Evaluating the performance of investments in public sector

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY ---оNG HÃI YEN EVALUATING THE PERFORMANCE OF INVESTMENTS IN PUBLIC SECTOR: A CASE STUDY OF HIFU MASTER OF BUSIN

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY

-оNG HÃI YEN

EVALUATING THE PERFORMANCE OF INVESTMENTS IN PUBLIC SECTOR:

A CASE STUDY OF HIFU

MASTER OF BUSINESS ADMINISTRATION THESIS

HoChiMinh City - 2010

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY

-оNG HÃI YEN

EVALUATING THE PERFORMANCE OF INVESTMENTS IN PUBLIC SECTOR:

A CASE STUDY OF HIFU Major:Business Administration Major Code:60.34.05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr Nguyen Minh Kieu

Ho Chi Minh City - 2010

Iw o u l d l i k e tot h a n k tomanyofmyc o l l e g u e s f r o m H I F U , w h o h a v ehelpedmeduringthecollectionofdataasw e l l assupportm e d u r i n g doingresearch:

M s NgoK i m L i e n , D r V u o n g DucHoangQ u a n fromBoardo f Director,Ms.LeThiTamTam,Ms.PhamThiMinhNgoc,Mr.NguyenThanhTuan,andmyother

colleguesfromD e p a r t m e n t s ofA c c o u n t i n g aswellasEntrustedFundManagement,Planning,HumanResourceManagementandAppraisal

MyspecialgratitudeisextendedtoallinstructorsandstaffatFacultyofBusinessA d m i n i s t r a t i o n a n d P o s t g r a d u a t e Faculty,U n i v e r s i t y o f EconomicsH o C h i M i n h City(UEH)fort h e i r s u p p o r t a n d thevaluablek n o w l

e d g e d u r i n g mystudyinUEH

IwouldalsoliketoavailthisopportunitytoexpressmyappreciationtoProfessorN g u y e n D o n g Phong,UEHBoardofD i r e c t o r s f o r c r e a t i n g M B

A p r o g r a m i n E n g l i s h andDr.TranH a M i n h Q u a n forhiss u p p o r t during

t h e course

Specially,m y t h a n k s g o t o M r N g u y e n T h a n h T r u n g forhisv a l u a

b l e andenthusiasticsupportforthisresearchstudyandforhiscommentsofEnglishfromearlydraftofmythesis

Lastbutn o t least,thedeepestandmosts i n c e r e gratitudegoestomybelovedparents,myhusband Mr.Nguyen HungLong,my daughter BaoTranandmysonDucH u y , fort h e i r b o u n d l e s s support,abundantloveandencouragementthroughoutmyperiodofstudy.I,therefore,dedicatethisworkasagifttothemall

r HI F U Thenewmeasurementincludingfinancialaspectandsocialaspectismorecomprehensive,proper,andcomplete.Them e a s u r e m e n t isalsoappliedtoevaluateHIFUperformanceofpublicinvestment.

Recommendationsforrelatedentitiess u c h astheGovernment,HCMCPeople’sCommittee,andH I F U ares u g g e s t e d toimprovet h e m a n a g e m e n t ofHIFUandfundslikeHIFU

Keywords:publicinvestment;performance;performancemeasurement;publico

rganization;effectiveness;efficiency;andHoChiMinhCityInvestmentFundforUrbanDevelopment

Contents

Acknowledgement i

Abstract ii

Contents iii

ListofTables v

ListofFigures vi

Abbreviations vii

Chapter1:Introductiontothestudy 1

1.1 Rationaleofthestudy 1

1.2 Problemstatement 4

1.3 Researchobjectivesandquestions 4

1.3.1 Researchobjectives 4

1.3.2 Researchquestions 5

1.4 ScopeandLimitations 5

1.5 Researchmethod 5

1.6 Implicationsofresearch 7

1.7 Structureofthestudy 7

Chapter2:IntroductiontoHIFU 8

2.1 Introduction 8

2.2 LegalstatusofHIFU 8

2.3 Organizationalstructure 9

2.4 Mainbusinessactivities 11

2.4.1 Lending 11

2.4.2 Investment 12

2.4.3 TrustedFundmanagement 13

2.4.4 Authorized municipalbondissuance 13

2.4.5 Financialservices 13

2.5 Monitoringandevaluationofoutcomes/results 13

Chapter3:LiteratureReview 15

3.1 Publicinvestment 15

3.2 Theperformanceofthepublicorganizations/funds 15

3.3 Measuringtheperformanceofthepublicorganizations/funds 18

3.4 Conclusions 22

Chapter4:ResearchMethods 25

4.1 Introduction 25

4.2 ResearchDesign 25

4.3 Datacollection 27

4.3.1 DocumentCollection 28

4.3.2 PersonalInterviews 29

4.4 DataAnalysis 33

4.5 Conclusion 34

Chapter5:DataAnalysisandFindings 36

5.1 Introduction 36

5.2 Linksbetweendataanalysisandresearchobjectivesandquestions 36

5.3 Thefindingsofdataanalysis 38

5.3.1 ThecurrentperformancemeasurementofHIFUinpublicinvestments 38

5.3.2 Experiencesofperformancemeasurementinpublicinvestments 40

5.3.3 Expectationsofperformancemeasurementinpublicinvestments 41

5.3.4 Objectivesusedtoevaluateperformanceinpublicinvestments 42

5.3.5 Financialassessment 43

5.3.6 Socialcontribution 49

5.4 Conclusions 53

Chapter6:ConclusionsandRecommendations 56

6.1 Introduction 56

6.2 Conclusionsrelatedtoresearchquestions 56

6.2.1 Conclusionsrelatedtothefirstquestion 56

6.2.2 Conclusionsrelatedtothesecondquestion 58

6.3 Recommendationsoftheresearchstudy 59

6.3.1 RecommendationsforHIFU 59

6.3.2 Recommendationsforthegoverment 61

6.3.3 Recommendations forfunder–HCMCPeople’sCommittee 62

6.4 Limitationsandfurtherresearch 63

References 64

Appendix 66

Guidance forindepth-interviews 66

Listofinterviewees 68

Financialstatementsof2008and2009 69

ListofTables

Table4.1Questionnaireforinterview 31

Table5.1Theplannedandactuallendinganddirectinvestmentfrom2004to2009 39

Table5.2LiquidityratiosofHIFUfrom2004to2009 43

Table5.3LeverageratiosofHIFUfrom2004to2009 44

Table5.4EfficiencyratiosofHIFUfrom2004to2009 46

Table5.5ProfitabilityratiosofHIFUfrom2004to2009 47

Table5.6HIFUreturnonequityandmarketreturnfrom2004to2009 47

Table5.7Thepercentageofactuallendinganddirectinvestmentfrom2004to2009 51

Figure2.1OrganizationchartofHIFU 10

Figure3.1Theperformanceofpublicinvestment 16

Figure5.1TheframeworkforevaluatingHIFUperformance 37

Figure5.2LiquidityratiosofHIFUfrom2004to2009 44

Figure5.3LeverageratiosofHIFUfrom2004to2009 45

Figure5.4EfficiencyratiosofHIFUfrom2004to2009 46

Figure5.5HIFUROE,RM,andRBfrom2004to2009 48

Figure5.6Thepercentageofactuallendinganddirectinvestmentfrom2004to2009.51Figure5 7AssessmentsonqualitativeperformanceofHIFU 53

Chapter1:Introductiontothestudy

1.1 Rationaleofthestudy:

Publicinvestmentisconsideredaspublicexpendituresthatthegovernmentaddstothepublicphysicalcapitalstock.Theyincludethebuildingofinfrastructuresuchasroads,ports,schools,hospitals,etc.Theissueofwhetherpublicinvestmentiseffectiveisstillacontroversy.Inbothdevelopedandlessdevelopedcountries,onecanspeakofacrisisofthepublicsector.Themainchargeisthatitiscostlyforwhatitdelivers.Eventhoughthisparticularchargeisrarelysupportedbyhardevidenceithastobetakenseriouslybecauseofitsimpactonbothpolicymakersandpublicopinion(Pestieau2009).Privatebusinessandforeignorganizationsoften participateinsectorsthatrequirelesscapital,lessrisk,higherprofit,andshortpaybackperiodbecausetheirobjectiveistogetprofitfromtheirinvestment.Thus,fieldssuchaswelfare,infrastructure,education,health,etc.w h i c h requirel a r g e capital,morerisk,longp a y b a c k c a p i t a

l a r e usuallyi n v e s t e d b y thegovernment t h r o u g h governmenta g e n t s toavoidtheu n b a l a n c e intheeconomy’sstructure.Moreover,investinginpublicsectorhelpingt o increaset h e p e o p l e ’ s standardofliving,stablydeveloptheeconomicgrowthandattractforeigninvestorsarethegovernment’sactivities Thegovernmenthasstakeditspoliticalcredibilityondeliverings i g n i f i c a n t andnoticeablei m

-p r o v e m e n t s to-p u b l i c s e r v i c e s (Crawfordetal.2003)

However,therehasbeenconsiderabledebateoverthedeliveryofpublicservicesa n d thep e r f o r m a n c e ofthep u b l i c sectororganizationst h a t deliverthem.AccordingtoMicheli (2005),mucho f thisdebatehasb e e n basedo n performanceinformationreportedinperformance

leaguetablesandperformancetargetsagainstwhichpublicsectororganizationsareassessed.Thesetargetsandleaguetables,whichareregularlydebatedbypoliticiansandthemedia,areoftencriticized.Therea r e m a n y o p i n i o n s a r g u i n g t h a t investmentsinpublicsectordon’tresultinefficiencyinaspectoffinancebecausetheproject

si n thissectorn e e d a l a r g e a m o u n t ofc a p i t a l andt a k e a

longt i m e ofcapital t u r n o v e r , morer i s k , althoughthereisnoo f f i c i a l researchofthisi s s u e O n e i s usedtohearingharshstatementsaboutinefficientpublicservices.Itisnotsurprisingtoseepublicsectorperformancequestioned.Whatissurprisingis

t h a t w h a t ism e a n t b y p e r f o r m a n c e , a n d howi t ismeasured,doesnotseemtomattermuchtoeitherthecriticsortheadvocatesofthepublicsector(Pestieau2009).Ontheotherhand,duetoglobalizationandliberalizationofworldmarkets,c o m

p e t i t i o n facedbyt h e o r g a n i z a t i o n s hasbecomemoreandmoreintensiveandthepressuretoperformbetterisunavoidable(Ong&Teh2009).AccordingtoG r e i

l i n g (2004),inrecentyearsmanaginga n d measuringperformancehasbeenoneofthekeydriversinthereformofthepublicsector.Performancemeasurementmayprovidedataonhoweffectivelyandefficientlypublicservicesaredelivered.Evaluationencompassesefficiency(theabilitytoundertakeanactivityattheminimumcostpossible)andalsoeffectiveness(whethertheactivityisachievingtheobjectiveswhichweresetforit)

(Carin&G o o d 2004).A c c o r d i n g toMoeti(2000),t h e importanceo f evaluatingt h e performanceo f public sectorgoesbeyond s i m p l y taking“good”evaluationasanendinitself,butratherasameanstoanend.Theoutcomeoftheevaluationmayresultineitherachangeinthegoalsrequired oftheorganization,changeintheorganization’sproceduresandmethods,orchangeintheorganizationbythewayo f g r o w t h , reorganization,o r r e d u c t i o n I n thatline,Carin& G o o d (2004)suggestedthatevaluationmakesanimportantcontributionbutnotalways“thea n s w e r ” Evaluationp r o v i d e s governmentofficials,developmentmanagers,andcivilsocietywithbettermeansforlearningfrompastexperience,improvingservicedelivery,planningandallocatingresources, anddemonstratingresultsaspartofaccountability

InVietnam,theg o v e r n m e n t alsoissuedDecision TTgo n O c t o b e r 6 , 2 0 0 6 o n themonitoringa n d evaluationo f performanceofstate-ownedenterprises,MinistryofFinanceissuedCircularNo.115/2007/TT-BTCo n S e p t e m b e r 25,2007guidinga numbero f c o n t e n t onm o n i t o r i n g and

evaluatingtheperformanceofstate-ownedenterprises,u n d e r w h i c h "evaluatingtheperformanceofbusinessisusingcriteriatodeterminetheeffectivenessandc l a s s i f y b u s i n e s s ” Criteriaforevaluatingi s thes y s t e m ofnormsa n d s t a n d a r d s usedt o determinep e r f o r m a

n c e andc l a s s i f y businessescomprehensivelyandobjectively.Evaluatingtheperformanceo f thebusinessintendedforclassification andincentivestoencourage onmaterialandmentalforb u s i n e s s a n d managementa n d administrationofb u s i

n e s s operationseffectively,handleintimeforbusinessandbusinessmanagementweaknesses

HoChiMinhCityInvestmentFundUrbanDevelopment(HIFU),afinancialinstitutiond i r e c t l y undertheH o C h i M i n h City( H C M C ) People'sCommittee,togetherwithotherlocalinvestmentfundswereexpectedtoactastheentityo r

i e n t e d t r a d e a n d attractprivatec a p i t a l a n d i n v e s t ininfrastructureprojectsurban-

orientedrecoverycosts.HIFUisresponsibleforinvestinginthepublicsectorsuchasconstructionofbridges,roads;buildinghospitals,schoolsundertheobjectiveprogramsofthecity.Intheperiodofintegration,theinvestmentsininfrastructure,healthcare,educationarethetopconcernsoftheauthoritiesofH C M C , contributingt o attractingforeigninvestment,betteringlivingconditions,improvingenvironmentandupgradingtheintellectualstandardsofthep e o p l e M a n y projectsthatHIFUfinishedinthepasttimecontributedtofulfillingobjectiveprogramsofHCMC

However,todatetherehasbeenlimitedresearchonevaluatingtheeffectivenessof

investmentsinpublicsectorinVietnamingeneralandofHIFUinparticular.Conductingsuchresearchw i l l enablepublicorganizationsnotjusttoenhanceefficiencyofinvestmentsinpublicsector,butalsotoencouragep r i v a t e s e c t o r andnon-

stateeconomicsectorst o participateint h i s sectorundersuitableformssoast o graduallydecreasethelistofw o r k s w i t h 100percentofstatecapital.Moreover,moreimportantly,itraisesawarenessoftheperformancemeasurementinthepublicsector

1.2 Problemstatement:

AccordingtotherouteofenteringWTO,fromtheendoftheyear2007,V i e t n

a m op en ed thef i n a n c i a l market.Foreignbanksandfinancialinstitutionsarea l l o w

e d tooperatecompletelyinVietnam.Thecompetitionofinvestmentmarketi s increasinglystrict.Ontheo t h e r hand,o w i n g tog l o b a l e c o n o m i c crisis,Vietnamdoesn’tavoidtheinfluencefromthatcrisis.Asaconsequence,thegovernmentishavingpoliciestotightenpublicinvestments,especiallyinefficientprojects,pursuanttoDecisionNo.390 ofthePrimeMinister.Assessingthep e r f o r m a n c e ofpublici n v e s

t m e n t s isn e c e s s a r i l y indispensableintheperioda n d H I F U isthecaseatp o i n t, especiallyw h e n H I F U tob e a H C M C ’ s financialcorporationandofthewholecountry.Inaddition,HIFUisapilotmodelofthep u b l i c organizationoperatingundertheobjectivep r o g r a m s ofthelocal.TheresultsfromtheevaluatingperformanceofHIFUcanbeusedtorefertootherinvestmentfundsinthecountry.Finally,evaluatingtheperformanceofH I F U resultsinfindingoutthes c i e n t i f i c b a s e t o enhanceeffectivenessofinvestmentsinthepublicsector

Insummary,theproblemthatpublicsectororganizationsinVietnamingenerala n d H I F U i n particularfacea p p e a r s tobethath o w e f f e c t i v e n e s s ofinvestmentsinpublicsector

Therefore,thep r o b l e m t o b e addressedi n t h i s researchi s t o e v a l u a t e t

h e performanceofHIFUinvestmentsinpublicsector,andthen,tor ecommen dforitsimprovementinthefuture.

1.3 Researchobjectivesandquestions:

1.3.1 Researchobjectives:

Aresearchobjectivei s theresearcher’sv e r s i o n o f a b u s i n e s s problem.Objectivesexplainthepurposeoftheresearchinmeasureabletermsanddefinestandardso fwhattheresearchshould a c c o m p l i s h (Zikmund1997).I n solving theresearchproblemthisstudyhasthefollowingobjectives:

- Toidentifythea p p r o p r i a t e methodtoe v a l u a t e theperformanceofH

1.5 Researchmethod:

Inchoosingaresearchdesign,Zikmund(1997)discussesthreetypesofbusinessresearch:exploratory,descriptiveandcausalresearch

 Exploratoryresearchi s usuallyc o n d u c t e d t o clarifyandd e f i n e thenatureofaproblem

 Descriptiveresearchisdesigned tod e s c r i b e characteristicsofapopulationorphenomenon

 Causalresearchi s c o n d u c t e d t o identifyc a u s e a n d

-e f f -e c t r-elationshipsamongvariabl-esw h -e r -e th-er-es-earchp r o b l -e m hasalreadybeennarrowlydefined

Choosinga t y p e o f r e s e a r c h d e p e n d s u p o n t h e r e s e a r c h q u e s t i

o n s thattheresearcherw a n t s toa n s w e r Thisresearchs t u d y isdesignedtoinvestigateHIFUinvestments,evaluatetheperformanceofHIFUinvestmentsandidentifytheextentoft h e e f f e c t i v e n e s s ofH I F U investments.Thus,“exploratory”wasviewedasanappropriateresearchtype.Ins u m m a r y , theexploratoryresearchh a s beenchosenforthisresearch.Anexploratoryresearchtechniquethatintensivelyinvestigatesoneorafewsituationssimilartotheresearcher’sproblemsituationiscasestudymethod,andinthisresearch,itisusedtoobtaininformationtotheresearchproblem

Selectingresearchdesignisthen e x t s t e p a f t e r c h o o s i n g typeofresearch.Therearefourtypesofresearchdesignfromwhichtoselect:survey,experiments,observationandsecondarydata(Zikmund1997).Selectionofresearchde si gn isba se

do n thea d v a n t a g e s an d disadvantagesofea ch kindofresearchd e s i g n s andc i r c

u m s t a n c e s inwhichtheresearchp r o b l e m isdefined.Inthisresearch,survey,andsecondarydatamethodsareusedincombination

Surveyw a s chosenasa researchtechniquei n thiss t u d y toinvestigateanddescribetheperformanceofH I F U publicinvestmentsandidentifytheappropriatep e r f o

r m a n c e m e a s u r e m e n t ofHIFUpublicinvestments.QuestionnairesweredesignedanddirectlyaskedtointervieweestocollectdatarelatedtoHIFUpublicinvestmentsa

n d identifytheappropriateperformancem e a s u r e m e n t o f HIFUpublicinvestments.T h e argumentf o r c h o o s i n g s u r v e y w a s t w o f o l d F i r s t l y , surveysp r o v i d e quick,efficienta n d a c c u r a t e meansofassessingi n f o r m a t i o naboutthep o p u l a t i o n S e c o n d l y , surveysa r e moreappropriateincaseswherethereislackofsecondarydata

Thesecondaryd a t a methodw as usedtoi n v e s t i g a t e theperformance o finvestmentsinp u b l i c sector.Thev a r i a b l e s s u c h asl i q u i d i t y r a t i o s , financialleverageratios,efficiencyratios,andprofitabilityratiosarederived fromfinancials t a t e m e n t s Thesefinancials t a t e m e n t s areavailablef r o m accountingdepartmentofHIFUandfromotherfinancialorganizationsdirectly

1.6 Implicationsofresearch

Evaluatingtheperformanceofpublicorganizationsistheanswerforthedebateb e t w e e n theadvocatesandcriticsofinvestmentsinpublicsector.Ontheotherhand,t h e findingsa r e notj u s t tohelpe n h a n c i n g effectivenessofHIFUinvestmentsinpublicsector,butalsotoencourageHIFUincreasingactivitiesinthissector Consequently,thefindingsurgethep r i v a t e sectorandnon-

stateeconomicsectors toparticipateinthepublicsector.Finally,itraisesHIFUawarenessoftheperformancemeasurementinthepublicsector

1.7 Structureofthestudy:

Thisresearchisstructured

into6c h a p t e r s Chapter1introducestheresearchincludingresearchbackground,researchproblem,researchobjectives,andresearchq u e s t i o n s Chapter2 introducestoH I F U Chapter3 providesa literaturereviewo f measurestoevaluatet h e performanceofi n v e s t m e n t s inpublics e c t o r C h a p t e r 4 d i s c u s s e s methodologyutilizedint h e research.Chapter5analysesthedatacollectedandpresentsthefindingsoftheresearch.Chapter6pointsoutconclusionsandrecommendationsoftheresearch

2.1 Introduction

HoChiMinhCityInvestmentFundforUrbanDevelopment(HIFU)wasestablishedin1 9 9 6 asa pilotp r o g r a m i n t e n d e d t o mobilizec a p i t a l foru r b a n d e v

e l o p m e n t i n v e s t m e n t outsideofthestatebudgetp u r s u a n t t o a decisionofthePrimeMinisteroftheSocialistRepublicofVietnam(SRV)dated10September1996withachartercapitalof VND5 0 0 billion,tobeprovidedb y H o C h i M i n h City( H

C M C ) Whilethereareothersimilarfundsoperatingi n Vietnam,HIFUistheonlyoneestablishedpursuanttoaDecisionofthePrimeMinister;all o ftheot he rt we nt y threesimilarfundsw e r e established pursuanttoactionso f theP e o p l e ’ s Committeesoft h e citieso r p r o v i n c e s w h e r e s u c h fundsarelocated

Asanentity100%o w n e d b y H C M C , H I F U isa statefinancialinstitutiono

p e r a t i n g underregulationsp a s s e d b y theChairmanoftheHCMCPeople’sCommitteefollowingtheapprovaloftheMinisterofFinance(MOF).HIFUdisbursesandr

e p a y s fundsentrustedtoi t b y H C M C ; l e n d s tou r b a n infrastructureprojects,a n d makesd i r e c t investments,t a k i n g s t a k e s o f upto20%ormoreinj o i n t stockc o m p a n i e s involvedinsocio-

economicinfrastructure.CityInfrastructureCompany(CII)isonesuchcompanyfoundedin2001,whichoperatestransportationandotherprojectsundersucharrangementsasBuild-Transfer(BT)andBuild-Operate-

Transfer(BOT).From2003u p ton o w , HCMChasissuedmunicipalbondsw i t h theproceedsbeingusedb y HI F U forvariousinfrastructureprojects.Throughi t s b o r r o w i

n g fromfinancialinstitutions,HIFUisprovidingadditionalcapacitytofinanceinfrastructure.HIFUpurposeistomobilizecapitaltoinvestinthedevelopmentofinfrastructureprojectsandotherurbandevelopmentsinHCMCasrequestedbytheHCMCPeople’sCommittee

2.2 LegalstatusofHIFU

HIFUisneitherabanknoranon-bankfinancialinstitutionasdefinedintheLawonCreditInstitutions(LCI),whichtookeffectonOctober1,1998.As

as t a t e

-o w n e d entitydirectlyunderthemanagement-oftheH C M C P e -o p l e ’ s C-ommittee,ithasa l e g a l statusthatisu n u s u a l butn o t u n i q u e , asu p todate,thereare24suchfundsoperatinginVietnam.WhileHIFUoperatesundertheauthorityoftheHCMCPeople’sCommitteeandnotunderthedirectcontrolofM O F , certainaspectsofitsoperationandthoseofotherprovinciald e v e l o p m e n t fundsaregovernedbyMOF.SpecificallytheirfinancialmanagementisgovernedbyMOFCircular43andaccountingpoliciesbyMOFCircular78

HIFUestablishmentu n d e r a decisiono f thePrimeM i n i s t e r doesnotprovideclarityabouti t s legals t a t u s , andd o e s notp r o v i d e c l a r i t y abouttheregulatoryframeworkwithinwhichitshouldoperate.HIFUisnotgovernedbythelawonbanksandfinancialinstitutions orthelawonprivateenterprisesorthel a w o n s t a

t e o w n e d enterprises( S O E s ) Thislacko f l e g a l c l a r i t y makesHIFUdifficulttoe v a l u a t e itsperformancei n publici n v e s t m e n t I n orderforHIFUtobeabletobetterperformtasksassignedbytheHCMCPeople’sCommitteet h r o u g h theprocessofev al ua t io n asw el l asthef i n d i n g s fromtheevaluation,HIFUwillneedtooperateaspresentlystructuredwhilewaitingfora newlegalframeworktobeapprovedthatwouldapplytoallHIFU-likefunds

2.3 Organizationals t r u c t u r e

Aslocalinstitution,theFundisdirectlyundertheauthorityofthePeople’sCommitteeofH C M C TheF u n d ’ s organizationals t r u c t u r e includestheBoardo f M a

n a g e m e n t , ControllerSection,GeneralDirector,D e p u t y GeneralDirectors,andseveraltechnicaldepartments(SeeFigure2.1)

Inordertoensurethemanagerialautonomy,HIFUislegallymadedistinctfrommunicipaltechnicaldepartmentsbyplacingitunderanindependentboardofm a n a g

e m e n t Accordingtot h e Charter,theF u n d ’ s BoardofManagementh a s seventoninemembersfromheadsofgovernmentdepartments.Currently,theBoardhass

i x memberswhoarerepresentativesf r o m H C M C InstituteforEconomicResearch,DepartmentofFinance,DepartmentofPlanningand

salesofassets,monitoringp e r f o r m a n c e anda d v i s i n g m a n a g e m e n t , andapp

rovingmajorc h a n g e s intheF u n d ’ s policiesv i s à

-v i s p e r s o n n e l , marketing,internal.TheControllerSection istoo-verseeandinsp

ecttheoperatingactivitiesoftheGeneralDirector,ChiefAccountant,technicaldepa

rtmentswithregardstocompliancew i t h thel a w , theF u n d ’ s chartera n d regulatio

ns,financialnorms,resolutionsandd e c i s i o n s madeb y theBoardo f Management.I t

economyinfrastructureandHoChiMinhCity’seconomy,whicharec o n s i d e r e

d g e n e r a t i n g s o u n d r e v e n u e forl o a n

repaymentandcapitalpay-back.Inprojectsfinancedbysyndicatedloans,HIFUhasoftenbeentheloanmanager.From1 9 9 7 t o 2 0 0 9 , H I F U hasprovidedloanstoabout175projectso f variousfieldc a t e g o r i e s I n additiontousingH I F U capital,H I F U h a s raisedfundsthroughsyndicatingloanswithotherfinancialinstitutionstofinanceinfrastructureprojectsinH o C h i M i n h City,especiallyfocusingo n followingmaingroupsofprojects:



Transportation:Thesearecapital-intensiveprojects.FocusingonprojectsofconstructingandrehabilitatingkeytrafficroutestosolvetrafficjamintheCity( D i e n BienP h u St.,H u n g V u o n g St.,P h u M

y Bridge,ProvincialRoads15&25andotherprojectsofroadandbridgeconstruction),andpublicmeansoftransportation(buses)

Totallendinga m o u n t tot h i s projectcategoryw h i c h H I F U providesisV

N D 2,538billion.Lending totransportprojects accountsfor34.52%oftotalHIFUlendingfortheperiod1997todate

 Water:T o t a l l e n d i n g amountt o thisp r o j e c t categorywhichH I

F U providesisVND341billion.Lendingtowaterprojectsaccountsfor4.64%oftotalHIFUlendingfortheperiod1997todate

 Residentialareas,Industrialparks:Theseareprojectsundertheplanninga

n d newconstructingp r o g r a m o f H o C h i M i n h C i t y s u c h as

economic-sociali n f r a s t r u c t u r e s , residentialbuildingsa n d k e y marketsw h i c h HIFUprovidesisV N D 2,811billion.Lendingtotheseprojectsaccountsfor38.23%oftotalHIFUlendingfortheperiod1997todate

Health:Thesearep r o j e c t s undert h e p r o g r a m ofhealths o c i a l i z i n g t o

buildandequiphospitals,infirmarieswithmodernfacilities.TotallendingamounttothisprojectcategorywhichHIFUprovidesisVND710billion.Lendingtotheseprojectsaccountsfor9 6 6 % o f totalHIFUlendingfortheperiod1997todate

 Education:thesea r e projectsundertheprogramofeducationsocializingto

upgradefacilitiesofschoolsinHoChiMinhCity.TotallendingamounttothisprojectcategorywhichHIFUprovidesisVND334billion.Lendingtotheseprojectsaccountsfor4 5 4 % o f totalHIFUlendingfortheperiod1997todate

ownedenterprisesandinvestinginplantsatindustrialparks(fortheperiodfrom1997to2000),havebeenstepbystepdevelopedthroughmoreplentifulwayssuchascontributingandfoundingn e w companies,investinginsecuritiesinprivatizedenterprisesandbeingprojects’i n v e s t o r (co-

investor)u n d e r p o l i c i e s o f H C M C P e o p l e ’ s Committee.HIFUisjoiningforcewithHCMC People’sCommittee tooperate someprojectsthatdirectlyservetheCity’smainpointprogramssuchas:theprogramoftransferringproductionfirmsthatpollutedenvironment(ex.TanPhuTrungIndustrialP a r k p r o j e c t ) ; w a t e

r treatments u p p l y p r o j e c t ( T h u DucandK e n h

DongWater Treatment plants); ur ba n infrastructure d e v e l o p m e n t p ro g

ra m (contributingcapitali n C I I joint-stockc o m p a n y ) ;

trade-serviced e v e l o p m e n t p r o g r a m fortheCity(contributingcapitalinHCMCSecuritiesCompany)

2.4.3 TrustedFundmanagement

Fromitsfoundationtimetodate,HIFUhasbeenauthorizedtomanageatrustedf

u n d ofV N D 1 , 3 3 5 6 8 9 billionfroms u c h differentsourcesasstatebudget,proceedsfromstatehousesales,privatization.Themostefficienta n d largestprojectisclearanceandrehabilitationofNhieuLoc–

ThiNgheChannel,buildingresidentialareasforlowincomepeople,investmentoftheconstructionofruralroads,cleanwatersupplyprojectforthepeopleofthecity,andHCMCelectricnetworkrenewproject

2.4.4 Authorizedmunicipalbondissuance

From2 0 0 3 ton o w , authorizedbytheCity’sg o v e r n m e n t , H I F U successfullyissuedmunicipalregularbondtoraisefundforlocalbudgetonthepurposeoffinancingkeyprojectsofHCMC

2.4.5 Financialservices

Providingfinancialservicessuchasissuingc o r p o r a t e bondsforcorporatecustomers,capitalstructuring,investmentconsulting,andprojectpreparationconsulting

2.5 Monitoringandevaluationofoutcomes/results

Apresentmonitorings y s t e m hasb e e n e s t a b l i s h e d inHIFUtomonitorandevaluatet h e p r o j e c t s activitiesa n d o p e r a t i o n s leadingtot h e projectobjectives.Themonitoringsystemhasthreecomponents:

1 HIFUi n t e r n a l s y s t e m w i l l p r o v i d e t h e b a s e l i n e dataa n d reporto n resultsasfollows:HIFUDepartmentofAppraisalwillcollectinformationabouttheprogressmadeinimplementingtheprojectpreparationandappraisal.HIFUDepartmentofInvestmentaswellasHIFUDepartmentofTrustedFunds,andHIFUDepartmentofPlanningandPromotionwillcollect

informationabouttheprocessofi m p l e m e n t i n g theprojectintermsoft h e i r respectivemanagementobjectives.HIFUDepartmentofCreditwillcollectinformationabouttheloans,disbursement,loancollection,outstandingloan.

3 Allprojectinformationw i l l b e compiledbyH I F U managementanddiscussedwiththeHCMCPeople’sCommitteeinameetingtobeheldyearly.Themeetingwillp r o v i d e ano p p o r t u n i t y todiscussp r o j e c t p r o g r e s s andanyoutstandingissues,includingtheneedtorefineoradjustanyprojectcomponents

3.1 Publicinvestment

Andersonetal

(2006)definedpublicinvestmentaspublicexpendituresthataddtothepublicphysicalcapitalstock.Theyincludethebuildingofroads,ports,schools,hospitals,etc.Thiscorrespondstothedefinitionofpublicinvestmentinnationalaccountsdata,n am el y,capitalexpenditure.Sevenmaininvestment-and-

policyclustersareidentifiedintheareasofruraldevelopment;urbandevelopment;h e

a l t h systems;e d u c a t i o n ; genderequality;environment;andscience,technologyandinnovation(Andersonetal.,2006)

Thepurposeso f p u b l i c investmenti n c l u d e itsresourcea l l o c a t i o n function,incomereallocationfunction,andstabilizationofe c o n o m i c activity,andconsiderationf o r futuregenerations,a n d thevalueo f p u b l i c investmentassessedasitsratiotoGDPincludesvaluesintendedtoachievethesegoals.Itise s s e n t i a l toa l w

a y s remembert h a t p u b l i c investmentisd o n e n o t onlyt o createinfrastructure,buttoachieveothergoalssuchassocialsecurityandthestimulationofb u s i n e

s s , andthatthep e r c e n t a g e s oft o t a l p u b l i c investmentintendedtoachieveeachofthesegoalsiscloselyrelatedtopoliciesandconditionsofeachc o u n t r y Therefore,t h e r e is nobodytodenyt ha t thenatureofpublicinvestmentsismulti-objectives

Investmentactivities

inpublicsectorareusuallyimplementedbyState-o w n e d enterprisesinpublicsectorareusuallyimplementedbyState-orpublicinpublicsectorareusuallyimplementedbyState-organizatiinpublicsectorareusuallyimplementedbyState-onscalledtheagentundertheinpublicsectorareusuallyimplementedbyState-objectivesassignedb y theG o v e r n m e n t c a l l e d t h e p r i n c i p a l Theseorganizationsd o notbaseprofitsasa meanso f evaluatinga n d controllingt h e i r performance.Performanceisthusd e f i n e d b y theextentt o w h i c h t h e a g e n t ( s ) fulfil(s)t h e objectivesassignedbytheprincipal(Pestieau,2009)

3.2 Theperformanceofthepublicorganizations/funds

Organization’ssuccess,specially,publicsectororganizations(PSOs),dependsontheextenttowhich organizationperformanceisevaluated andtheapproachu s e

d A p p r o a c h i n g thep e r f o r m a n c e inpublicsectorisa newissue

c i e n c y , someothersa p p r o a c h theperformanceo f public investmentina s p e c t of

e f f e c t i v e n e s s o r theboth.Sincethe1 9 7 0 s , thep u b l i c sectorhasb e e n c o n t i n u

o u s l y p u s h e d t o improvethee f f i c i e n c y andeffectivenessofi t s p e r f o r m a n

c e Thus,efficiencyande f f e c t i v e n e s s aretwodifferentaspectsofperformance(Figure3.1)

Figure3.1Theperformanceofpublicinvestment

Itisimportanttounderstandthedifferencebetweenefficiencyandeffectiveness.E f f i c i e n c y isunderstoodasa ratioofo u t p u t toi n p u t ( G r e i l i n g , 2004)

I n l i n e w i t h this,accordingtoCrawfordetal

(2003),measuringanorganization’se f f i c i e n c y isabouttherelationshipb e t w e e n theoutputsitproducesandt h e i n p u t s i t uses.I n t h a t sensea publicservicei s e f f i c i e

n t i f a definedo u t p u t isr e a c h e d b y minimizingtheinputf a c t o r s o r g i v e n a d e

f i n e d amountofinputfactorsanoutputmaximumisreached.Inhispart,theprocessoftryingtomeasureanorganization’sefficiencycanthereforebebrokendownintothreesteps.F i r s t , itsinputsandoutputs needtobedefined andmeasured.Secondly,itisn e c e s s a r y tod e f i n e w h a t isfeasible–

i n o t h e r words,w h a t outputscouldbeachievedforanygivensetofinputs.Finally,theorganization’sac tu al i n p u t s a n d o u t p u t s arec o m p a r e d w i t h thes e t o f feasibleinputsa n d o u t p u t s I n contrasttoe f f i c i e n c y measures,e f f e c t i v e n e s smeasuresaredirectedatdetermininghowwellaserviceisprovidedorhowsuccessfula

departmentorprogramis inmeetingpreviouslyestablishedobjectives (Smith,1998).Hearguedthatthesemeasuresareconcernedwiththequalityofserviceprovided.Obviously,twocommonpointsamongthepublishedresearchaboutevaluatingp e r f o r m a n c e ofpublici n v e s t m e n t s arethatthec o m p l e x i t y andt h e difficultiesofevaluatingresultedfromthenatureofmulti-

objectivesofpublicinvestments.Indeed,ifitisunderstoodinthiscontextinputsascostsandoutputsasbenefits ofgovernmentp r o g r a m s , accordingtoM o e t i ( 2 0 0 0 ) , threedistinguishableandcomplicatingfeaturesofevaluationcanbeidentified.First,istheproblemofdeterminingtheappropriatevariablestousetorepresentsuchperformancemeasuresasbenefitsandcosts(orgainsandlosses).Determining andarrayingt h e s e variablesc a n provet o bea timec o n s u m i n g a n d difficulttask.S e c o n

d , anothercomplicatingfactoristhatm a n y ofthevariablesconsideredasgainsandlossesarenoteasilyquantifiableandthusmeasurable.Inlinewithagovernment’sobligationsandcommitments toitscitizens,p ro g r a m benefitsandcostsmustbeevaluatedbeyondprofitmaximizationresultsa n d t a k e a c c o u n t ofnon-monetaryv a r i a b l e s s u c h asp o l l u t i o n , healthandsafety,o r evenwastesofpeople’stime.Changesinanyoftheseaccountsshouldbeincludedinthecalculation.Third,thepricingofresourcesorbenefitsismorecomplicatedforpublicthanforprivateenterprises

Similarly,Pestieau(2009) suggestedthatiftheprincipalwereaprivatefirmtheobjective assignedtothema na ge r wouldbesimple:maximumprofit.H o w e v

e r withpublicauthoritiesonehasmultipleobjectives.Theprincipal,thatisthestatetakenasrepresentingsocietyasa w h o l e , h a s multipleobjectivesbecauseofthemanyd i

m e n s i o n s o f s o c i a l welfare.A s a resultthemissionsassignedtothea g e n t s arealsomultifold,sothatthep e r f o r m a n c e -

a s s e s s i n g issuebecomesmorecomplexthanthatofprivatefirmswheretheprofitlevelistheperformancemeasurement(Pestieau,2009)

Inthatline,GreenbergandNunamaker(1987)discussedaboutthenatureofperformancemeasurementinnonprofitorganizationsandthe

informationprocessingdifficultieswhichcanresulttherefrom.H e saidthatwithouta doubt,t h e u s e o f multiplep e r f o r m a n c e measuresi n e v a l u a t i n g andcontrollin

gn o n p r o f i t activitiesisc o m m o n p l a c e Thesemultiplem e a s u r e s c a n beviewedasshort-runobjectivesint he ms el ve s, o r assurrogatesformoreill-defined,non-measurablegoals.Ineithercase,theuseof

suchmeasuresisencouragedduetotheinabilitytoadequatelyquantifytheoutputsofnonprofitprograms.Moreover,intheabsenceofcompetitiveoutputmarkets,'netincome'doesn o t p r o v i d e a meaningfulmeasureo f organizationale f f i c i e n c y andeffectiveness.Asingle, objectivesummary performance measurea na lo go us to'netincome'simplyisnotavailableinmostnonprofitenvironments

3.3 Measuringtheperformanceofthepublicorganizations/funds

Performancemeasurementhasbeenthefocusofmuchattentioninrecentyearsasameanstomanagingandcontrollingorganisations.Muchoftheearlyworkconcentratedontheprivatesector.However,morerecentlythishasbeenextendedtoPublicSectorOrganizations(PSOs) Moregovernmentsappeartobeshowinganinterestinthisissuebyusingtargetsandleaguetablestoshowimprovementsintheservicesbeingdeliveredonthetaxpayer’sbehalf(Wilcox& B u l g a j 2 0 0 4 ) Measuringp

e r f o r m a n c e isi n c r e a s i n g l y i m p o r t a n t

innot-for-profitandP S O s fromt h o s e aslargeastheUSfederalg o v e r n m e n t tothesmallestvolunteergroup( M a c p h e r s o n 2 0 0 1 ) Performancemeasurementprovidesgovernmentorlocalgovernmentorfunderswithawayofdeterminingwhetherpublicfundsthatarebeinginvestedtoagentsornonprofitsub-

granteesarebeingusede f f e c t i v e l y I t alsooffersa vehiclefori m p r o v e d i n f o

r m a t i o n exchangebetweenfundersandpublicorganizationsastheycommunicateaboutp r o g r a m performance

Behn( 2 0 0 3 ) i d e n t i f i e s eightmanagerialp u r p o s e s f o r p e r f o r m a

n c e m e a s u r e m e n t thatp u b l i c m a n a g e r s canusep er fo rm an ce measurestoevaluate,control,budget,motivate,promote,celebrate,learn,andimprove.Insummary,performancemeasurement,asaformofevaluation,canassistinorganizationalg r

o w t h andbeanimportantdecision-makingtoolformanagement.Itisviewed

asa meansofd e m o n s t r a t i n g accountabilityi n g o v e r n m e n t

-n o -n p r o f i t co-ntractrelatio-nships.Performa-nce measureme-ntisalsoawaytoguidedecision-

makingi n o r g a n i z a t i o n s becausethemeasurest h a t areusedarebasedo n themission,goals,ando b j e c t i v e s oftheo r g a n i z a t i o n ( Z i m m e r m a n n & S t e

v e n s 2006)

Inthediscussionofe v a l u a t i o n andp e r f o r m a n c e m e a s u r e m e n t , thereisthedistinctionbetweenformativeandsummative evaluationsandthedifferentimplicationse a c h t e r m h a s fora program.Thetwoconceptsdifferintheirintendeduses;fore x a m p l e formativee v a l u a t i o n s areintendedtoi m p r o v e a p r o g r a

m inprogress whe re as su mm at i ve evaluat ions askquestionsli ke should fundsberealloca ted tootherprograms Summativeevaluationsareoftendoneattheendofafiscalye ar todeterminew h e t h e r aprogram shouldc on ti nu et o receivefunding.Formativeevaluations ofapr og ra m mayb e do ne morefrequently,s u c

h asmonthlyo r quarterly,a n d allowforimprovementstobemadeduringthep r o c e s sofimplementation.Themanagerialpurposesoflearninga n d i m p r o v i n g areemphasizedw i t h theu s e o f formativeevaluations(Behn2 0 0 3 ) Thedistinctionb e t w e e

n f o r m a t i v e ands u m m a t i v e e v a l u a t i o n s reflectsthattherearemanypurposesforevaluatingprograms

Historicallyevaluationw a s conductedbyevaluatorsoutsideoftheorganizatio

nw h o s e p r o g r a m wasbeinge v a l u a t e d H o w e v e r , inrecentyearsparticipatorye v a l u a t i o n wasu s e d m o r e frequentlyw h i c h meantt h a t p r o g r a m stakeholdersbeganparticipatingintheevaluationprocess.Theconceptofparticipatorye v a l u a t i o n alsot i e s inw i t h thepurposeofimprovinga p r o g r a m byinvolvingstakeholderswhoareresponsiblefortheprogram’simplementation.Participatoryevaluationallowsprogramstakeholderstoevaluatetheirownprogramsandrecognizeareasofimprovementthatexist

Inliteratureofevaluatingtheperformanceofanorganization’sactivities,therearetwomethods,includingbasingonlyon

itsrecordsandcomparingtosimilarorganizationsofthes a m e category.Ontheotherhand,typesofmeasuresc o u l d b e categorizedi n t o financiala n d n o n - f i n a n c i a l ,

statisticalandnon-statistical,orabsoluteandrelative.Concretely,Goriaev(2002)i n d i c a t e d t w o typesofp e r f o r m a n c e measures:a b s o l u t e ( b a s e d onlyo n theperformancerecordofagivenfund)andrelative(constructedwithrespecttosomeendogenousorexogenousbenchmark).Absolute performancemeasuresmayberaw,suchasfundtotalreturn,orrisk-

adjusted.Relativeperformancemeasurescanbe cardinal( e g , fundr e t u r n a d j u s t

e d b y thecategoryb e n c h m a r k ) o r ordinal( e g , fundperformancerankw i t h i

n a givencategory)

Inprivates e c t o r e i t h e r financialmeasureo r n o n financialm e a s u r e isusuallyusedbecausefinancialmeasuremeetsenoughthedemandofevaluationinaspectoftheobjectiveofmaximizingprofitandwithinternalorientedobjectivesn o n financialmeasureisn e e d e d , respectively.F o r e x a m p l e s , OngandTeh(2009)suggestthatinmanufacturing therearetwotypesofmeasures:financialmeasuresandnon-

financialmeasures.Financialmeasuresexpresstheperformanceandachievementinmonetaryterms,includedinthechartofaccounts,andp r o v i d e a highlevelofa g g r e g a t

Ammons’study(1996).Thespecificmeasurementcategoriesfora s s e s s i n g performanceinclude:efficiency,workload,effectiveness,andproductivity(Zimmermann&Stevens2006).Efficiencymeasureso r i n p u t s a r e usedt o describet h e resourcesrequiredtoprovidea service.Workloadmeasuresoroutputs quantifyhowmuchworkisperformedorservicesdelivered.Effectivenessoroutcomemeasuresreflectthequalityof

theservice.Effectivenessisdefinedastheextenttowhichtheobservedoutcomesareconsi st en t with theintendedobjectives.Lastly, productivitymeasurescombineefficiencyandeffectivenessmeasuresintooneindicator.

Althoughawiderangeofmeasuresofperformance andmanydifferent approacheshavebeensuggestedi n i n v e s t m e n t performancet h e o r y , ingeneraltherei

sa l a r g e consensusa ro un d theideathatthe indicatorso n which performanceisbasedarethefinancialratiosachievedthroughannualaccountingan d managementauditingr e p o r t s , a n d non-

financialindicatorsrepresentingsatisfaction,quality,marketshareandhumanresourcesgainedbysurveys.AccordingtoMoeti(2000)whenformulating anopinionontheperformanceofanorganization(publico r p r i v a t e ) precautionmustb e takensucht h a t one’sv i e w shouldnotb e limitedtoquantitativec o n s i d e r a t i o n sofr e v e n u e s a n d expendituresw h i l s t o v e r l o o k i n g theobjectivesoftheorganizationandtheo u t c o m e s oftheo r g a n i z a t i o n s activitiesb ot h quantitativeandqualitative.Inaddition,findingandapplyingtherightevaluationstandardsfori n v

e s t m e n t isimportant.H o w e v e r , previousresearchhasconsistentlyidentifiedsomekeylimitationsoft r a d i t i o n a l performancemeasurementsystems,which tendtorelyalmost exclusivelyonfinancialme as ur es , andfailtoprovidedataonquality,responsivenessandflexibility;havealackofstrategicfocus;concentrateontheindividualorthefunction,notontheprocess;andhaveacontrolbias(Kanji&Sá2007).Talkinga b o u t thisissue,Moeti(2000)mentionedt h e p r i n c i p a l -

a g e n t relationt h a t i s r e p r e s e n t e d b y P e r f o r m a n c e Agreementsi n h i

s studyforthecaseofS o u t h A f r i c a Hesuggestedthatthemethodsofevaluatingtheperformanceofg o v e r n m e n t p r o g r a m s a n d p r o j e c t s h a v e longb e e n a subjectthathaschallengedr e s e a r c h e r s i n t h e socialsciences.T h e a p p r o a c h taken

b y scholarsofmanagementandadministration tendtofocusontheinternalencumbrancestoeffectiveperformance,suchascommunication,compensationandmotivation.E x a m p l e s oftheoriesa n d methodsfromthisfieldincludethegoalsa p p r o a c

h andp a r t i c i p a n t satisfactions u r v e y s I n contrast,t h e standard

methodemployedbyeconomistsinevaluatingpublicandprivateprogramsandprojectsist h e benefitcostanalysis(BCA)method,thecentralcriterionofwhichissimplythatthebenefitsofaprogram mustoutweighitscosts.I n hispart,threeobjectivessuggestedinevaluating thepe rf or ma nc e inS o u t h Africa publicsectorarethefollowings:

 TheimplementationofPerformanceA g r e e m e n t s signedbetween thePrincipalandtheAgent

 Evaluatingp e r f o r m a n c e througha c c o u n t i n g andmanagementauditingactivities

 Thequalitativeperformanceappraisal

ThePerformanceA g r e e m e n t s refertotheh e a v y consultationw h i c h isinvolvedineffectingtheseagreements andthereexistsafairamount offlexibilityindefiningperformancemeasures.Thes c o p e oftheagreements,h o w e v e r , isheavil

yw e i g h t e d towardinternallyfocusedm e a s u r e s Similarly,thequalitativeperformanceappraisalthatisexternallyf o c u s e d referstoqualitativeassessmentsofthesocialobjectivesandoutcomes.Finally,basedonthedisciplineofpublicaccounting,theefficient, competent,andhonestuseofpublicfundsisevaluatedthroughfinancialratios

3.4 Conclusions

Measuringoutcomes involvesgoinga stepfurtherfrommeasuring outputs

t o l o o k i n g att h e largerpictureanddeterminingh o w thep r o g r a m o r activitymadea difference.I t ismoremeaningfultop r o g r a m stakeholderstodeterminew h a t ther e s u l t s w e r e o f thep r o g r a m a n d h o w theyc o m p a r e d t o expectedresults.MeanwhileHIFUcurrentperformancemeasurementsystemisbasedonDecree224,theperformanceevaluationstandardsystemofenterprisesp r o m u l g a t e d b ytheP r i m e M i n i s t e r andg u i d e d t o implementb y V i e t n a m M i n i s t r y of

F i n a n c e s u c h asr e v e n u e a n d o t h e r s ; b e n e f i t a n d benefitrateonStatecapital;overduedebtsandduedebtpaymentcapacity;implementingpolicieso n t a x , S t a

t e budget,credit,insurance,environmental

protection,labor,w a g e s , financialr e g i m e , a c c o u n t i n g , auditing,financialstatementsando t h e r s ; a n d implementingp u b l i c productsands e r v i c e s H I F U

h a s alsobeentryingtoincorporateo u t c o m e measurementtomeasureoverallp r o

g r a m effectiveness.However,ithasbeenunabletolinkefficiencymeasureswitheffectivenessm e a s u r e s toobtainmeasureso f productivityo w i n g tothenatureo

fm u l t i

-o b j e c t i v e s andthec -o m p l e x i t y -o f p u b l i c i n v e s t m e n t s O n the-otherhand,accordingtoBehn(2003),theleadersofapublicagencyshouldnotgolookingfortheironemagicperformancemeasure.Instead,theyshouldbeginbydecidingonthemanagerialpurposestowhichperformancem e a s u r e m e n t maycontribute.O n l y

t h e n c a n theyselecta c o l l e c t i o n ofperformancemeasureswiththecharacteristicsnecessarytohelpthem(directlyandindirectly)achievethesep u r p o s e s Therefore,theauthorl e a r n e d fromtheliteratureonperformanceandtheadviceofBehn(2003)andobtainedtheapproachofeffectivenesstoHIFUperformanceinthestudybecausethefocusonoutcomemeasurementhasparticularrelevancetopublicinvestmentsofH I F U

Theliteraturea l s o s u g g e s t s t h a t multiplesetso f measuresformultipleusersmayb e n e c e s s a r y a n d a varietyofdifferenttypes ofp e r f o r m a n c e measuresareidentified (Kravchuck &Sc ha ck 1996).Therefore,adoptingMoeti(2000)’ss u

g g e s t i o n s ofobjectivesi n evaluatingtheperformanceofpublici n v e s t m e n t s andthed e f i n i t i o n ofperformancementionedbyP e s t i e a u (2009),inthepresent studytheperformanceofpublicinvestmentsofHIFUisevaluatedwithtwoaspects:

 Financialaspect:Evaluatingperformancethroughaccountingandmanagementauditingactivitiestoseehowtheefficient,competent,andhonestuseo f p u b l i

c f u n d s f r o m HIFUfinancialr a t i o s , annuali n d e p e n d e n t a u d i t i n g reports,evaluationreportsofi n t e r n a t i o n a l andd o m e s t i c financialorganizations

 Socialaspect:A s s e s s i n g theimplementationo f t a r g e t s a s s i g n e dbytheHCMCPeople’sCommitteeinternally aswellasthequalitativeperformancereferringtosocialobjectivesandoutcomesexternally.ThetargetsassignedbytheH

C M C P e o p l e ’ s C o m m i t t e e includethea m o u n t o f moneyt o lend,theamountofmoneytoinvestinpublicprojectssuchasHCMCelectricn e t w o r k r e n e w project,cleanw a t e r supplyp r o j e c t forthepeopleofthecity,investmentoftheconstructionofPhuMybridge, ThuThiem newurban area,etc.Thesocialo b j e c t i v e s arer e s u l t e d f r o m objectiveprogramss u g g e s t e d b y theHCMCPeople’sCommitteesuchasprogram reducingprostitution, addict,andcrime.Theq u a l i t a

t i v e performancea p p r a i s a l ofHIFUi s madebyitself,H C M C P e o p l e ’ s Committee,HCMCEconomicsI n s t i t u t e , H C M C BudgetEconomicsD e p a r t m e n t, HCMCFinanceDepartment,ando t h e r externalorganizations

4.1Introduction

Chapter3reviewed relevantliteratureonperformanceandperformance m

e a s u r e m e n t inpublicinvestments.Then,attheendofchapter3,aconclusionoftheapproachtoassessingHIFUperformanceandtheobjectivesmeasuredinpublicinvestmentwascreatedbasedontheliteratureandtherealityofHIFU

Thepurposeofthischapteristodescribe,justify,andexplaintheresearchmethodologyu s e d inthestudy.Itincludesd e m o n s t r a t i n g howresearchdesign,anddatacollectionandanalysisutilizedtoanswertheresearchquestionsoutlinedinchapter1.Thischapterisstructuredintofivesections

Section4.1generallyintroducesthechapterincludingthemaincontents,objectivesandstructureofthechapter.Section4.2discussesandexplainshowther e s

e a r c h designc a n b e a p p r o p r i a t e l y u t i l i z e d int h i s s t u d y t o a n s w e r theresearchq u e s t i o n s Section4 3 mentionsm e t h o d s ofdatac o l l e c t i o n

Chapter1statesthemainresearchquestionsincluding:

❖ WhichistheappropriatemethodtoevaluatetheperformanceofH I F U investmentsinpublicsector?

❖ HoweffectiveareHIFUinvestmentsinpublicsector?

Inseekinganswertothesequestions,itiscriticaltohaveinformationasfollows

➢ The current performance measurement of HIFU in

publicinvestments

s e a r c h isinmainstream.A n exploratoryresearchtechniquet h a t i n t e n s i v e l y investigatesoneo r a fewsituationss i m i l a r totheresearcher’sproblem situationiscases t u d y m e t h o d , andint hi s research,i t isusedtoobtaininformationtotheresearchproblem.

Zikmund( 1 9 9 7 ) classifiedresearchm e t h o d s intofourbasictypes:surveys,experiments,observation,andsecondarydatastudies.Inthisresearchsurveya n d secondarydatamethodsw e r e utilized.Surveyw a s chosenasaresearchmethodinthisstudytoinvestigate andclarifyperformanceandperformancem e a s u r e m e n t

i n p u b l i c i n v e s t m e n t ofHIFU.Theargumentforchoosings u r v e y w a s basedo n twomajorr e a s o n s Firstly,surveyprovidesa quick,efficienta n d accuratemeansofassessinginformationaboutthepopulation.Secondly,surveyismoreappropriatewherethereisalackofsecondarydata.I n t h i s case,s e c o n d a r y datao f performanceandp e r f o r m a n c e m e a s u r e m e n t inpublicinvestmento f HIFUisinsufficient

;t h u s , conductinga surveyt o gaini n f o r m a t i o n aboutp e r f o r m a n c e andperformancemeasurementinpublicinvestmentofHIFUwasnecessary.Surveysmaybefurtherclassified

bythec o m m u n i c a t i o n mediumusedi n t o m a i l , telephones u r v e y a n d personalinterview(Zikmund1 9 9 7 ) Selectiono f a p p r o p r i a t e methodstocommunicatewithrespondentsw a s veryimportanti n t h e s u r v e y s T h i s s e l e c t i o n maybebasedonthep o s s i b i l i t y ofc o m m u n i c a t i n g w i t h r e s p o n d e n t s , theadvantagesanddisadvantagesofthemosttypicalsurveys,andthebudgetallocatedfortheresearch.However,itemnon-

response,possibilityforrespondentmisunderstanding,andrespondentcooperationorparticipationareprobablythemostimportantfactorsforsuccessofasurvey.Therefore,thisstudyusedpersonalinterviewasa methodt o o b t a i n informationa b o u t p e r f

o r m a n c e andperformancem e a s u r e m e n t inpublicinvestment ofHIFUfromtherespondents

–professionalsanddirectors

Inadditiontousingpersonalinterviewtoobtainprimarydatarelativetoperformanceandperformance measurement inpublicinvestment ofHIFU,thesecondaryd a t a m e t h o d w a s alsou s e d toexaminethem.Thef i n a n c i a l ratiossuchasl i q u i d i t y ratios,f i n a n c i a l leverageratios,efficiencyr a t i o s , andprofitabilityratioswerederivedfromfinancialstatements.ThesefinancialstatementswereavailablefromHIFUDepartmentofAccountingandsometimesf r o m otherHIFUdepartments.Moreover,secondaryd a t a couldbegatheredfromther e p o r t s ofotherorganizationsi n c o o p e r a t i o n w i t h H I F U o r workshopsdiscussingHIFUperformanceinpublicinvestments

4.3 Datacollection

Thissectiondiscusseshowrelevantdatawascollectedforansweringtheresearchquestionsinsection4.2.Datacanbedescribedasqualitativeorquantitative.Qualit

non-numericalcharacteristics,while quantitativedataisalldatathatiscollectedinnumericalform.Qualitativer e s e a r c h revealsp e o p l e ’ s values,interpretativeschemes,min

dm ap s, b e l i e f systems,andruleso f living sot h a t ther e s p o n d e n t s ’ r ea li ty canbeunderstood(Cavanaetal.2001).Aqualitativeapproachprovidesamorecompleteviewoftheimpressionsofthoseinvolvedandtheproblemfromtheirperspective.Thepurposeofthisstudyistoidentifyanappropriateperformance

measurements y s t e m forH I F U andevaluatetheperformanceofHIFUpublicinvestments.Thereforethequalitativeapproachismostappropriate.

Thep e r f o r m a n c e measurementando u t c o m e measurementli te ra t ur e providesa n u m b e r ofsuggestionso n h o w todesigna n d i m p l e m e n t effectiveperformancem e a s u r e m e n t s y s t e m s Methodshaveb e e n u s e d w i t h i n theimplementationlitera ture toshow d i f f e r e n t typesandcomponents ofperformancemeasurements y s t e m s Forcarryingoutt h i s r e s e a r c h , basedo n specificaspectsmentionedinthechapter3,differentmethodshavebeenconsidered.Themainmethodsusedinthisresearcharecomparative,analytical,exploratory,descriptionandexplanationmethods

Int e r m s ofdatas o u r c e s , therearetwomainsourcesofdata:p r i m a r y dataandsecondarydata.I n thisthesis,bothp ri ma ry ands e c o n d a r y datah a v e beencollected.Methodsutilizedindatacollectionaredocumentcollection,andin-

depthi n t e r v i e w s Theinterviewsw e r e primarys o u r c e s ofdataw h e r e a s thedocumentscollected foranalysiswereasecondarysourceofdataf or examplefinancial

s t a t e m e n t s Thesefinancials t a t e m e n t s areavailablef r o m accountingdepartmento fHIFUan d fromother financial organizations directly.ThefinancialratiosofHIFUsuchasliquidityratios,financialleverageratios,efficiencyratiosandprofitabilityratiosareresultedfromthesecondarydataforanalysis

4.3.1 DocumentCollection

Forcasestudies,themostimportantuseofdocumentsistocorroborateandaugmentevidencefromtheothersources(Yin2003).Documentcollectionw a s conductedbyretrievingHIFUperformancedata,measurementsystemdata,andinformationrelatedtothisstudy.DocumentswerecollectedfromtheH I F U , HCMCPeople’sCommittee,DepartmentsofHCMC,otherrelativeorganizationsan d d u r i n g interviews.Performance,c u r r e n t p e r f o r m a n c e evaluationtoolsandr e p o r t i n g m e

c h a n i s m s u s e d b y H I FU incooperationw i t h externalandinternalentitiessuchasWorldBank,UnitedStatesTechnical

DevelopmentAid(USTDA),FranceDevelopmentAgency(AFD),andHCMCInfrastructureI nv es tm en t Joint-

stockC o m p a n y (CII)w er ee x a m i n e d Trainingmanuals,presentationsgivenatregionalconferences,a nd go ve rn me nt notices,reports,andb u l l e t i n s f r o m HCMCP e o p l e ’ s Committeew e r e a l s o examined.Thisinformationprovideda deeperunderstandingofh o w performancem e a s u r e m e n t i s beingutilizedb y H

C M C People’sC o m m i t t e e a n d identifiedHIFUperformance.Finally,financialstatementsandauditingreportswouldbeexaminatedtoverifyhowefficient,competentandhonestuseofpublicfunds

4.3.2 PersonalInterviews

Yin(2003)arguedthatoneofthemostimportantsources ofcasestudyinformationistheinterview.Aquestionnairewasdesignedandbasedonwhat informationtob e acquiredr e f l e c t i n g i n t e r v i e w e r actuallineofi n q u i r y T h e questionnaireconsistsofmanyopen-

endedquestionss o astoexploitmoreexplanationanddescriptionr e l a t i v e toH I F Uperformance,H I F U c u r r e n t m e a s u r e m e n t s y s t e m , a n d i m p r o v e m e n

t s u g g e s t i o n s Interviewq u e s t i o n s w e r e generatedf r o m t h e p e r f o r m a n

c e m e a s u r e m e n t literature.Asanexample,theliteraturereflects thatoutcomemeasurementissuitabletoevaluatingperformanceo f publicinvestmentstherefor

et he researcheraskedintervieweestoelaborateo n theirp e r c e p t i o n o n theoutcomemeasurement.Similarly,theliteraturer e f l e c t s t h a t participatorye v a l u a t i o

n a l l o w s p r o g r a m participantstoevaluatetheiro w n programsandrecognizeareaso f i m p r o v e m e n t thatexist,thereforetheresearcheraskedH I F U professionalstoe l a b o r a t e ontheirevaluatingHIFUperformanceofpublicinvestmentsandaskedentitiesfinancedby HIFUt o elaborateontheirp e r f o r m a n c e ofprograms a n d projectsthattheyhadexperienced,inducingthesuggestionsofimprovements

Ont h e otherhand,theperformancemeasurementliteraturew h i c h discussesparticipatorye v a l u a t i o n supportedtheneedtoi n c l u d e t h e m int h e process.Thereforea listo f i n t e r v i e w participantswasestablished,includingfourdifferentcategoriesasfollows:HIFUastheagent,HCMCPeople’sCommitteeastheprincipal,entitiesfinancedbyHIFU,andotherexternal

ra n d m e m b e r ofmanagementboardfromorganizationthatc u r r e n t l y receive fundsfromHI FU sinceit s a c t i v i t i e s would bemostdirectlyaffected byHIFUperformance.Theentityfinancedb y HIFUw a s alsoassuredthatitsconfidentialitywouldbemaintained.

AlthoughHIFUhastheconformationtotheregulationofVietnamMinistryo

f F i n a n c e forthep e r f o r m a n c e evaluationstandards y s t e m ofenterprises,itmustp r o v i d e ther e q u i r e d informationt o H C M C P e o p l e ’ s Committee.Therefore,thepurposeofi n t e r v i e w i n g fiver e p r e s e n t a t i v e s f r o m H C M C People’sCommittee,H C M C Department ofFinance,andHCMCDepartmentofPlanningandInvestment was togaina lo ca lg ov er n me n t perspectiveontheirevaluationsofHIFUperformance,andtheirexpectations

Itwasdeterminedthatanin-personinterviewwith theGeneralDirectorofHIFU,wouldbebeneficial.TheobjectiveofthisinterviewwastolearnhowHIFUismeasuringitsperformanceinpublicinvestments.Questionswereaskedr e g a r d i n g H I F U experiencewithe x i s t i n gmeasurements i n c e t h a t hasbeenthedatawhichhasbeennecessaryforHIFUtoimprovethemeasurement.Itwashopedthatthroughthisinterview,theresearcherwoulddiscoverwaysinwhichtheH I F U c a n streamlineitsp e r f o r m a n c e m e a s

u r e m e n t s y s t e m inthefuture.Similarly,twointerviewswereconductedwithHeadofControllerSectionandDeputyGeneralDirectorrespectively.Fiveremainingprofessionalsw e r e i n t e r v i e w e d belongingtoD e p a r t m e n t ofAccounting,DepartmentofInvestment,DepartmentofPlanning,DepartmentofCredit,andDepartmentofAppraisal.TheywereaskedregardingtheirevaluationofHIFUperformancei n p u b l i c investmentsasw e l l astheirperceptiono n t h e existingperformancemeasurement

Research Question

Information needs

Questionnaire

Which is

the appropriate methodto evaluatethe

performance

1 The current 1.1 How is HIFU performance measured

and what measures are used?

performance measurement

of 1.2. What are advantages andHIFU in public disadvantages as well as strong points andinvestments. weakpoints

measurement investment?

of of

currentperformance HIFUinpublic

of HIFU

investment in public

sector? 1.3 How is the coverage of current

performance measurement of HIFU in public investment?

1.4 How is the accuracy of current performance measurement of HIFU in public investment?

2.1 Describe performance measurement systems in public investment that you have utilized.

2 Experiences

performance measurementof

in public investment. 2.2 What do you particularly like about

public investment. 3.2 What specific advice would you give

to HIFU in implementing a new performance measurement system?

4.1 What should the contents be used to evaluate performance in public investment?

4 Objectives Table4.1Questionnaireforinterview