2.1. Establishment and development history of the Housing and Urban Development Corporation (HUD)
The Housing and Urban Development Corporation (HUD Corporation) is a State- Owned corporation organized and operates according to the Decision No. 90/TTG dated O7 March, 1994 of the Prime Minister. The Corporation was established in 2000 (according to the Decision No. 08/2000/QD-BXD dated 02 June, 2000 of the Minister of Construction) from the Housing and Urban Development Company (which was incorporated on 10 October, 1989 according to the Decision No. 843/BXD-TCLD of the Minister of Construction)
Its main activities are:
Making investment and development of residential areas, urban areas, economic zones and centralized industrial parks.
Providing consultant services on construction and infrastructure development of urban areas, industrial parks.
Providing management services for projects on investment and development of housing, new urban areas and industrial parks.
Making construction, installation of civil, industrial, transportation, irrigation, tele- communication works, and infrastructure of urban areas, industrial parks, lining and power station projects, and water and electricity systems of civil and industrial projects...
Managing services in new urban areas, residential areas.
Having joint-venture and combination relations with foreign and domestic organizations in investment and development of urban areas, residential areas and industrial parks.
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HUD Corporation has been working for 20 years, with the current growth and financial accumulation development; it can carry out at the same time many big projects in different areas. Its own equity has been increasing rapidly in the recent years, from nearly one hundred and fifty (150) billion Vietnamese dong (equivalent to eight million US dollar) in 2000 to over one thousand and eight hundred (1,800) billion Vietnamese dong (equivalent to one hundred million US dollar) now.
The annual growth rate is high and stable with an average rate of over 20% for production value, turnover and profits. Turnover from housing and _ infrastructure development accounts for a great proportion. Till 2008, the Corporation has put into operation 140 blocks of apartments with totally 2.3 million square meters. The total area of new urban zones is over 2,000 ha in the whole country.
2.2. Analysis of the Corporation’s internal environment 2.2.1. Human resources
HUD Corporation has recruited and trained a great number of cadres, of which the majority is university and post graduates with experience in carrying out big projects.
At the time being, the Corporation has 1,428 staff, of which 306 are female, with the following qualifications:
- Post graduates: 35 people, accounting for 2.45%
- University graduates: 788 people, accounting for 55.18%
- Junior College graduates: 211 people, accounting for 14.77%
- Others: 394 people, accounting for 27.59%
The Corporation has also divided and organized many departments which very necessary for the activities of companies now such as operational, site-clearance, planning, project management and marketing. The strengths and weaknesses of its human resources are as follows:
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Table 2.1: Strengths and weaknesses of human resources Strengths
- Plentiful human resources
_- Suitable qualifications and experience _- Good organization structure from
! project obtainment to site clearance,
| design, construction, supervision,
| quality control, economic and financial
| planning
| - Having its project management board
| with decentralization at sites to timely
| get information for decision-making
| - Marketing staff have good relations
| and impressions on clients and
| competent authorities who help them
| find more investment opportunities for
| the Corporation.
| - Having a rather strict control system,
| having control board of each division
| which can support and encourage
{
| divisions to improve difficult situations
|
2.2.2. Financial resource
for big projects
projects are
Weaknesses
- As compared to the development of the Corporation and the projects the Corporation has been carrying out, its workers have not yet had high skills _ enough.
High-ranking management leaders have not yet developed their full
| capacities.
_- The circulation of staff and workers and simultaneous
_ projects is still not flexible
_- There is insufficient investment in to . marketing research unit so that they can study more about the market, the
| geographical characteristics and habits
“of the people of localities where
located, | economic
| efficiency and feasibility of projects.
Capstone Project Report
The Housing and Urban Development Corporation (HUD) is a 100% State-owned enterprise, specializing biggest real estate projects in Vietnam. Capital is a very important factor for all enterprises, especially in construction industry. At the moment, the Corporation has its own equity of 1,800 billion Vietnamese dong (equivalent to one
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hundred million US dollar). In the recent time, the Corporation has successfully kept its stability and development despite of financial crisis and stand-still real estate market to be initiative in financial potential for investment.
Table 2.2: Capital Development Data
No. Items 2007 2008 2009.
I Opening shareholder equity 108614211856 2
II Annual growth | 3353519
1 Additions from other sources of own equity | 165 _ 0 0 |
2 Additions from annual profit | 170 214 341 |
3 Additions from mergence of other companies | | 221 150 |
4 Additions from implemented projects | 1.700 |
IH Closing shareholder equity | | 1,421 / 1,856 4,047 |
‘IV Planned investment capital = | 2,542 [ 4,000 6,060. |
(Source: HUD, 2009)
In 2008 alone, the mother Corporation itself created the capital flow of VND 4,685
billion.
Table 2.3: Capital Mobilization in 2008
No, | items | | Amount - Percentage per
| (billion dongs) total capital flow
l Sales revenue | | 2,988 — 64% -
3 Credit bạn ; ——— :r.
— Tel —~ ... 7 4.685 "`...
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Table 2.4: Business results in recent years
No Items ‘Unit 2006 2007 2008
1 Total business value biliondong 2,619 3,929 - 5,000
Construction _ billion dongs 961 1500
| Business _ billion dongs 2,967 3,500 2 | Tumover —Ô lbiliondongs 2313 3/192 - 4150 ~
3 _ Profits before tax | billion dongs 120 196 ~ 300
Profit/Turnover | % 6% | 7%
- Profit/Equity | % 10% 14% -
_ Contributions to State | | | ]
4 _billiondongs 80 1593 | 250 -
_ budget |
5 Closing ownequity _| billiondongs 1065 1421 1,856
6 Investment capital | billion dongs 2,125 2,542 | 4,000
Total construction floor | › |
7 | thousand m 337 399; 320
. area | |
| | million an
8 Average income 1.95 21 243
| dongs/person |
9. | Total assets value | | 6,124 | 8,603 |
(Source: HUD, 2007, 2008, 2009)
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Table 2.5: Financial figures in the recent two years
Figures 2007 2008
1. Liquidity |
| Short-term Payment Coefficient (times) Led 1.11
| Quick Payment Coefficient (times) 0.58 0.46
| Debt Payment (times) | 8 26
_ 2, Capital structure
‘Net Profi Net Turno ver( % Mr xezcmre-mncxrrrgre2222-EZTE97E Tre 9 ——r—i 43 ~-
- Debts/Total Assets 0.71 0.69 ị
. Debts/Equity 2.43 2.26 |
EguityrTotal Capital Somes ... ke . aoe" "ơ.. 7 ơ |
| 3. Operation Capacities | " Do |
| Total Assets Turnover (period/year) - | 0,34 |
Fixed Assets Tumover (period/year) _ | - 5,53
Cash Flow Ratio (day) l 128
“Cash Collection Period (day) 9
| Payable Holding Period (day) - 25
| Inventory Holding Period (day) - = 3460 !
! 4. Profit Margin’ He |
_ Net Profit/Total Assets (%) 3,93 4,47
Net Profit/Equity (%) _ SỐ 13,48 1455 —
| Net Profit Margin/Sales (%) a
(Source: HUD, 2007, 2008, 2009)
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Payment figures show that HUD’s liquidity is quite good. It is in safe position by the end of 2007 and 2008. The quick payment ratios are a little low but acceptable for a company in construction industry since it has a rather high inventory holding ratio.
Debt payment ratios are quite good since it was 8 times in 2007 and 26 times for 2008. The ratio of 2008 is much high since 2008 debts are lower while business results of 2008 is much better.
The debts/total assets ratio is rather stable and rather high (+/-70%) but with such a good debt payment as mentioned above, the Corporation is still assured with low financial risks.
With such big assets, assets turnover ratios are not high but acceptable. However, the cash flow ratio of 128 days/period means that the Corporation maintains a high cash balance and the available cash using efficiency is not very good. Cash collection period of 128 days/period is rather high, showing that its clients are abusing the Corporation’s capital. The inventory holding period of 346 days shows the particular characteristic of the construction industry. Year after year, turnover and profit have been increasing remarkably.
In financial aspect, the Corporation has following strengths and weaknesses:
Table 2.6: Strengths and weaknesses of financial sources
. "Sirousiin “mỏ == 7
= Capital source for projects is high to meet - Analysis for capital source 1
| monthly expenses such as labor cost, material | selection, financial plans, costs, |
“cost, ... and capital turnover demand “usage purposes are not of high |
| - Business report is very good, creating | standard so that the Corporation can | _ opportunity for the Corporation to join biddings arrange, allocate capital for.
| for new projects investment efficiency.
| - Annual turnover is increasing every year,
| creating trust for customers and its laborers.
‡
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2.2.3. Technical — material facilities resources
The Corporation has been investing a lot in material facilities and technology to meet the common development demand of the society. Working facilities are rather good, to meet the minimum demand of the laborers. Technical facilities are improved to meet the construction progress. The Corporation also invests a lot in technology and information system, a fundamental factor for the implementation of construction projects.
Normally, investment projects are, based on their total investment capital, divided into three groups: A, B or C. Each group of projects has undergone a specific authority for approval. Construction laws provide regulations on project quality control. Such information is often shared and updated among different departments of the Corporation via internet and network.
Table 2.7: Strengths and weaknesses of technical and material facilities
Strengths | Weaknesses
le Technology has been invested and
| - The update of advanced
| compliant to the regulated standards. ơ
| technologies is still slow.
| - Enough machines and equipment for "ơ ơ
| - Staff is still lack of initiativeness
| works
| | and creativeness.
| - Labor safety is managed rather well
| - Material facilities are sufficient for
_ working
2.3. Analysis of external environment 2.3.1. Analysis of macro environment
Every entity needs an environment for existence and development. A common environment consists of wide social aspects which have direct and indirect influences on each industry and each enterprise of the industry.
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PEST Model studies influences to an enterprise in such aspects as political, economics, socio-cultural and technological. The influences are from great to smaller extents. from international business environment, national business environment, industrial business environment to the enterprise’s internal environment.
Firstly, political and legal issues can affect industries in the whole territory and enterprises are forced to observe all legal factors which include the political atmosphere, the tendency to change laws, changes of tax laws, corporate laws, land laws, war, external affairs policies, investment inspiring policies for specific areas or economic fields ... At the moment, Vietnam is one of the nations having political stability and is considered of great potentials in its renovation and development course. In the eye of domestic and foreign investors, Vietnam has many good and stable conditions for business and production. It is a peaceful country without war, and State leaders who are striving for a proper framework of laws and policies to be suitable to the common trend of development and globalization. For the construction industry, the Vietnamese Party and State are developing the urban according to the overall planning; gradually building up cities and towns becoming modern urban areas of the same pace with regional countries and the world as the whole. In 1999, the Government already had an overall planning for the development of urban areas, residential areas, economic zones for different cities and provinces, special economic zones to the year 2020. However, till now, the infrastructure in newly-developed urban areas in Hanoi, Ho Chi Minh City and cities under provincial authorities is not yet good, housing and social infrastructural works still fail to meet required standards of advanced and modern urban areas. With such resolutions, State policies support the course of urbanization a lot. On 18” June 2009, the State issues regulations on directions of urbanization and the National Assembly has approved the draft law on amendment and addition to the Article 126 of the Housing Law and the Article 121 of the Land Law which allow Vietnamese oversea people, from 1“ September 2009, to buy houses without limitations, increasing demand for housing. The Decision
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No. 96/2009/QD-TTg, which coming into effect from 22nd July 2009, is also providing amendments on policies on housing for students, workers and people of low-income.
According to the Decision, investment and business activities in housing for college students and people of low-income enjoy a reduction of 50% of VAT and such enterprises are exempted from 2009 corporate income tax for these activities.
Economic factors in PEST Model consist of issues relating to inflation, unemployment, GPD (economic growth, monetary sustainability, payment balance), exchange rate in export, domestic and foreign investment, economic decline or balloon economy, prices of basic materials such as electricity, water, petrol ... Vietnam has been having its development impetus with rapid growth rate in the last twenty years. Below are GPD statistics of Vietnam from 2003 to 2009 done by Central Intelligence Agency in the USA:
Table 2.8: Vietnamese GDP rate in recent years
— Year2003 ô=| GDP - real growth rate
2003 6.00% —
2004 | 7.20 %
2005 | 7.70 %
2006 | 8.50 %
2007 | 8.20 %
2008 | 8.50 %
2009 | 6.20 %
(Definition: This entry gives GDP woul on an annual basis adjusted for inflation)
Source: CIA World Fact book - Unless otherwise noted, information in this page is accurate as of September 17, 2009)
The Asian Development Bank forecasts that the growth rate of Vietnam is 6% in 2010 with the conditions that the State Bank of Vietnam keeps on its monetary tightening and the State maintains its current policies. According to the objective necessity,
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urbanization is also speeded up together with the economic development and the national course of industrialization and modernization. Since Vietnam became WTO member, international and multi-national groups and corporations operating in real estate market have been quickly intruding into the market of Vietnam, a young and potential market.
The demand for infrastructure development, the demand for a better living space for high- income people are increasing while the competition among these groups and corporations is more and more crucial. This is a big pressure on HUD. Vietnam has great potentials for development in the future. However, 2009 is a hard year for the global economy since economic crisis takes place everywhere. Although not facing with serious impacts, Vietnam has to meet with obstacles in foreign investment, import and export which force the State to have more flexible policies on monetary, interest rates and inflation. Recently, to control inflation and encourage the trade, Hanoi authority has to risen up basic interest rate and devaluate the Vietnamese dong by 5%. The monetary devaluation will inspire exports but also make prices of imported goods higher. “JMF thinks that the Government of Vietnam is struggling against the global economic crisis rather well”, said Mr. Ben Bingham, IMF Chief Representative. However, remaining and the future still affect greatly the construction industry in general and HUD Corporation in particular. In the future, Vietnam will surely step forwards but there is an issue of inflation control. The Government of Vietnam has been trying to keep inflation at a rational rate and tighten monetary and fiscal policies, using the tool of exchange rate. However, this seems to be a challenge to the Vietnamese economy in general and the construction industry in particular. Prices of input materials such as petrol, oil, natural materials are rather instable.
Socio-cultural factors also have influence on the enterprise’s operation environment.
They consist of the social consumption trend, consumption habits, community awareness ... Each nation, each territory has its own cultural values and social factors which build up consumers’ characteristics in such area. For construction industry and housing
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business, social factors divide the community into different groups of clients with different income and psychological characteristics. At the moment, the population of Vietnam has much better health and life expectancy. Average income is increasing remarkably. In 2006, GPD per capita increased by 7.8% as compared to 2005, that of 2007 also increased by 6% as compared to 2006. As stated by the General Department of Statistics, GDP per capita of Vietnam was 834 USD in 2007; 1,034 USD in 2008 and might reach 1,074 USD in 2009. The Government expects to reach 1,200 USD in 2010.
Many people believe that with the current GPD rate, Vietnam has got out of developing countries with low income to be among those of medium income. The Ministry of Planning and Investment sets up the target of 2,100 USD in 2015. With increasing income, people not only stop at earning enough for living but also have demand for good food, beautiful clothes, big houses, making the demand for housing increase remarkably.
The group of people having low income currently receives great concern from the State.
There have been a great number of State decisions to be issued such as the Decision No.167/2008/QD-TTg dated 12" December, 2008 of the Prime Minister on supporting poor households with housing; the Resolution No. 18/NQ-CP dated 20" April 2009 of the Government, the Decision No.65/2009/QD-TTg, No.66/2009/QD-TTg, No.67/2009/QD- TTg dated 24" April 2009 of the Prime Minister on policies to push up the development of housing for students, workers in industrial zones and people having low income in the urban. To keep pace with the development rate of regional countries, apartment buildings are also developed to bring back different trends and concepts on life. Many people believe that to possess an apartment means that they are modern or successful ...
Technology is the forth factor of the PEST Model which also has many influences to HUD Corporation. It consists of the level of technology development in construction, the debut of new products from new technologies, new production method with more savings, the new ways of management over distribution channels and client approaches.
Information technology booming and development have brought the people to
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construction design of developed countries in the world. Human demand for infrastructure, roads, planning ... unceasingly increases. In the recent years, the supreme development of science and technology, new material development have created different tendencies for the feeling of design, structure, architecture in housing construction. There have been applications of advanced technological solutions to production and construction to reduce cost, balance cost and investment efficiency between high-storey and low buildings, high and medium standard buildings to ensure rational prices which are suitable to the people’s income towards meeting the demand of the majority people of low and medium income in the urban of Vietnam. Composite material for construction is a typical example of science and technology development. These materials can replace many traditional materials in construction to make ceiling, floor, walls and window frames. In civil construction, the technology to make solid by sunlight or ultraviolet rays which replaces that by hand helps to make the products stable, use less labor with low cost and long duration and more quantity. The development of technology has gradually improve the quality of housing design, architectural spacing, apartment structure, construction quality and usage of construction materials suitable to the environment, the regional climate and the common development level of the society. It also creates favorable conditions for the application of science and technology advances in housing construction, to make use of energy saving solutions, environment-friendly solutions, to be suitable for disabled people in designing, housing construction. This is to ensure for the sustainable development of housing projects.
Besides PEST four factors, such issues as demography and globalization also make influences to HUD in the current situation. The increase of mouths to feed leads to the increase of the demand for housing. The age of the population of Vietnam is rather young, of which the majority lives in the urban and its surroundings, making the demand for housing there great. The tendency of globalization facilitates business traffic, removes trade obstacles and diversifies customers comes from every corner of the world. The need
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