BUIDING BUSINESS STRATEGY COWAELMIC FOR THE PERIOD 2011 2015

DISSERTATION MBA

BUIDING BUSINESS STRATEGY - COWAELMIC FOR THE
PERIOD 2011 - 2015

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INTRODUCTION
CHAPTER 1: THEORITICAL BACKGROUND ON BUILDING BUSINESS
STRATEGY FOR ENTERPRISES
1.1. Definitions on strategy
1.2. Types of strategies
1.3. Business Strategic Planning Process
1.3.1. Defining the mission and key goals
1.3.2. Macro environment analysis
1.3.3. Industrial Environment Analysis
1.3.4. Internal Environment Analysis
1.4. SWOT Analysis Matrix
1.5. Generic business strategy
1.5.1. Strategy basis
1.5.2. Type of Generic Strategies
1.6. GREAT model – Selecting the optimum strategy

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CHAPTER 2: ANALYSIS OF COWAELMIC’S BUSINESS STRATEGY

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2.1. Introduction to COWAELMIC
2.1.1. Overview on formation and development of COWAELMIC
2.1.2. Organizational structure
2.2. Cowaelmic’s business environmental analysis
2.2.1. Analysis on impacts of the macro environmental factor
2.2.2. Analysis on impacts of the industrial environment factor
2.2.3. Internal environmental factor impacts analysis
2.3. SWOT analysis

CHAPTER 3: RECOMMENDATION FOR
COWAELMIC’S BUSINESS
STATEGY FOR 2011 – 2015.
3.1. Orientation for corperate’s development
3.1.1. Vision, Mission
3.1.2. Core Value
3.2. COWAELMIC’s business strategy Orientation for the period 2011-2015
3.2.1. Orientation of strategy for production and business organization
3.2.2. Strategies and optimum business strategy selection for 2011 – 2015 periods
3.2.3. Optimum business strategy selection according to GREAT model
3.3. Strategic Solutions
3.3.1. Technology and product Solutions
3.3.2. Solution for human resources management
3.3.3. Solution for capital resources
3.3.4. Analyzing finance of project
3.3.5. Marketing solutions
3.4. Implemetation

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3.4.1. Implement strategy S/O
3.4.2. Implement solutions of Human Resource Management
3.4.3. Implement capital solution
3.4.4. Marketing implementation
APPENDIX
Appendix 1: The main business lines of COWAELMIC
Appendix 2: Overview on production technology for steel structural types
Appendix 3: Production technology in factory
CONCLUSION
REFERENCE

Acknowledgements
We certify that all the content of this project is the effort during the process of
studying, understanding as well as topic selection by the author team members

(besides the reference document and data enclosed).
We hereby acknowledge that this written project has not been collected by any other
studying or training program.
Ha noi, 20 August 2011
The Author group

CHAPTER 1: THEORETICAL BACK GROUND ON BUILDING BUSINESS
STRATEGY FOR ENTERPRISES
1.1. Definitions on strategy
Strategy is an orientation and scope of an organization in long term in order to
gain the competitive advantage for institution by defining all resources in a changing
environment to meet the market demand and satisfy expectations of relate parties.

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Roles of strategy
- Create the relation between strengths and weakness of the company, the mutual
supporting relation between opportunities and challenges outside the company, and
then create the competitive advantage for enterprise.
- Help the manager to see the opportunities and threats that may happen in current and
future business in order to make analysis and forecast the future market, take full
advantage of opportunities, reduce the threats, improve the competitiveness of
enterprise, and achieve great success.
- Help the enterprises to create better business strategy via using systematic approach,
creating base for and increase the connection among internal members in realizing the
common target of the enterprise.
1.2. Types of strategies
- Classification by strategy level:
+/Corporate strategy (General strategy).

+/Business strategy (sector).
+/ Functional Strategy.
- Classification by the strategy content.
Regarding the strategy content, the managers can define strategy in different types:
+/ Marketing, commercial strategy
+/ Financial Strategy
+/ HR Strategy
+/ Technology Strategy
1.3. Business Strategic Planning Process.
The business strategic planning is regular task which requires the involvement of all
enterpirse memebers. It includes following steps.
THE MANAGING THE STRATERGY PROCESS

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Figures 1.1: Process of managing the strategy. Source: Le The Gioi, Nguyen Thanh
Liem and Tran Huu Hai, “Strategic Management”, Statistical Publishing House, 2009)
1.3.1. Defining the mission and key goals
- Defining the organizational mission / Defining the strategic goals

.

1.3.2. Macro environment analysis
Economic

Political - Legal

Threat from
new entrants

Global
Supplier power

Rivalry

Buyer power

Threats of
substitutes

Cultural
Social

Technological
Demographical

Figure 1.2: Macro Environment
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(Source: « Strategic Management: Concepts and Cases: Competitiveness and
Globalization »’ Micheal Hitt and all, 2010)
1.3.2.1. Economic environment
1.3.2.2. Governmental, Legal, Political environment.
1.3.2.3. Technological Environment
1.3.2.4. Natural environment.
1.3.2.5. Cultural and Social Environment
1.3.3. Industrial Environment Analysis
Industrial environment includes all internal factors close to the company that have a direct
impact on the organizations strategy. These factors are five forces demonstrated in the

Porter Model of five forces.
Figure 1.3: M.Porter Five Forces Model
Threats from the
potential
competitors
Negotiating
capacity of
suppliers

The competition of
the available
company

Negotiating
capacity of
purchasers

Threat of
substitute
products Model of 5 competitive forces
(Source: Le The Gioi, …, 2009, Strategic Management,

by Mr. Porter, pg.106)
Michael Porter provided a framework that models an industry as being influenced by five
forces. The strategic business manager seeking to develop an edge over rival firms can use
this model to better understand the industry context in which the firm operates.
1.3.3.1. Threats of entry
1.3.3.2. Theats of subtitutes
1.3.3.3. Supplier
1.3.3.4. Buyer power

1.3.3.5. Rivalry
1.3.4. Internal Environment Analysis :
1.3.4.1. Production and Operation
1.3.4.2. Research and Development
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1.3.4.3. Finance
1.3.4.4. HR and organization
1.3.4.5. Marketing and sales
1.3.4.6. Defining sustainable competitive advantage
1.4. SWOT Analysis Matrix
SWOT matrix is a strategic planning method used to evaluate the Strengths,
Weaknesses, Opportunities, and Threats. The SWOT analysis provides information
that is helpful in matching the firm's resources and capabilities to the competitive
environment in which it operates. As such, it is instrumental in strategy formulation
and selection. If the analysis target of SWOT is a business strategy, the research
objective is improving the enterprise performance;
Figure 1.4: Simplified SWOT analysis Frame
Environment analysis

Internal
environment

S- Strengths

WWeaknesses

External environment
O Opportunities

T Threats
S-O:
S-T:
Pursue opportunities that

Use its strengths to reduce

are a good fit to the

its vulnerability to external

company's strengths.

threats.
W-T:

W-O:

Prevent the firm's

overcome weaknesses to

weaknesses from making it

pursue opportunities

highly susceptible to

external threats.
(Source: « Essentials of Strategic Management », D.Hunge and T.Weleen, 2006)

SWOT can be understood as followed:
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Strengths: Maintain, develop, use as leverage

•

Weaknesses: Improve attributes of the person or company that are harmful to

achieving the objective.
•

Opportunities: Good anticipation of external conditions that is helpful to achieving

the objective.
•

Threats: external conditions which could do damage to the objective.

1.5. Generic business strategy
1.5.1. Strategy basis
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Michael Porter defined three general strategies which can be applied at business unit level
in order to create competitive advantage. Basis of competitive strategy:
(1) The demand of customer, what to satisfy;
(2) Target groups, who to be satisfied;
(3) Differentiation capacity, How to satisfy the customers’ demand
1.5.2. Types of Generic Strategies

Figure 1.5: Porter's Generic Strategies

(Source: « Essentials of Strategic Management », D.Hunge and T.Weleen, 2006)
1.5.2.1. Cost Leadership Strategy
1.5.2.2. Differentiation Strategy:
1.5.2.3. Focus Strategy
1.5.2.4. A Combination of Generic Strategies
1.6. GREAT model - Selecting the optimum strategy
The enterprise need to select an optimum strategy because they can not implement all strategies
at a time or each strategy by a random order. It will cost time, efforts and resources.
That’s why it’s necessary to do selection for a best strategy which will serve well the
development objectives of the enterprise given its advantages and disadvantages.

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On the synthesis of all strategies which has been figured out through the SWOT analysis SO, S-T, W-O, W-T, we can use GREAT matrix to identify fundamental features of each
strategy, which will help us to find out the desired strategy.
Figure 1.6 : GREAT MATRIX
Criteria

Weight

Strategy 1
Rating Score
3
4=2x3

Strategies
Strategy 2

…
Rating Score
5
6=2x5 …

Column 1
2
Gain (G)
Risk (R)
Expense(E)
Achievability (A)
Time(T)
Total
1
Xx
Xx
(Source: « Grands Strategies », C.Hill, 2008)

Strategy n
Rating Score
i
j=2xi

xx

Step 1: Recognize key aspects to be considered as criteria in column 1.
Step 2: Anticipate the impacts of those criteria on the general strategy; use the weight of
impacts to show the importance and its degree of influence on strategic factors (weight in
the range of 0-1, with the total of weights is 1).
Step 3: Evaluate and Grade every criterion in each strategy. The grade scale is 1-5, which is

equivalent to 5 levels: poor, average, above average, good, and excellent.
Step 4: Calculate the grades into equivalence by multiply column 2 with the responsive
weight, then we come up with the total grade for each strategy in the final row. Finally, we
highlight 1-3 strategies with highest grades, which are strategies to be focus on.

In conclusion:
In today's highly competitive business environment, budget-oriented planning or
forecast-based planning methods are insufficient for a large corporation to survive and
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prosper. The firm must engage in strategic planning that clearly defines objectives and
assesses both the internal and external situation to formulate strategy, implement the
strategy, evaluate the progress, and make adjustments as necessary to stay on track.
Given the information from the environmental scan, the firm should match its
strengths to the opportunities that it has identified, while addressing its weaknesses
and external threats. A competitive advantage can be based on cost or differentiation.
Michael Porter identified three industry-independent generic strategies from which the
firm can choose.
The selected strategy is implemented by means of programs, budgets, and procedures.
Implementation involves organization of the firm's resources and motivation of the
staff to achieve objectives. The way in which the strategy is implemented can have a
significant impact on whether it will be successful. In a large company, those who
implement the strategy likely will be different people from those who formulated it.
For this reason, care must be taken to communicate the strategy and the reasoning
behind it. Otherwise, the implementation might not succeed if the strategy is
misunderstood or if lower-level managers resist its implementation because they do
not understand why the particular strategy was selected. The implementation of the
strategy must be monitored and adjustments made as needed.

CHAPTER 2: ANALYSING COWAELMIC’S BUSSINESS STRATEGY
2.1. Introduction to the enterprise
2.1.1. Overview on formation and development of COWAELMIC
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Water Electrical Mechanical Installation and Construction Joint Stock
Company (COWAELMIC) was formed from 100 Electrical Team under Nam Ha Noi
Area Architecture Company on November 15th, 1975. Water and Electrical
Mechanical Installation Factory was established when the country had just been
unified and the subsidy was still heavy. In October, 1992, Ministry of Construction
decided to merge two factories: Water Electrical Mechanical Installation Factory and
Housing Development Construction Factory, in which the core was Water Electrical
Mechanical Installation Factory into Water Electrical Mechanical Installation
Company. This merger met the necessities of the country economic renovation. In
2000, Construction and Water Electrical Mechanical Installation Company was the
first Company in the field of construction and installation to boldly pioneer a historic
step moving to the new enterprise model – Joint Stock Company. The typical works
associated with the this new period were: New urban zone project of Xuan Hoa ward
in Phuc Yen Town, Vinh Phuc Province, Phuoc An residential area in Long Tho
commune, Nhon Trach district, Dong Nai Province, Nhan Chinh Building, D5 Cay
Giay, Vuon Dao, Nghi Son Cement Plant, Tan Water drainage project in Hoa – Lo
Gom basin (TH4), etc. Since the establishment, the Company’s operation scale and
the apparatus have been growing. In comparison with the 90s when the force of
officials and employees only included over 200 people, the total current number of
officials and employees signing long-term labor contracts with the Company is
approximately 800 people, corresponding the increase of works with turnover of over
1000 billions. In period of 2005 – 2009, the Company has developed very steadily and
firmly. Many projects of urban zone, industrial park, buildings have been implemented
by the Company. Especially, the Company has been investing in research and

application of steel frame structure technology in the field of high-rise building.
+ The main business lines COWAELMIC:
Construction activity is the traditional business of the Company. Since equitization in
2000 Cowaelmic always be one of the leading contractors, prestigious domestic and
international. With a skilled staffs and workers, advanced machinery and equipment is
synchronized, Cowaelmic has executed thousands of project, including many large
project requiring high technical, art, complex, in many different industries such as Ba
Giang Post Office, Bac Ninh Post Office, National Conference Center, Nghi Son
Cement Plant…

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Investment and development of urban and industrial zone is one of the main
businesses of COWAELMIC. The company started interested in and develops in this
area since 2003 when COWAELMIC started investing to build high-end apartment
and leasing office in Hanoi such as: Water Electrical Mechanical Installation and
Construction Joint Stock Company Bulding, Cau Giay D5 Apartment, Xuan Dinh
Apartment…Since then, with the rapid development of economic and the real estate
market, especially the development of new urban areas in cities and provinces
throughout the country, the field of urban and industrial development investment of
COWAELMIC had boom. Currently, COWAELMIC has been investing to expand the
field of urban an industrial zone development investment in the country. Some typical
projects such as Xuan Hoa new urban (Vinh Phuc), Phuoc An urban (Dong Nai),
Vuong Dao-Tay Ho Building (Hanoi), Long Tan A urban (Dong Nai), Cali-Long Duc
industrial zone (Long An)… At this point, COWAELMIC is known as one of the
prestige real estate corporation, the domestic and international customer confidence,
appreciate.
+ Vision and Mission: To develop the company becomes the consortium of
contractors, the dynamic business investor, contributing to the development of Hanoi

Construction Corporation - Vietnam Housing and Urban Development Group
+ The primary goal: “DIVERSITY DEVELOPMENT - SUSTAINABLE
INVESTMENT” is the long-term goal of the company.
+ Development Orientation:
Figure 2.1: Achieving economic growth with high targets.
NO
1
2
3
4
5

TARGETS
Total Assets
Owner’s Equity
Profit/Equity
Average Salary
Dividend

UNIT

YEAR 2010

TILL 2015

Billion VND
Billion VND
%
Million/P/M
%/year

1,600
117
45
2.5-3.5
18

2,600
300
45
5.0-6.0
25

%
%
%
%

62.1
32.4
1.2
4.3

45
35
5
15

The proportion of job structure

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+ Construction/Erection
+ Real Estate, Other business
+ Designer Consulting
+ Manufacturing, Construction Materials

With the difficult situation of accommodation for workers, students, people with lower
incomes… in large cities due to migration from rural area to city, the application of
new construction technologies helping reduce construction time and cost is an
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effective measure. Presently, Viet Nam has no factory that manufactures building steel
structure; this is a new construction technology. While the needs and requirements for
application of steel structure technology in high-rise buildings in the future are
certainly very high. From this situation the company orients:
- Assembly apply new technology in high-rise buildings construction and other super
size, super weight products…
- Operate in manufacture of construction material for new construction technology
application.
- To develop the research applied new construction technology.
2.1.2. Organizational structure:
Figure 2.2 : Organizational structure

2.2. Cowaelmic’s business environmental analysis
2.2.1. Analysis on impacts of the macro environmental factor
The macro environment (PESTLE) is impacted by factors as follows:
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Law
Society –
Culture

Economy
COWAELMIC

Politic

Environment
Technology

Figure 2.3 : The macro environment (PESTLE)
a) Social-cultural environnemental factor:
+ Population:
- The population explosion:
The average national population in 2010 is estimated at 86.93 million, 1.05%
higher than in 2009. The increase in population and immigration is becoming a
challenge. The total number of migrants in the country within five years prior to the
population census in 2009 increased to 6.7 million. Migration from rural to urban areas
has significantly accelerated the urbanization process and thus put pressure on the
infrastructure system and social services in the urban areas. Population growth is a
factor increasing social needs and thereby increase demand for housing. Real estate
demand is a quantity proportional to the population factor, especially the higher
mechanical population growth rate will cause spikes in real estate demand. Elasticity
of demand for land and housing is strongly dependent on the variables: family size,
income and prices. A country is considered to be developed, ensuring social security
issues, it, in addition to ensuring adequate food, clothing for people, must solve the
most important and urgent problem of housing, because "to settle to develop".

Currently, the demand for housing of the people of our country is high pressing our
society. According to recent statistics by the Ministry of Construction, Vietnam has an
average housing area per capita across the country of about 17.2 m2. Compared to
some countries in the region, the average housing area in Vietnam is still low as China
25 - 29m2 of floor / head, Thailand 22m2 of floor / head, Malaysia approximately
31m2 of floor / head. Notably, the area per capita in 2010 in Vietnam is 14.3 m² /
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head, especially Hanoi is a city having the lowest housing area per capita (7 to 7.5
m2). But the supply to meet the huge demand on the average price housing is still very
limited. At the moment, 40% of Hanoi's people have housing difficulties; Ho Chi
Minh city needs 18 thousand shelters for workers, students, and low-income people. In
particular, according to a preliminary investigation on housing for officials and public
servants, there are still thousands of households living in housing conditions not
guaranteeing a minimum standard. The area has about 30% of state employees
distributed with housing in which the percentage of the number of young families
having no house (living in transplant households, temporarily) account for a large, 4%
rent in advance; for the level-4 private residence housing, over 30% of households
need improved housing. Most industrial parks are lack of housing for workers as the
number of employees increased, but in development planning of industrial parks; it
excludes the requirement of accommodation for workers. Due to the reasons above, it
makes the current housing prices in Vietnam in the big cities higher than in many other
countries. According to our survey, in a few years ago, in Hanoi, an average house
could be bought with about 1 billion, but now, it costs at least about 1.7 to 2 billion or
more. Land price in a relatively favorable position with car parking space in some
districts such as Ba Dinh, Dong Da, Cau Giay, Thanh Xuan, Hai Ba Trung ... currently
ranges from 60-400 million m2. And in the deep alleys, where two motorcycles are
harder to avoid each other, the price is not less than 20 million m2. The apartments,
including the old ones, buyers also have to spend between 25-50 million per m2. With

this lofty price, despite of being in need, low-income people could not afford.
From these situations, it can be seen that the segment on housing for averageand lower income people in provinces across the country is enormous. According to
statistics of Ministry of Construction, in a short time, there have been about 190 lowincome housing projects with a capital of nearly VND 30,000 billion being registered
with the size of 7 million m2 of housing, equivalent to 170,000 flats. Of these,
approximately 37 projects have been constructed with investment of 3,600 billion,
contributing to address accommodation for about 64,000 people. For the projects on
housing for workers in industrial parks (IPs), 24 projects have also been started with
total investment of 2,600 billion, upon completion; they will contribute to address
accommodation for about 125,000 workers in industrial parks. For projects on housing
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for students, 94 projects have been started in 28 provinces with the total government
bonds of 5,500 billion. Upon completion, these projects will meet the accommodation
needs for 180,000 students across the country...
The problem of social housing construction actually became active in the
country in 2010. Many localities made efforts to promote the creation of the fund for
low-income people, workers, students, such as Hanoi, Ho Chi Minh City, Da Nang,
Binh Duong, Thanh Hoa ... Particularly in Hanoi, the low-income housing projects
were started with about 25,000 apartments, including some projects such as Ngo Thi
Nham, Viet Hung began selling accommodation ...
According to Mr. Nguyen Quoc Tuan, Deputy Director of HaNoi Department
of Construction, the city has put the target, by 2015, to meet 60% of students wishing
to be tenants in dormitory and 50% of workers in industrial parks in need to be
addressed with housing; basically solve shelters for low-income people in urban areas
having pressing needs for housing with about 15,500 apartments, corresponding to
approximately 1.5 million m2.
In Ho Chi Minh city, 8,300 social housing units have been built, or more than
1.2 million m2 of floor, contributing to solving the problems of housing for those who
are officials, employees, officers and professional soldiers in the armed forces...

Danang city also has developed 127 blocks of apartments, expecting to allocate
11,332 apartments, of which 66 blocks with 2,859 units were built and put into use,
while 61 blocks with 8,473 apartments are be quickly constructed and completed
documents to start construction.
Ministry of Construction has published a draft Housing Strategy to 2020 and
vision to 2030 to collect opinions of local people, scientists ... The draft sets out the
objectives to 2020 strive for the average housing area of the country reaching 25m2 of
floor / head, the rate of permanent housing nationwide reaching 75%, about 70-80% of
students in need able to hire accommodation in dormitory and 60% industrial workers
in need able to be tenants in housing projects for workers.
About Vision to 2030, housing will be developed towards increasing harmony
between people and natural environment, strengthening exchanges, community
activities and striving to have average housing area nationwide achieving 30m2 of

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floor / head, the rate of housing with high construction quality and comfortable of over
80%...
Understanding this reality on demand for housing in low and average-income
segments, Cowaelmic company has developed research, applied new construction
technologies with outstanding features "sustainable structures, fastest construction
time, most reasonable price.”
- Age structure of population decides needs:
According to report of General Department of Population, since 2006, annually,
our country has supplemented about 1.5 million people to the workforce, current
population at working age accounts for 62.7%. Accordingly, Vietnam has entered the
stage of "gold" population structure with a large rate of people at working age, low
rate of dependents. This is truly one of a kind opportunity for the country’s socioeconomic development. If the Government has appropriate policies to develop human
resource and create employment opportunities, particularly focuses on young labor

force, it will contribute to economic growth, while income per capita increases, the
demand for housing will increase. Results of deep analysis on migration survey data
also show that, in the period 2004-2009, these were 6.6 million of migrants in and
outside the provinces in Vietnam; most migrants were young people, where the
number of youth female migrants increased significantly. This is also a cause of
increased demand for housing in big cities.
+ Culture, lifestyle, family:
The social factors also have a major impact on real estate values. One area
where population density is suddenly increased due to mechanical population growth,
real estate values will increase as supply-demand balance is broken. High population
density in many areas causes congestion and severe degradation; many old apartments
are degraded, damaged. As reported by the Hanoi Department of Construction, the city
has more than 1,000 old apartments, especially, 11apartments in danger level D, forced
to be relocated and renovated and rebuilt in accordance with Housing Law. Especially
in the ancient quarter, the population density is about 82,300 people per km2, which is
very high compared to the requirements of population density control planning for the
ancient quarter in 2020 of 50,000 people per km2. The implementation of Project on

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“stretching population in ancient quarter " and " renovating old apartment" requires
supply of resettlement areas to ensure rapid progress of clearance.
With the trend that the family size in Vietnam has been increased, it is
accompanied by demand for housing and land area in parallel. However, the
coefficient of elasticity does not merely depend on the change of size, but depends on
the structure of the family. The change of size associated with changes in family
structure (marriage of children, children entering into the adulthood, the presence of
elderly, of several generations living together etc...) will generate relatively large
elasticity of housing demand. There is a new trend of young people "to separate from

home" to enjoy the feeling independence for themselves and separate from the
management of the family or a tendency of today’s couples is to separate after
marriage, not living with family. This is also a factor affecting the increase in housing
demand.

Figure 2.4 : Demand house depending on Family size and structure
With the serious pressure of housing shortage and the needs to quickly build
new urban areas as analyzed above have affected COWAELMIC’s business
orientation to implement "the revolution" in housing construction technology in
Vietnam Nam.
b. Economic factor analysis:
+ Income:

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Demand for housing is essential and indispensable basic need for every people.
Therefore, the demand for minimum housing will increase proportionally with the rate
of income when income exceeds the limit on food. To a higher limit, if incomes
continue to increase, increase of minimum housing demand will slow down and even
decrease instead to increase in demand for senior housing.

Figure 2.5 : Demand house depending on income
With an average GDP growth rate of 7.5% / year and GDP per capita also
having increased significantly, from less than $ 400 in 2000 to about $ 1,160 in 2010,
it brings Vietnam into the ranks of countries considered as "lower middle income."
While housing prices in particular in big cities in Vietnam are now too high relative to
the income of the people, as well as beyond its real value. Vietnam is a country whose
economy is growing, but housing prices tending to be located in the "top" highest in
the world is still a paradox. High level of real estate prices affects the solvency of the

people. While the world’s experience shows that indicator for assessing the risks in
investing in housing is the ratio between the amount of money that a family must pay
for the mortgage on monthly income level. For middle-class families, the ratio is about
1 / 3, i.e. each family spends only 30% of monthly income to repay mortgages.
Meanwhile, in Vietnam, this rate is about 80% for high income families. And if
spending all of their income to buy a house, servants of other countries only take 4 to 5

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years, but Vietnam’s officials take over 20 years. This solvency in our country reflects
a high level of risk, ease the debt crisis...
Explaining the irrationality, many people think mainly because the supply of
housing in big cities is in the shortage compared to demand, mainly in low cost
housing segment (approximately 10 triệu/m2) conforming to the income of most
people. The low-income apartment projects will occupy the real estate market in the
future. This is the segment that COWAELMIC targets.
+ Fund:
General Department of Statistics has released official data on economic growth
of Vietnam in 2010. Accordingly, the total domestic product (GDP), calculated at
current prices, reached 1.98 million billion. This figure is equivalent to about $ 104.6
billion (based on interbank exchange rate on 28/12), about $13 billion higher than in
2009. If comparing to the base period (1994), the growth rate of Vietnam's GDP in
2010 reached 6.78% compared to 2009. For the sector structure, the industry and
construction has the largest increase (7.7%), service 7.5% while agriculture increases
by only about 2.8%. Thanks to investment in real estate increased from 2000 to 2010,
especially HCM City real estate market promises to be one of three developing real
estate markets in Asia - Pacific in 2010.
However, recent policies to limit real estate lending by the Government under
Resolution 11/NQ - CP made the real estate market throughout the country in general

and in Hanoi in particular in the first half of this year hardly exciting. The credit
crunch impact on both buyers and sellers on the real estate market. The real estate
enterprises lend large amounts of investment capital, as banks tighten credit that they
do not have sufficient capital for construction, leading to delays and the project could
be "hang". In addition, the situation that the banks' interest rate increases (lending
interest rates of many banks are high, between 18-20%) has become barrier to make
the capital poured into real estate reduced, the transaction is therefore darker, capital
lending activity is also not very satisfactory because of the small loans. Gloominess is
the state forecasted for the real estate market in 2011 and it could last into the year of
2012. This is the difficulty of the entire construction sector as well as COWAELMIC
company. To cope with the difficulties, the company has reviewed to restructure

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projects and reduce investment capital; focus on investment in low-cost housing
projects applying new technologies, this market segment is being interested.
In addition, the average but steady income earner having demand for housing is
expecting to be supported with funds from the banks with services for the mortgage
repayment, competitive rates.... But if the credit for loans to buy real estate is
tightened, the people themselves do not have opportunity to buy.
Among the difficulties mentioned above, there are also a few bright spots, such
as policies to support low-interest loans from the Development Bank of Vietnam for
enterprises investing in construction of social housing are considered as quite practical.
This source of capital has created a shift in investment into the segment of low-income
housing and real estate business enterprises including COWAELMIC company with
the application of new construction technology.
+ Inflation:
Since the state bank adjusts to increase rates along with tight monetary policy to
solve the problem of high inflation for macro stabilization, it will make the real estate

market in 2011 hardly recover. Interest rate will be difficult to reduce even desirable,
since it will be difficult to expect strong cash flow for real estate market.
In addition, Vietnam's inputs to produce raw materials such as steel iron, steel
are mostly imported so that when foreign currency exchange rates increase, it will
cause the price increase, leading to the price of construction materials increase and this
affects construction costs making business plans of the investors affected by price
increases when they do not want to increase price to be able to attract customers in the
context of rising interest rates. This is also a major difficulty for COWAELMIC
because its new construction technology uses mainly imported materials such as steel.
To cope with this difficulty, the company has focused on finding solutions to replace
with newer and more complex structures, but it can reduce the volume of steel.
However, this solution will increase labor costs in the steel structure processing, but
not significantly.
c. Politics and law Analysis:
The political stability is one of integral factors which contribute to help
Vietnam to be patient in economic development policies. The political stability brings
back Vietnam the peace and prosperity. In comparison with some countries in the
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same region, it is easy to see that, since 1990, except for Singapore, almost countries
in the region have gone through political crisis. Meanwhile, Vietnam’s politics is
always stable ensuring the close connection to perform the consistent economical
policies. Many economics experts have said that the success of Vietnam’s innovation
tasks is also based on the this politics stability
Vietnam legal system becomes more and more perfect with the stable
development strategy. In the recent years, the legal development task in Vietnam has
been gradually reinforced and improved in order to build one basic legal frame to
serve the stable development of the country. In which, the laws on the development of
economics, environment, poverty alleviation and gender are considered as the most

priority fields to become the foundation for achieving development targets and
strategy
Since 1990, foreign investment under the manner of direct investment (FDI)
and official development assistance (ODA) has been increasing in Vietnam’s
economy. Over $ 14 billion of FDI capital has been disabursed in Vietnam for 10
recent years. About 50 % of total Vietnam’s oversea investment capital creating 90%
of GDP. The FDI capital trend has signs to increase which has been supported by
policies of creating more opening investment environment of Vietnam, political
stability as well as good security. State’s enterprises are arranged again according to
the trend of strong economical corporations, as the spine for the whole economics.
Private enterprises were encouraged to develop that created many jobs,
diversified goods for domestic and exporting markets. The institution and policies for
the stability of Vietnam’s development brought into play advantages, made the process
of economical development become quickly, high growth rate, long growth
maintenance time, synchronous with environment’s stable development, the sign of
environment regression, natural resource exhaustion were initially prevented.
The principle was not mentioned that the less production could ensure the
stability, but different production could not only ensure the growth but also the
stability of the development process that was tested in the Vietnam’s actual
environment. When the constitution in 1992 was issued, the promulgation of legal
documents really came in the eventful stage. With the confirmation “the State
develops the multi-sector commodity economy, following with market structure, with
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the state’s management and Socialist orientations …. Bring into play all advantages of
economical sectors: national economy, individual economy, and State capitalism,
private capitalism… the individual has the right to do business following with the
law… has the right to own life’s materials, production materials…” the institution
1992 really set up the legal foundation for the born of new economy’s legal system.

Follow with the statistics, since the constitution 1992 until now, the national assembly
has issued many laws and ordinances to adjust social relations on the economical
sector and other sector related directly to the economical development such as labor,
land. Only for the number of economical laws, they held about 60%, ordinances held
about 30% of total laws and ordinances which were issued in the recent time. This is a
great rate that shows the priority for focusing task of the legislation.
Issued documents on the large scale created relative comprehensive legal
corridor for economic sectors, liberated all production capacity, attracted foreign
investment, opened affair economic corporation, encouraged domestic investment,
transferred strongly to the management of national economy by the law. It can be
assessed generally that during 10 recent years (from 1992 – until now) we had built
one relative completed legal document system on the economic sector. Although there
were many shortcomings, basically they were so positive for the transferring of
economic management mechanism, enforcing production development, mobilizing
and utilizing effectively resources, creating capital accumulation for the development
investment and improving the living standards for the people.
To contribute for the stable economic development, we must early have one legislative
strategy to complete legal system in general and economic system in particular, but in
the coming time there will be a program of law and ordinance development in the
national assembly – term XI in order to concretize steps closely following with the
targets “stable, high effective and quick economic growth, go together with the task of
solving urgent matter about the society… improve people’s living standards, increase
the accumulation from internal economy, create strong premise for higher
development stage in the beginning of next century.
Vietnam’s social and economic development strategy proposed general goals which
are: bring the country out of the underdeveloped state; improve obviously physical
life, culture and spirit for the people, create the foundation for Vietnam in 2020 to
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become the modern industrial country. In the recent years, we achieved many
considerable results in the related sectors to the stable development, but still many
tasks need to complete. One of them is insufficient matter in the management
mechanism of real estate market. The planning is not stable, scientific, does not
forecast all demands, and then lead to many other insufficient matters.
Tax policies could not regulate the speculation, land holding, then made the price of
real estate increase and hotter unusually. At the present, we still have not publicized
the demand, supply capacity for land, real estate. Evenly, it could not be known about
the real demand capacity. Thus, it led to many happening negative matters, control the
market and make the price increase so highly. With the same consideration, real estate
experts said that there has not been any policy to adjust house market in order to
ensure the market to develop in the balance, specially adjust on the price, house
segment with many different types. People who have really demand for the living
places, could not have the ability to own their houses, meanwhile investors have many
conditions to invest into the real estate market that made the price increase too high
through many intermediary stages.
Unstable real estate market, unreasonable price are important factors which impacted
negatively to economic development, caused difficulties in the living house solution
for the people, thus we need to improve the capacity, validity of the State’s
management system about the real estate market. The State needs to continue to
improve and concentrate the manpower for the development of commercial houses and
main social house projects, perform the method to increase the supply for the market.
Concurrently, we need to strengthen to check and handle immediately the breach in the
investment and business in real estate sector. In order to solve the above absurdity, Mr.
Nguyen Tran Nam said that it needs to complete legal frame of the real estate market
such as long term capital mobilization policy

to develop the market, policy on

transactional tax, asset tax, house development policy for rent…

Real estate market development budget and assistance fund from the State’s budget,
had effects in supporting for people belong to weak group in the society (the poor, low
income, disabled people, people in social policy…). From 2008 until now,
Construction Ministry and related organizations concentrated to choose the method for

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increasing the supply for real estate market, especially urban apartment building,
office and public projects, social house for low income people and labors.
After three times of adjustments, Land law in 2003 made the land really
become great resource of the country, create conditions for the development of real
estate market. However, there have been many shortcomings, remaining matters as
well as many out of date regulations. In the seminar “land policy and real estate
market” organized by Environment and resource Ministry in Ho Chi Minh City on 25 th
September 2010, The Ministry not only assessed the work after 10 years of performing
the land law in 2003, took the ideas and suggestion of organizations, enterprises to
progress to adjust and change land law in 2013. “ in nearly 20 years, Ho Chi Minh
city’s real state passed through three high price waves (1991- 1992, 2001 – 2002 and
end of 2007 – begin of 2008)
After each period of price waves, real estate market set up a new price level.
Contributing for the land waves were continuous changes about policies.
Shortcomings in the policy influenced strongly to the real estate market in the recent
time. Mainly it caused by continuous changing land regulations that could not meet the
market’s development process. Its results from the market fluctuation caused negative
impacts to the society such as increasing land price too high, difficulties in the
industrialization and urbanization progress. Especially, Land price increasing wave in
2007- 2008 pushed up the price far from actual price. Labors could not have enough
afford to have chance to buy houses. The process of real estate development, the role
of the State is so important in balancing and preventing the speculation, ensuring the

balance of people’s house demand, if not, it can lead to unbalance in the society
The promulgation of the Decree 71/2010/NĐ-CP dated 23/6/2010 and the
circular 16 guiding for this Decree, disentangled the real estate market, forward to one
obvious and more advantageous real estate market. Besides, only real estate
enterprises which can prove the capacity and finance be able to compete in the market.
Simultaneously, it can limit purchasing contracts on paper, reduce obviously the
speculation state. Also following with this Decree, the investor will receive more
opening policies because they are allowed to sign the contract to corporate with
partners and investors, negotiate to distribute the profits by cash or house. However,
they are only allowed maximum for capital mobilization methods not mover 20% of
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