivable in construction companies
For the construction enterprises to be paid fully and timely in accordance with the
work progress and to reduce stress caused by capital shortage, management of accounts
receivable and cash management are of a great importance. The main activities of this
section include: selecting investors, agreeing on payment methods; tracking debt collection
and seeking corresponding fundings with the receivables. Effetive payment methods and
debt collection play a decisive role over the outcome of this operation.
2.3.3 Management of inventory in construction companies
In order to have effective management of inventory in construction companies, there
should be forecast on demand of raw materials, determination of optimal order of supplies
and control of existing inventory. For inventory as raw materials, it is advisable to choose
the optimal order of supplies based on the models of EOQ or JIT. For the construction work
in progress, it is necessary to determine costs and carry forward the most reasonable cost.
2.3.4 Management of fixed assets in construction companies
The issues intensively analyzed include choosing approaches of forming fixed assets,

assessing financial outcome of investment decision, pricing, depreciating, replacing and
disposing fixed assets. As construction is a special industry, there should be close focus on
asset lease and machinery depreciation by capacity and productivity.
2.4. Criteria for evaluating asset management in construction companies
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Asset management in construction companies can be evaluated based on the a
number of key criteria as follows:
Current assets
Short-term solvency = (1.25)
Current liabilities
Current average receivables
Average period of collection = (1.27)
Average sales on credit /day
Current net revenue
Current inventory turnover = (1.30)
Currentl average inventory
Current net revenue
Current efficency ratio of fixed assets = (1.36)
Current average use of fixed assets

Current profitability ratio of fixed asset = Current net profit after tax (1.37)
________________________________
Current average use of fixed assets
Period efficiency of total assets = Current net revenue (1:38)
_____________________________________
Current average use of total assets

Period profitability ratio of total assets (ROA) = Profit after tax and interest (1.39)

Current average use of total assets

2.5. Factors affecting asset management in construction companies
There are many elements affecting the asset management in construction companies,
some of which are awareness and competence of the company management board, capital
management, management tools, and management mechanism of the company. In addition,
there are two external factors, including the State’s regulation on property management and
level of market development.
CHAPTER 3
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CURRENT SITUATION OF ASSET MANAGEMENT
IN LISTED CONSTRUCTION JOINT STOCK COMPANIES IN VIETNAM
3.1. Introduction to overall research
When selecting the listed construction joint stock companies for research, the
researcher did not base on their names but on the revenue from their construction activities
(including construction and installation) in the total income of the companies, which was
higher than the revenue from any other activities (such as trade of real estate, production of
construction materials, comerce, water supply, etc ) for most of the time from 2006 to
2010. At the same time, the researcher removed the newly listed companies (from 2010)
because they did not have sufficient data for analysis. List of 104 construction joint stock
companies selected for overall study is presented in Appendix 02. As of 03.31.2011, the
number of construction joint stock companies listed at the stock exchanges in Ho Chi Minh
City and Hanoi was 104 companies, representing 5% of the active construction enterprises.
The foundation of the listed construction joint stock companies was closely associated with
the development history of Vietnam's construction industry, with 78% equitized from the
state-owned enterprises including many large companies such as Machinery Installating
Corporation (Lilama), Corporation of Construction and Infrastructure Development (Licogi),
PETROVIETNAM (PV), Song Da Corporation and Vietnam Corporation of Construction,
Import and Export (Vinaconex), etc. 82% of these companies have their own asset of at
least 200 billion VND in value. Under Vietnam’s current regulations, all the listed
companies in general (including construction companies) have to perform some duties such
as: maintaining the listing standards (defined in Articles 8 and 9 of Decree 14/2007/ND-CP);

issueing company rules as prescribed in Decision No. 15/2007/QÐ-BBCVT - BTC;
complying with regulations of corporate governance promulgated in Decision No.
12/2007/QD-BTC; and publicizing information under the provisions of Circular No.
38/2007/TT-BTC.
Table 3.6: Average value of asset structure of listed construction joint stock companies
from 2006 to 2010
Unit:%
Year Cash/Total assets
Receivables/
Total assets
Inventory/ Total
assets
Fixed assets/
Total assets
2006 6,93 33,79 28,72 21,88
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2007 7,78 31,69 27,86 17,77
2008 5,70 27,59 32,55 17,37
2009 6,86 28,09 29,11 17,93
2010 6,08 32,07 26,63 17,53
Source: [31] and calculations by author
As we can see, in the asset structure of the companies under research, the accounts
receivable took the largest proportion (except in 2008), followed by inventory, fixed assets
and cash. Although it presented the particular features of the construction industry, the asset
structure above showed many potential risks of liquidity (e.g. failure to collect accounts
receivable despite business results recorded), preventing the companies from finishing work
on schedule or ensuring quality of work as agreed (due to shortage of capital).
3.2. Current situation of asset management of listed construction joint stock companies
3.2.1. Status of cash management
3.2.1.1. Forecast of cash flow

Based on the construction plans (including detailed cost estimates) approved by the
investors, the accountants figure out detailed spending needs of the enterprise for each
period. Then, based on the financing plans for the project and payment terms agreed on with
party A, they can determine the volume and arrival time of the counterpart funds. Under
Article 9, ND112/2009/ND - CP on cost management of construction projects, the total
estimated cost of a project is the total estimated cost of construction work, equipment,
project management, investment consultation, backup In addition, management staff need
to estimate the amount of escrow to be as bid bond (in accordance with the provisions of
Article 27 of Procurement Act 2005) to ensure the implementation of contract, and to
guarantee the advance payment when entering for each project. According to Decree No.
48/2010/ND - CP of the Government on construction contract, construction companies are
required to ensure contract performance (in the form of deposit, escrow or letter of
guarantee) before the contract takes effect and is approved by party A, which lasts until the
switch to the stage of maitenance work. The escrow value as contract implementation
guarantee is stipulated in the bidding documents and shall be at least 10% of the contract
value. According to the actual results of survey, this number is usually 5%. Also, under
Articles 16 and 17 of the decree, if requested by the investor, the construction companies
must provide a guarantee of advance equal to the value of the investor’s advance. The
amount advanced by the investor for the construction work is at least 10% of the contract
value (for a contract worth over 50 billion VND), 15% of the contract (valued from 10
billion to 50 billion), and 20% (under 10 billion).
Furthermore, even when they have completed the whole project, the construction
companies cannot receive 100% of the contract value since they still have to perform
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warranty of the work as agreed in the contract. The warranty work is stipulated in Article 45,
Decree 48/2010/ND - CP.
The use of money as escrow or deposit (directly to the investor or banks for letters of
guarantee) to ensure contract performance, guarantee advance payment, and guarantee
maintenance work, will result in stagnant funds, forcing management personnel to be
careful in the process of balancing revenues and expenditures for the security of liquidity.

3.2.1.2. Determination of optimal budget
The subjective evaluation given by 15 people interviewed showed that none of the
listed construction joint stock companies in Vietnam fully applied the model above.
Normally, the chief accountant determines the minimum cash balance for each period based
on short-term spending plans of the business and as well as on management experience (this
factor is quite important and was agreed on by 100% of the respondents). That balance is
stored partly as cash in the safes of the company, partly as deposits at banks to meet regular
needs of payment such as salaries, service fees of electricity / water / telephone / office rent,
purchase of equipment / sub- materials, and partly as a reserve for unexpected incidents
arising in the construction progress. In 9 of the 15 companies under survey, cash in safes
and deposits at banks accounted for most of the cash balance (75%). In the remaining
companies, an equivalent amount, including escrow for trust funds management at the
financial company of the corporation or savings at banks, is used as collateral for loans and
guarantees.
3.2.1.3. Monitoring and maintaining optimal budget
- Changes in payment policies:
When funds is abundant, the listed construction joint-stock companies can allow party A to
reduce the rate of advance (this is also considered a major factor that increases business
opportunities for the companies – agreed by 70% of the respondents), to delay collection of
machinery rent, to offer extension on outstanding debts, to advance employee salaries, to
increase rate of payment at sight for raw materials, to make early repayment, and to do the
opposite in case of temporary shortage of funds.
- Covering budget deficit:
If long-term deficit occurs, the chief accountant proposes to the company director for deficit
covering plans. In theory, several methods can help, such as selling liquidity securities or
withdrawing savings, recovering investment trusts, etc However, most of the responses in
the interview were "bank loans", which causes the company to sink deeper in debts and
suffer from risk of losing ability of solvency.
- Investment of surplus funds:
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The most common investment plan is putting surplus funds as savings into banks or offering
it as loans to other enterprises within the industry. The holding of securities has only been in
practice since 2006 or 2007 due to the rapid growth of the market.
3.2.2. Status of receivables management in listed construction joint stock companies
3.2.2.1. Selection of investors and projects
First, investor’s capacity:
Currently, investors all have their own website to introduce their development history,
capacity of personnel and finance, and projects already implemented by them However,
to reduce potential risks, the staff of project department (or economic planning department)
conduct verification of the information (especially the payment history) through the
companies which have once been involved in that investor’s projects, or through other
organizations such as banks, Ministry of Construction, Department of Taxation, etc
Second, project legality:
The project staff will check accuracy of the decisions on investment plans (explained clearly
in the bidding documents) to see if they match with territorial or regional planning
(provided by Department of Planning - Architecture or the designated agency like the
People's Committees) before making any decision.
Third, project funds:
Currently, the construction projects of urban complex are generally funded with the capital
advanced by the customers in the form of investment cooperation. This approach helps
create capital stability, but sometimes disputes arise between investors and customers (on
terms and value of contribution, product quality, delivery time, etc ), which affects the
flow of project funds, resulting in delay of payment to the contractors. Besides, the
contractors of public investment projects financed by government budgets frequently suffer
from delay in payments.
3.2.2.2. Agreement of payment
First, payment value:
Commonly, the investor makes single or multiple advance ranging from 10% to 30% of the
total contract value; the rest will be settled after the work handover. For the projects with
over 30% of the capital funded by the State, payment must comply with the current

regulations on each type of contract (Under Articles 49, 50 of the Procurement Act 2005).
Second, billing period:
The contractor and investor make agreements based on specific plans of construction and
installation approved to ensure timely supply of capital for the construction companies. For
the projects with over 30% of the capital funded by the State, the payment term is agreed by
the parties, but no more than 14 working days from the date party A receives complete valid
application of payment as agreed in the contract (Article 18, Decree 48/2010/ND – CP).
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Third, changes in terms:
Possible changes in construction cost can be foreseen in all construction contracts signed
between the listed construction joint stock companies and investors, which requires advance
adjustments to payment terms.
Fourth, measures of payment security:
Typically, to protect the interests of investors and contractors, measures of payment security
are specified in the contract. As stated above, under the current regulations, the contractor
shall make the bid security, contract performance guarantee, and advance payment
guarantees to compensate investors for any losses caused by the contractor’s faults in the
construction process. Forms of payment guarantee are collateral or escrow or letters of
guarantee (usually issued by commercial banks), which are specified by the investor but do
not exceed 10% of the contract value.
Conversely, the contractor may request the investor to lease payment guarantees to
prevent such risks as investor’s disappearance, bankruptcy, breach of contract, and delay of
payment. However, the result through in-depth interviews showed that the construction
enterprises (including the listed construction joint stock companies) were not competent
enough to require the investor to secure payment. Consequently, they must depend on the
current law to protect their own interests when such situations arise.
3.2.2.3. Monitoring and collecting debts
According to Table 3.3, the accounts receivable account for 34.27% of the total assets, most
of which is "receivables from customers" (60.5% - except for Vietnam Electricity
Construction Corporation – VNECO and Song Da - Thang Long Construction Corporation).

The rest is "advance to sellers" (advance to subcontractors, material suppliers, employees,
etc ) and "other receivables ".
First, tracking and settling debts:
Liabilities are carefully tracked for each investor, each project, each month/ quarter
Liabilities are sorted into several types such as overdue by 30 days, 60 days, 90 days and
more than 90 days with increasing levels of tracking, urging and collecting. Under Article
53, Decree 85/2009/ND - CP giving guidance on the Bidding Law (2005, 2009) and the
Construction Law (2003) guiding the selection of contractors, the billing record shall
includes: minutes of work acceptance in the period of payment confirmed by the
contractor’s representative, investor and consultant supervisor (if any); written confirmation
of increase or decrease in work volume produced by the contractor’s representative, investor
and consultant supervisor (if any); The list of payments on completed workload requested
by the contractor and the price stated in the contract; proposal of payment made by the
contractor, which clearly shows volume and value of the completed workload, value of
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increased or decreased workload, value of advance, and value of payment in the payment
period.
Second, reserve against bad debts:
As stipulated in Circular 13/2006/TT – BTC, the establishment and use of reserve for bad
debts are guided as follows: 30% of the debt value overdue from 3 months to less than 1
year, 50% of the debts overdue from one year to less than 2 years, and 70% of debts
overdue from 2 years to under 3 years. For undue debts from the economic organizations on
the point of bankruptcy or dissolution, missing, fleeing, being prosecuted, committed for
trial, or gaoled by law enforcement agencies, the company should estimate irrecoverable
losses to set up a reserve fund.
Third, settlement of disputes:
Usually, if the investor falls into temporary financial crisis but can settle the debts after
some months, the construction companies will offer the investor an extension of 30 to 90
days and apply certain penalty of interest rate. If the investor agrees to use an escrow
service for payment, the contractor will transfer the dossiers and documents to the bank to

be paid as commited. If the investor deliberately delays payment after repeated reminders or
goes bankrupt or flees, the contractor will stop construction until receiving enough money
or file a lawsuit to the enforcement agencies for settlement. Under Article 39, Decree
48/2010/ND - CP, the listed construction joint stock companies may temporarily stop the
work in the construction contract when the investor fails to make payment after more than
28 days from the due date.
In addition, under Article 44 of the Decree, the parties may hold negotiation and
make settlement on what have been signed in contract. Recently, negotiation has been the
most preferred solution applied by the listed constructions joint stock companies. Lawsuit is
applied only when negotiation does not work. Commercial arbitration is not taken in
consideration.
3.2.2.4. Seeking counterpart fundings for receivables
It is necessary, even urgent, for the listed construction joint stock companies to seek
counterpart fundings for receivables. This is because of the fact that although all of the 15
construction companies under survey gained profit (profit after tax> 0), their business result
was not yet transformed into cash. Except for PETROVIETNAM NGHE AN
CONSTRUCTION JOINT STOCK CORPORATION – PVNC, which had a larger net cash
flow than profit after tax, all of the remaining companies had smaller cash flow than profit
after tax. Particularly, the net cash flow of 8 of the 15 companies was under zero, suggesting
that the cash flow of these companies was not sufficient enough to cover the spending needs
even when the companies were making profit. Only after emplementing investment
activities could the net cash flow in 2010 of the companies be improved.
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In the short term, if Party A does not make sufficient and due payments, the chief
accountant or the director of the construction company may hold negotiation with the key
stakeholders such as employees, suppliers of raw materials, machinery-for-lease
companies for extension of the due debts until the company’s accounts receivable are
collected. In addition, the management staff can navigate the idle funds of other projects to
the projects in need. When the payment is delayed for longer than one month, the chief
accountant may decide to sell liquidity securities, to withdraw savings or to apply for short-

term bank loans, depending on the specific condition of the business. These approaches will
obviously incur borrowing costs or opportunity costs.
3.2.3. Status of inventory management of listed construction joint stock companies
3.2.3.1. Forecast of demand for raw materials
The supplies office staff (assisted by technical personnel) base on the schedule and
progress of each project approved to figure out the workload, including floor, stairs,
playground, roads, pipelines, etc. to accomplish in the period.
Combining the average consumption of materials with the table of work allocation
(showing technical requirements of each project item), we can estimate the total
consumption of raw materials in general and specific needs of each material (sand, gravel,
brick, stone, cement, iron, steel, asphalt, power lines, pipelines ). Then, we can produce a
detailed list of raw materials in demand by type of materials, time incurred in each project /
package and a summary on material needs of the whole project.
3.2.3.2. Determining optimal order of supplies
According to the evaluation given by the management staff interviewed, purchase of
supplies as the construction work progresses (without identifying overall optimal order of
supplies) is also an effective way to ensure economic efficiency for the construction
companies and is appropriate for this particular industry. However, lack of material stock
also causes many construction companies to fall into difficulties when material prices
increase unexpectedly.
3.2.3.3. Monitoring and holding inventory
For the inventory as raw materials which are imported on actual demand, the output
price is standardized or authorized. The staff of supplies office, economic planning
department and technical support unit should work in coordincation to monitor the
construction progress and the supplies demand of each item to write a report on changes in
material needs and current status of materials in stock and submit it to the board of directors
for decision on the time and volume of the next supplies order.
3.2.3.4 Setting price and carrying forward costs of unfinished work
With respect to inventory as the cost of unfinished construction work, the companies
should base on the inventory sheet of the unfinished work to aggregate and allocate costs

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like costs of raw materials, direct labor, overall production, machinery use, management and
other transactions Furthermore, the companies should carry out periodical accounting
work to determine the volume of completed items to figure out revenue and cost of goods
sold. Under Decree 112/2009/ND - CP on cost management of construction projects, the
Ministry of Construction gives guidelines on how to set and publicize construction norms,
and ways of identifying and managing price set for each project.
3.2.4. Status of asset management in listed construction joint stock companies
3.2.4.1. Selecting approach of forming fixed assets
Currently, the listed construction joint stock companies in Vietnam only own some
common device (required for all projects), which is of small value and easy for move,
including hoists (similar to lifts for transporting workers and materials to upper floors),
excavators, bulldozers, excavators, tamping machines, drilling machines, lathes, concrete
mixers, pumps, generators, transport vehicles, cranes and such tools as scaffolds, concrete
slabs, columns, panels arrays, instrumentation, etc These assests are formed by purchasing
from Japan (28% to 58%), Russia, Germany, China (5% to 17%) and Vietnam for they are
of good quality, low fuel consumption, and suitable for technical requirements of local
construction.
3.2.4.2. Assessing financial outcome of investment decision
Two key factors often taken in consideration before purchasing fixed assets in the
listed construction joint stock companies in Vietnam include the practical need (regular /
irregular) and the cost savings of the new equipment compared with that of rent. Then,
decision on which assets to buy (in terms of models, types, suppliers ) is based on several
factors such as advice of sales staff, company budget and even discount rate for the decision
maker. Regarding hiring sub-contractors, the economic efficiency is measured by the
difference between the rate of profitability achieved by self-performing the work and the
rate obtained from transferring work to the sub-contractors. The selection of sub-contractors
is primarily based on traditional relationship, cooperation, or affiliation between the units
(dependent or independent) in the same group or corporation, and the rate of commission
offered by the subcontractors.

3.2.4.3. Pricing and depreciating fixed assets
According to Article 4 of Decision 206/2003/QD - BTC on management, use and
depreciation of fixed assets. Price of tangible assets (including the new and the used) is the
actual price plus taxes (exclusive refundable taxes) and other relevant expenses at the time
the asset is ready for use. Such expenses are interest on loan to puchase fixed assets, fees of
transportation, loading and unloading, upgrade, installation, testing, and registration tax.
There are three depreciation methods for the construction companies to choose, but 100% of
the companies apply the method of straight line depreciation, compling with Regulation
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206/2003/QD – BTC, which is customized for each type of fixed assets by the chief
accountant.
3.2.4.4 Replacement and disposal of fixed assets
Usually, at the beginning of a year, the staff of supplies office gather information on
fixed asset status from the working teams, construction sites, warehouse, etc and the
estimated workload of the year to make a plan of replacing, liquidating, and furthering
investment for the fixed assets.
3.3 Assessment on asset management in listed construction joint stock companies in
Vietnam
3.3.1. Achievements
Table 3.15: Average value of targets for assessing asset management in listed
construction joint stock companies in Vietnam
Target 2006 2007 2008 2009 2010
Short-term solvency (times) 1,23 1,29 1,26 1,19 1,32
Quick solvency (times) 0,81 0,69 0,69 0,79 0,76
Inventory Turnover (cycle / year) 3,66 3,44 3,01 3,92 3,55
Profitability ratio of total assets - ROA (%) 4,75 5,25 4,82 4,77 4,45
Profitability ratio of equity – ROE (%) 21,3 16,8 14,7 16,2 13,8
Source: [31] and calculations by author
The average short-term solvency was relatively stable between years and revolved
around value 1, showing that the construction companies generally had enough short-term

asset to pay short term debts. Compared with that of the joint stock companies of other
sectors, this target is almost the same in value (see table 3.10). The quick solvency ranging
from 0.7 times to 0.8 times on the yearly basis demonstrated that the construction
companies did not depend much on inventory. Without selling stocks, they were still able to
settle up to 80% of their total liabilities.
Average ROA of 4.67% proved that every 100 VND rationally invested in total
assets by the construction companies resulted in 4.67 VND (as profit after tax and interest).
In 2010, this ratio was higher than that of other listed joint stock companies in the industrial
sector, public services, finance and telecommunications.
The average ROE of 16.5% (in 5 years) meant that every 100 VND properly invested
in the listed construction joint stock companies in Vietnam resulted in 16.5 VND in profit
(or dividends) after one year. In 2010, the ROE of these construction companies was 13.8%,
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higher than that of the companies in the industrial sector, public services, consumer services
and telecommunications.
3.3.2. Drawbacks
Table 3.16: Average value of targets for assessing asset management in listed
construction joint stock companies in Vietnam
Target
2006 2007 2008 2009 2010
Immediate solvency (times) 0,13 0,14 0,14 0,18 0,15
Average period of collection (days) 136,3 166,4 163,9 170,7 187,9
Efficiency ratio of fixed assets (times) 8,91 9,91 8,31 7,13 6,18
Profitability ratio of fixed assets (times) 0,39 0,58 0,42 0,41 0,41
Source: [31] and author's calculations
First, liquidity tended to decrease and was weaker that that of the listed joint stock
companies of other sectors. Especially, the immediate liquidity was much weaker than the
quick solvency, averaged at only 0.15 times in 5 years. That is, without debts recovery, the
money available was only enough to pay 15% of the short-term debts, and when the investor
failed to pay debts on time, the liquidity of the construction companies would be threatened.

Second, the average period of collection was too long, ranging from 4 months to 6
months from the time the revenue was recorded (on volume of completed work), for the
contractor to be paid in full.
Third, although effeciency ratio of fixed assets was high, approximately 8 times, it
did not reflex the actual exploitation of the fixed assets in business. This is because a large
amount of machinery and equipment was externally leased for each item of the construction
project (e.g. lease of machinery or sub-contracting), which was included in the revenue of
the business, but was not included in the value of the fixed assets on the balance sheet.
Therefore, the profitability ratio of fixed assets was much smaller in value (from 15 to 30
times) as the outsourcing cost was deducted to determine net profit.
Fourth, the profitability ratio of total assets (ROA) and the profitability ratio of
equity (ROE) both tended to decrease, suggesting that efforts to manage assets in recent
years have not resulted in the desired effect.
Fifth, in 2010, the average ROA was 4.45% (equal to that of other industries), but
only 43 of the 104 listed construction joint stock companies had a higher-than-average ROA.
In particular, 7 companies had ROA under 1%, which meant that with 100 VND of the total
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assets resulted in less than 1 VND in profit after tax and interest after one year. These were
the companies with low ROE (less than the average of 13.8%). This seriously affected the
income of the year of the business owners and creditors, which requires taking effective
measures to improve the situation.
3.3.3. Causes of drawbacks
3.3.3.1. Subjective causes
Drawbacks of asset management in the companies under research stemed from many
aspects such as insufficient awareness and competence of the company leaders and
employees; irrational capital management in both aspects: capital structure and method of
raising capital; backward tools of management, lack of synchronized and appropriate
apparatus of management. In particular, the weaknesses in capital management had the
greatest impact.
From 2006 to 2010, the capital structure of the surveyed companies remained stable

(difference between years only ranged from 1% to 2% - except in 2006) with a debt ratio of
at least 66% of the total capital. Particularly, some companies like Song Da - Thang Long
Corporation, Song Da Construction and Investment Corporation, Construction Company No.
21 and Song Da 27 had regular debt of approximately 90% of the total capital. The short-
term debt ratio of the companies surveyed was approximately 60% of the total debt.
Table 3.19: Fundings structure of listed construction joint stock companies in Vietnam
Unit:%
Year 2006 2007 2008 2009 2010
Debt / total capital 77,84 66,92 67,32 69,41 66,70
Short-term debt / total debt 64,96 58,22 58,20 58,88 54,62
Source: [31] and calculations by author
Theoretically, through the financial leverage mechanism, the use of debt helps create
tax savings and gain income for the business owners. But, as a result of this, the need of
payment of the business will increases (both the short term and long term), creating pressure
on (even change the behavior of) the management staff in the decision-making process. Not
only the way of maintaining capital structure is of many disadvantages, but also the method
of raising capital is not reasonable. The capital is raised from trade credit, bank credit, initial
contribution (the first time issuance of shares) and undistributed profits (funds formed with
profit after tax to supplement the equity). These are the traditional approaches commonly
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applied in 75% of the enterprises in Vietnam (regardless State- owned companies, limited
liability or joint-stock).
3.3.3.2. Objective causes
In addition to the subjective causes mentioned above, there remain objective reasons
for the drawbacks in the asset management of the construction companies in general, and
the listed construction joint stock companies in particular. The most outstanding reason is
the support services of debt management in the construction enterprises have not yet
developed.
Currently, there are about 7,000 lawyers [40] working for the bar associations, law
offices and law firms, primarily located in large cities, providing advice or protecting

company interests in the court when problems arise rather than consulting on operation
plans for the construction companies to avoid risk (especially at the stage of drafting
regulations, charter or contract terms). In addition to the lawyers, till the end of 2010, there
were only 207 arbitrators nationwide, working at six commercial arbitration centers [40].
From 2004 to 2009, these centers helped settle 283 cases, but none of the cases were related
to liabilities between contractors and investors [40]. Also, promotional activities to change
the perception of communities and businesses have not received proper care. Moreover, not
until 2010 was the commercial arbitration law officially enacted, replacing the Ordinance on
Commercial Arbitration and partly improving the legality of this legal service.
In addition to seeking legal advice, the listed construction joint stock companies all
need services of purchasing and selling debts or debt collection. But up till now, there has
been just one company specializing in buying and selling debts and stagnant assets of
enterprises (operating under Ministry of Finance). This company was established in 2003
with focus on promoting the process of restructuring, equitizing, empowering, selling,
contracting and leasing the state-owned enterprises. Moreover, products of the construction
industry are of unique features. There has never been any precedent in Vietnam that the
contractor sells party A’s debt to a debt purchasing company to recover capital for the
project.
Currently, only a few debt collecting companies like Dan An, Song Bao, Minh Tin
are licensed to establish and have had efficient operation. Similarly, only a few law firms
like Phu and lawyers, Giai Phong law office are licensed to provide debt collection
services If the debts have sufficient legal grounds and the debtors do not flee or go
16
bankrupt, success rate of debt collection can be up to 85%. However, high fees of debt
recovery (ranging from 20 to 50% of debts recovered) [44] often cause the construction
companies become unprofitable after debts are recovered.
Bidding and construction planning are still weak in terms of legality and deployment
process. The unexpected changes in the State’s legal provisions (commonly occurring after
1 to 2 years in effect) often spoil bidders’ plan or plan of financial allocation and asset
management of the listed construction joint stock companies. This makes the bidders unable

to participate in the bidding and reduces business opportunities of the enterprises. In the
bidding process, there remain frauds committed by investors and contractors such as bid-
agreement (that is, the investors or the bidders agree to help a pre-appointed bidder to win
the bid); transforming bid packages into too bid packages (which makes smaller companies
unable to enter for the bidding), or into too small packages for the method of bid
appointment to be applied; releasing no bidding information to the public as regulated by
the State; falsifying bidding information; taking advantage of the corporation or group’s
capacity and reputation to win the bid, then sub-contracting to the subsidiaries; offering an
excessive price to win the bid, then faking reasons to apply for capital supplementation;
offering a high rate of commission (from 15% to 30% of the contract value) to the investor’s
representative and the bidding assembly [45]
Also, the inconsistent overall plan of regional and territorial construction has
increased the debt of many listed construction joint stock companies.
CHAPTER 4
SOLUTIONS FOR ENHANCING IN ASSET MANAGEMENT
IN LISTED CONSTRUCTION JOINT STOCK COMPANIES IN VIETNAM
4.2. Direct solutions for improving asset management in listed construction joint stock
companies in Vietnam
4.2.1. Assessment on impact of asset management on ROA, ROE and Z index in listed
construction joint stock companies in Vietnam
Table 4.1: Impact of asset management and debt coefficient on ROA, ROE and Z
index in listed construction joint stock companies in Vietnam
Target
Coefficient
affecting ROA
Coefficient
affecting ROE
Coefficient
affecting Z
Short-term solvency 0,171 0,268 0,490

17
Average period of receivables - 0,301 - 0,263 - 0,417
Inventory turnover 0,256 0,295 0,284
Efficiency of tangible fixed asset
statistics
insignificant
statistics
insignificant
0,268
Profitability ratio of tangible fixed
asset
statistics
insignificant
0,422
Statistics
insignificant
Debt ratio -0,519 0,378 - 0,325
Total asset
statistics
insignificant
statistics
insignificant
Statistics
insignificant
Possible reasons for change of
dependent variable
47% 43% 60,4%
Source: [39] and calculations by author
From the summary above, we can see that the data of 2010 was insufficient to
recognize the impact of the total assets on ROA, ROE and Z. Basing on the objective and

scientific estimates, we can confirm that when the asset is strictly and scientifically
controlled, ROA, ROE and Z will all increase, improving profitability while the company’s
operation is still in safety with no risk of bankruptcy. The impact of short-term liquidity and
average collection period were quite serious, so management staff should prioritize the
management of cash flow and debts. Although the debt ratio can amplify ROE, it reduces
ROA value and increases Z index, meaning that financial leverage gives business owners a
higher profit but hides many potential risks of liquidity since it does not originate from real
power of the enterprise.
4.2.2. Application of model Miller - Orr in funds management - research conducted at
Song Da-Thang Long joint-stock company
- Step 1: Determine minimum budget balance: based on account balance of cash and cash
equivalents at the end of the most recent 12 quarters and the comments of the accounting
staff interviewed, the minimum budget balance that keeps safety for the company is
determined at 73.177 billion VND.
- Step 2: Determine budget range d
3 Cb x Vb 1/3
d = 3 x x ( 4.13 )
4 i
18
As Song Da-Thang Long only had term deposits at the bank and it did not hold liquid
securities, “i” is determined as interest on savings with term of 12 months. Based on the
data published by the State Bank and the author's calculations, the average savings interest
rate in 3 years from 2009 to 2011 was 12.33% / year.
Cb is determined as the interest rate on savings lost when the company makes early
withdrawal. With interest rate on non-term deposits of 3% / year, if withdrawal is made
before maturity, opportunity cost shall be 9.33% / year. In addition, there remain some other
costs on withdrawal such as travel expenses and fee of withdrawal made with other banks.
But the management staff in the interview commented that those expenses were
insignificant.
Variance of revenue and expenditure budget (Vb) was determined as 14527.04

billion (data of net cash flow by day in 2010 provided by the accounting department).
By formula (4.13), d = 97.079 billion VND.
- Step 3: Determine optimal and maximum cash balance
M * = M min + d / 3 = 105.54 billion VND.
Mmax = M min + d = 170.25 billion VND.
Budget million VND

170,25 M max


105,54 M*

73,177 M min

0 Time


Figure 4.2: Model Miller - Orr applicable to Song Da -Thang Long joint stock
company
With reference to the results above, we can adjust the budget of 2010 by drawing a deposit
of 44.415 billion VND in Quarter 2 and repaying loans of 107.206 billion VND in Quarter 3
19
to keep the budget balance at the end of the quarter in the cash range. After model Miller –
Orr was applied, the profit after tax of Song Da-Thang Long increased by 2.238 billion
VND. Although the asset size decreased by 104.222 billion VND, the short-term debt was
proportionally reduced, lessening the liquidity risk for the company.
Table 4.8: Financial Ratio of Song Da-Thang Long joint-stock company before and
after application of model Miller – Orr
Item Before M – O application After M – O application Difference
Short-term solvency

1,0788 1,0827 0,0040
Debt ratio 95,24% 95,10% -0,13%
Profit 3,90% 4,01% 0,11%
ROA 1,46% 1,53% 0,07%
ROE 30,60% 31,18% 0,58%
Again, it is confirmed that the application of model Miller - Orr in the fund
management of Song Da-Thang Long has brought positive effects. For instance, it has
helped increase the liquidity and profitability and reduced the debt ratio. That is, the proper
approaches for fund handling, on the one hand, helps strengthen liquidity, and on the other
hand, increases profitability. In other words, strict and scientific management of budgets
helps achieve the objective of maximizing asset value while keeping safety (no increase in
debt pressure) for enterprises.
4.2.3. Using combined software for management of debt accounts, inventory and fixed
assets in listed construction joint stock companies
Besides its common features such as tagging, tracking, classifying, conducting
inventory, managing transactions and documents in a scientific way, the software helps
management staff to produce plans, annual reports, and corresponding estimates when the
input parameters change (specially effective for selecting approaches of depreciation,
investment or funding). Modern software can have additional functions such as automatic
dispatch of notice (on default schedule) to the electronic mailbox of the management staff to
remind or give warnings about construction progress, incurred liabilities, risk of material
shortage or date of machinery maintenance With efficient support of the modern
management means, productivity and efficiency of the management staff’s work will be
improved significantly.
Currently, it is very easy to find the software with such features. For large companies
owning a wide network and envolving in multi-business such as VINACONEX,
PETROLVIETNAM CONSTRUCTION JOINT STOCK COMPANY (PVC), Song Da -
20
Thang Long, Tasco, etc., it is advisable to apply ERP solution (Enterprise Resource

Planning). For companies running on a tight buget with simple products and a compact
hierarchy (such as Construction and Infrastructure Development Joint Stock Company-CID,
VNECO 2, VNECO 3, Quangnam Construction and Postal Development Joint Stock
Company-QCC, etc ), it is recommendable just to use specialized accounting software for
construction industry, which is sufficent enough to improve the ability of asset management.
4.3. Complementary solutions for enhancing asset management of listed construction
joint stock companies
In addition to the direct solutions mentioned above, to improve asset management of the
listed construction joint stock companies, it is necessary to change the existing funding
structure and traditional methods of raising capital by issueing bonds and stocks (internally
and externally). Besides, it is vital to improve and change the perception of management
staff and carry out synchronous modernization of management tools. At the same time, it is
advisable to make adjustment to management structure, separating the roles of ownership,
management and supervision, to establish marketing and planning department and practice
quality management ISO 9000: 2000.
4.2.2. Solutions for raising capital
4.2.2.1. Identifying and maintaining an appropriate funding structure
The analysis of ROE, Z and DFL of the listed construction joint stock companies in 2010
suggests that if macroeconomic conditions in the future goes on without significant changes,
the listed construction joint stock companies should maintain the scale of financial leverage
in the range of about 1 to 1.5 times, creating a profit before interest and tax (EBIT) of 3
times as much as the current interest. To achieve that goal, the companies need to reduce
their loan rate or make greater effort to take the most advantages of their investments and
assets in order to increase economic efficiency. In particular, the listed construction joint
stock companies which are maintaining a high debt ratio (80%), listed in table 4.2, should
reduce this rate at least to the average level of the group (70%). If other facts do not change
and the debt ratio is reduced to 70%, ROE, Z and DFL of those companies will change as
shown in Table 4.3.
Table 4.10: Value of ROE, Z and DFL of some listed construction joint stock
companies with assumed debt ratio in 2010 remaining at 70%

TT

Name Initial Initial
anticipated
ROE
Initial DFL

anticipated
DFL
Initial Z

anticipated
Z
21
debt
ratio
ROE


1 Song Đa – Thang Long 95,4% 30,0%

4,6% 1,99 1,58 0,14 0,27
2 Construction No 21 90,9% 27,4%

8,2% 1,75 1,49 0,79 0,95
3 Join Stock 482 80,8% 17,1%

10,9%

1,74 1,59 0,70 0,77

4 Construction No 9 89,0% 16,8%

6,1% 1,79 1,53 0,62 0,71
5 Lilama 18 84,7% 16,4%

8,4% 2,09 1,76 0,58 0,70
6
Song Đa Construction
and Investment
92,1% 15,9%

4,2% 3,03 2,04 0,49 0,70
7 Song Đa207 81,9% 15,3%

9,2% 1,97 1,73 0,70 0,79
8 Construction 565 87.4% 14,8%

6,2% 3,36 2,29 0,54 0,69
9 Vinaconex 25 80,5% 14,1%

9,2% 1,88 1,68 0,74 0,81
10
Phuc Hung Holdings
and Construction
75,4% 15,1%

12,5%

1,21 0,79 0,71 1,20
Source: [31] and calculations by author

As the capabilities of asset management did not change, debt rate in the capital
structure was reduced, equity ratio increased, and financial leverage decreased (within the
range of 1.1 to 2.2 times ), ROE of the companies listed was amplified compared with the
original, but reduced to less than the average level of the group (13.8%). However, as a
resutl of this, the threat of bankruptcy reduced. Particularly, thanks to this, Construction
Joint Stock Company No 21 was able to move into safe state (Z> 0.862). The Zs of the
remaining companies (except Song Da - Thang Long) all stayed at 0.7 or more.
If EBIT in 2010 increased 1.5 times compared with the original and the debt capital
structure of debt and credit accounted for 70%, the situation of 10 listed construction joint
stock companies would change significantly.
Table 4.12: Value of ROE, Z and DFL of some listed construction joint stock
companies with assumed debt ratio remaning at 70% of total capital and EBIT
increasing by 1.5 times compared with that of 2010
22
TT

Name
Initial
debt
ratio
Initial
ROE

anticipated
ROE

Initial DFL

anticipated
DFL

Initial Z

anticipated
Z

1
Song Đa – Thang Long
95,4% 30,0%

10,4%

1,99 1,32 0,14 0,56
2
Construction No 21
90,9% 27,4%

16,9%

1,75 1,28 0,79 1,58
3
Join Stock 482
80,8% 17,1%

21,6%

1,74 1,33 0,70 1,36
4
Construction No 9
89,0% 16,8%

12,7%

1,79 1,30 0,62 1,04
5
Lilama 18
84,7% 16,4%

18,7%

2,09 1,40 0,58 1,25
6
Song Đa Construction
and Investment
92,1% 15,9%

12,6%

3,03 1,51 0,49 1,55
7
Song Đa207
81,9% 15,3%

19,6%

1,97 1,39 0,70 1,42
8
Construction 565
87.4% 14,8%

19,5%

3,36 1,60 0,54 1,42
9
Vinaconex 25
80,5% 14,1%

18,8%

1,88 1,37 0,74 1,42
10
Phuc Hung Holdings
and Construction
75,4% 15,1%

20,0%

1,21 1,12 0,71 1,20
Source: [31] and calculations by author
Comparing Table 4.1 with Table 4.5, we can see that when debt ratio reduced and
efficiency of asset management increased, both ROE and Z of the 10 companies were
significantly improved. Except for Song Da - Thang Long, which was still in danger of
bankruptcy, the remaining companies were operating safely. Moreover, their ROE was
higher than the average level of the group (except for Song Da Construction joint stock
company, Song Da - Thang Long, and Construction Joint Stock Company No 9).
4.2.2.2. Reducing short-term debt in total debt
If other factors stay unchanged, the short-term debt rate in total debt of the 10
companies listed will have to be changed (as shown in table 4.7) for the companies to
achieve the intended objectives. After careful reconsideration, it comes to a conclusion that
all of the companies need to keep their short-term debt rate ranging from 32% to 73% of

total debt, and increase short-term liquidity by 1.5 to 2 times.
Table 4.14: Debt structure in 2010 of some listed construction joint stock companies
with assumed quick solvency as 1
23

TT

Name
Initial short
term debt
in total
debt
anticipated
short term
debt in
total debt
Initial
short
term
solvency
Initial
quick
solvency
anticipated
short term
solvency
1
Song Đa – Thang
Long
52,5% 33,0% 0,73 0,63 1,17

2
Construction No 21
86,8% 36,5% 1,16 0,42 2,76
3
Join Stock 482
91,5% 62,4% 1,04 0,68 1,53
4
Construction No 9
58,9% 32,8% 1,49 0,56 2,67
5
Lilama 18
91,7% 47,9% 1,06 0,52 2,02
6
Song Đa
Construction and
Investment
97,2% 61,4% 0,96 0,63 1,52
7
Song Đa207
92,4% 56,7% 1,08 0,61 1,76
8
Construction 565
94,7% 53,9% 1,06 0,57 1,86
9
Vinaconex 25
97,8% 73,3% 1,10 0,75 1,46
10
Phuc Hung
Holdings and
Construction

99,1% 57,39% 1,01 0,58 1,74
Source: [31] and calculations by author
4.4. Support for deploying solutions of improving asset management efficiency in listed
construction joint stock companies in Vietnam
Ministry of Finance and Ministry of Construction should coordinate with Vietnam
Construction Association, professional associations and Economic Research Institute to
carry out workshops, in-depth research or issue detailed guidelines on asset management for
construction companies. At the same time, there should be adjustment to the regulations on
asset depreciation, enabling construction businesses to accelerate depreciation for
technology renovation.
24
In addition, the Government and relevant agencies should facilitate development of
legal services with focus on compiling contracts and settling disputes through commercial
arbitration in the construction sector. It is also advisable to establish more companies
specializing in selling and purchasing debts, and promote debt collection service. Bidding
and construction planning should also be improved towards perfection.

CONCLUSION
The fact that asset management fails to achieve the intended goals in 57% of the
listed construction joint stock companies has raised an urgent need to practice appropriate
groups of solutions, focusing on such issues as human resources, capital management,
facilities for management and management deployment. The groups of solutions above
should be implemented in the order of importance and urgency of each group. It is
recommended that solutions for human resource be chosen first, paving the way for
successful application of the remaining measures. Solutions for capital management also
should be carried out as soon as possible to improve short-term liquidity, which, together
with strict and scientific management of asset, will help create a foundation for sustainable
development. Solutions for management facilities and management deployment will help
increase management efficiency, so the companies should base on their actual ability and
need to build their own roadmap for implementation.

Besides, to facilitate effective implementation of the solutions, it is necessary to
make a number of recommendations to the Ministry of Finance and other relevant agencies.
The recommendations should include issuance of detailed regulations and instructions on
asset management in the construction enterprises; adjustment to regulations on depreciation
of fixed assets; promotion of support services like debt collection; and improvement of
bidding and construction planning.
If the suggeted solutions are seriously and comprehensively practiced, the assets of
the listed construction joint stock companies will be more efficiently managed, which helps
achieve the goal of maximizing the value of owner’s asset and ensure safety and sustainable
development for the enterprises.