Tài liệu Determinants of business households'performance in rural areas of vinh phuc and bac ninh provinces

DETERMINANTS OF BUSINESS HOUSEHOLDS’ PERFORMANCE IN RURAL AREAS OF VINH PHUC AND BAC NINH PROVINCES ___________________________ A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam ___________________________ In Partial Fulfillment of the Requirements for the Degree Doctor of Business Administration ___________________________ By PHAM NGOC YEN (NANCY) December 2013 i APPROVAL SHEET The Dissertation of PHAM NGOC YEN entitled DETERMINANTS OF BUSINESS HOUSEHOLDS’ PERFORMANCE IN RURAL AREAS OF VINH PHUC AND BAC NINH PROVINCES Submitted in Partial Fulfilment of the Requirements for the Degree DOCTOR OF BUSINESS ADMINISTRATION A program offered by Southern Luzon State University, Republic of the Philippines in collaboration with Thai Nguyen University, Socialist Republic of Vietnam has been approved by Oral Examination Committee WALBERTO A. MACARAAN, EdD Expert CONRADO L. ABRAHAM, PhD Expert JOANNA PAULA A. ELLAGA, DBA Expert EDWIN P. BERNAL, DBA External Panel CECILIA N. GASCON, PhD Chairman Endorsed by: Recommended by: NELLY I. MENDOZA, DBA Adviser APOLONIA A. ESPINOSA, PhD Dean Accepted in Partial Fulfilment of the Requirements for the Degree Doctor of Business Administration _____________________ Date WALBERTO A. MACARAAN, EdD Vice President for Academic Affairs ii CERTIFICATE OF ORIGINALITY This is to certify that the research work / dissertation entitled “DETERMINANTS OF BUSINESS HOUSEHOLDS’ PERFORMANCE IN RURAL AREAS OF VINH PHUC AND BAC NINH PROVINCES” orally defended/ presented under the DBA Program jointly offered by Southern Luzon State University of the Republic of the Philippines and Thai Nguyen University of the Socialist Republic of Vietnam, embodies the result of original and scholarly work carried out by the undersigned. This dissertation does not contain words or ideas taken from published sources or written works by other persons which have been accepted as basis for the award of any degree from other higher education institutions, except where proper referencing and acknowledgment were made. PHAM NGOC YEN Researcher/Candidate Date Orally Defended: __________ Noted: DR. TU QUANH HIEN Director, Center for Research and Education Cooperation, Thai Nguyen University Date: ____________ iii ACKNOWLEDGMENT The researcher would like to express her gratitude to the following who made this study possible: Professors of the Post-Graduate Department of Southern Luzon State University – Philippines and the teachers of International Training Center – College of Agriculture and Forestry - Thai Nguyên University, especially to Dr. Nelly Mendoza, her dissertation adviser, for their generous encouragement and support to finish this work; Statistics Department of Vinh Phuc province and Bac Ninh province, for their enthusiastic support on collecting and processing the data; Business households in these two provinces, for their participation and informative responses they have provided; Management and colleagues at the University of Labour and Social Affairs and General Statistics Office, for their emotional support and encouragement; and Family and Friends, for the unconditional love and support. Pham Ngoc Yen iv TABLE OF CONTENTS PAGE TITLE PAGE ……………………………………………………………….. i APPROVAL SHEET ………………………………………………………. ii CERTIFICATE OF ORIGINALITY ……………………………………….. iii ACKNOWLEDGMENT ………………………………………………….. iv TABLE OF CONTENTS ………………………………………………….. v LIST OF TABLES …………………………………………………………. vii LIST OF FIGURES ………………………………………………………... ix ABBREVIATIONS …………………………………………………………. x LIST OF APPENDICES …………………………………………………... xi ABSTRACT ………………………………………………………………… xii CHAPTER I 3 Statement of the Problem …………………………………. 4 Objectives of the Study ……………………………………. 5 Significance of the Study ………………………………….. 6 Scope and Limitation of the Study ………………..……… 6 Definition of Terms …………………………………………. 7 REVIEW OF LITERATURE ………………………………. 10 Conceptual Framework ………………………………….… 39 Research Paradigm ………………………………………... III 1 Background of the Study ………………………………….. II INTRODUCTION …………………………………………… 40 METHODOLOGY ………………………………………….. 42 Locale of the Study ………………………………………… 42 Research Design …………………………………………… 42 Data Gathering Procedure ………………………………… 43 Sample and Sampling Technique …..………………… 43 Research Instrument ………………………………………. 44 Statistical Treatment ………………………........…….…… 45 v IV 50 Analysis of Situation of Business Activities and Business Environment of the Business Households in Rural Area of Vinh Phuc and Bac Ninh ………………….. 50 Determination of Formality Indexes ……………………… 86 Factors Influence to Decisions in the Expansion, Development of the Business’ Households and Influence to Business Performance of Business Households …………………………………………………. V RESULTS AND DISCUSSIONS …………………………. 97 SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS Summary …………….……………………………………… 117 Findings ……………………………………………………... 119 Conclusions ………………………………………………… 121 Recommendations ………………………………………… 122 REFERENCES ………………………...………………………………….. 126 APPENDICES ……………………………………………………………... 128 CURRICULUM VITAE ……………………………………………………. 160 vi LIST OF TABLES TABLE PAGE 4.1 Gender, Qualification, Experience of the Managers ………. 51 4.2 Number of Laborers in Sectors/ Provinces …………………. 52 4.3 Business Capital, Working Capital in Sectors/ Provinces … 53 4.4 Revenue, Profit in Sectors/Provinces ……………………….. 54 4.5 Rate of Households with Intention of Business Expansion . 55 4.6 Quality, Recruitment and Training of Laborers …………….. 57 4.7 Quality and Accessibility of Inputs …………………………... 58 4.8 Accessibility to Bank Loans ………………………………….. 61 4.9 Value of Loans and Rate of Loan Sources …………………. 62 4.10 General Assessment on Bank Loans ……………………….. 63 4.11 Land Area and Rate of the Households in Form of Land Use ……………………………………………………………… 64 4.12 Capacity of Business Space Enlargement …………………. 65 4.13 Land Use Right Certificate …………………………………… 66 4.14 Main Reasons for Obstruction of Business Space Development …………………………………………………... 67 4.15 Market Access and Competition …………………………….. 68 4.16 Importance of Infrastructure ………………………………….. 69 4.17 Assessment on the Quality of Infrastructure Services …….. 71 4.18 Rate of Households Accessing and Using Other Services .. 73 4.19 Taxes and Tax Inspection ……………………………………. 77 4.20 Assessment of the Households on State Officers and Authorities ……………………………………………………… 80 Accessibility to Information, Documents ……………………. 82 4.21 vii TABLE PAGE 4.22 Role of Local Authorities in Product Sale …………………... 84 4.23 Average Value in Score Range of 9 Component Indexes ... 87 4.24 Contribution of Component Indexes for Variance of the Four Factors …………………………………………………… 88 Average Value of Variables Reflecting the Households’ Business Performance ……………………………………….. 89 4.26 Regression Analysis ………………………………………….. 90 4.27 Weight of Component Indexes ………………………………. 91 4.28 Formality Index (FI) of Provinces and Districts …………….. 92 4.29 Average Statistic Value of Variables Used in the Econometric Models ………………………………………….. 99 4.30 Impacts of Business Environment on Profit and Revenue 100 4.31 Conversion into Enterprise Business of the Business Households ……………………………………………………. 104 Factors Affecting the Households’ Decision to Converse into Enterprise Business ……………………………………… 106 4.33 Business Registration of Sole Business Households ……... 110 4.34 Awareness of Benefits from Business Registration and Reasons Provided by the Households Without Business Registration ……………………………………………………. 112 Factors Affecting Households’ Decision to Get Business Registration ……………………………………………………. 114 4.25 4.32 4.35 viii LIST OF FIGURES FIGURE 1.1 PAGE Number of Non-Agricultural Business Household and Employees in Non-Agricultural Business Household in 20042012 Period ……………………………………………………… 2 Emulation and Analysis of Business Environment of Business Households ………………………………………….. 20 Determinants of Business Households’ Performance in Rural Areas of Vinh Phuc and Bac Ninh Provinces …………. 40 Nine Factors which creates Business Results of the Households ……………………………………………………… 41 4.1 Business Situation in 2012 Compared to 2011 ……………… 55 4.2 Capital Source Structure of the Business Households ……... 60 4.3 Informal Costs for State Employees in Total Income of Business Households …………………………………………... 81 Assessment on Attitude of the Authorities to Operation of Business Households …………………………………………... 83 4.5 Assessments of the Households on Local Authorities ……… 85 4.6 Confidence of Business Households in the Court System …. 86 4.7 Provincial Formality Index (PFI) and District Formality Index (DFI) ………………………………………………………………... 93 The Business Results of the Households and Formality Indexes …………………………………………………………... 97 2.1 2.2 2.3 4.4 4.8 ix ABBREVIATIONS GDP : Gross Domestic Product FI : Formality Index DFI : District Formality Index PFI : Provincial Formality Index PCI : Provincial Competitiveness Index VCCI : Vietnam of Chamber of Commerce and Industry VNCI : Vietnam Competitiveness Initiative GSO : General Statistics Office IPSARD MOLISA : Institute of Policy and Strategy for Agriculture and Rural Development : Ministry of Labour, Invalids and Social IRC : Indochina Research and Consulting Company x LIST OF APPENDICES APPENDIX PAGE A Method to Define the Weight on Basis of Direct Regression …………………………………………………… 129 B Documents Relevant to Household Business ……………. 134 C Questionnaire ………………………………………………... 137 xi ABSTRACT Title of Research : DETERMINANTS OF BUSINESS HOUSEHOLDS’ PERFORMANCE IN RURAL AREAS OF VINH PHUC AND BAC NINH PROVINCES Researcher : PHAM NGOC YEN (NANCY) Degree Conferred : DOCTOR OF BUSINESS ADMINISTRATION Name and Address of Institution : Southern Luzon State University, Lucban, Quezon, Philippines and Thai Nguyen University, Socialist Republic of Vietnam Adviser : Dr. Nelly I. Mendoza Year Written : 2013 ______________________________________________________________ There have been lots of studies on business environment. However, they concentrated only on business environment of enterprises and companies of large scale, those with business registration, or on business environment of a locality in general. These studies focus less on the business household environment particularly in the rural areas. However, in socio-economic development, household economies have always played an important role. Vinh Phuc and Bac Ninh, the two provinces adjacent to Hanoi, had been observed to be contributing to the economic and social development of Hanoi. The study focused on determining the factors that influence business households’ performance in the rural areas of Vinh Phuc and Bac Ninh provinces in Vietnam. It aimed to study the factors of the business environment creating an impact on establishment and development of business households in rural areas of these two provinces. A Formality Index (FI) was used to evaluate the business environment of business households. The index was patterned with the Provincial Competitiveness Index (PCI) xii designed by Vietnam Chamber of Commerce and Industry. PCI is in a score range of 1% of 100% but FIs are quantitative indicators that receive value on a scale of 1 to 10. The significant differences between the FIs were assessed according to their values. The higher value reflects a more business friendly environment to the households and vice versa. In the study, 500 business households were surveyed in the two (2) provinces. Sampling was made through the hierarchical random method, with layers of districts, communes and households. In each province, 250 business households were sampled. The study calculated the FI of the sample districts and estimated FI of the two provinces. The two important concern in building the FI is to determine component indices and to estimate the weight of component indexes. Although the FI method is similar to the PCI method, the study made some adjustments to some factors during the formulation of the component indices. Time cost, legal institution, and activeness of local authorities” in PCI were transformed into access to capital, business registration, and support from State authorities to make them suitable to the target type of business environment. The study calculated the FI for the sample districts and estimated FI for the two provinces. The results showed that FI of Vinh Phuc, 6.18, was higher than of Bac Ninh (6.15). These data showed that the current business environment of business households in the rural areas of Vinh Phuc and Bac Ninh provinces is not so good. There were more fluctuations in the FI on the districts, from 5.9 to 6.6. The districts with the most favorable business environment for business households in Vinh Phuc were Lap Thach, Yen Lac and Vinh Tuong; and in xiii Bac Ninh, were Tien Du and Tư Son. The districts with the most unfavorable business environment for business households in Vinh Phuc were Tam Duong, Binh Xuyen; and in Bac Ninh, were Que Vo, Thuan Thanh and Yên Phong. It was revealed that the business performance of the households was strongly influenced by the availability of capital, labor, as well as experience in the business market. Accessibility to human resources of high quality, easy access to output market and good infrastructure are business environment factors that have significant impacts on the business performance of the households. Factors of informal charges or assistance from State authorities were found to have insignificant impacts. Analysis results showed that capital, land; human resources have a great influence on the expansion and development of the business households. On the other hand, the output market factors have also a great influence on the decisions of business registration and business transformation into enterprises. Facilitation from authority was also found significant than other factors, but not clearly. xiv 1 Chapter I INTRODUCTION Being a developing country, Vietnam has gained remarkable economic achievement for nearly 30 years, both in economic growth and poverty reduction. GDP per capita growth rate reached 7% during the last decade. Poverty rate reduced from 58% in 1993 to 37% in 1998 and 14% in 2008. Businesses’ household makes a great contribution to the economic growth. It does not only help create jobs, increase income and increase state budget revenues but also build biggest networks reaching to distant areas. Thus, it developed distribution network, balance trading activities and local economy. The economy will witness a transition from unofficial sector to official sector. The number of agricultural household and non-agricultural production business will decrease. However, in the context of an economic transition facing a lot of difficulties, business households still play an important role. They help reduce the negative impact of economic shocks on household. Trade globalization brings about both opportunities and risks for the economy (Easterly and Kraay, 2000; Winters and associates, 2004). When losing jobs in business sector, employees can work in the household sector. Nguyen (2010) indicates that a number of labors who get low-paid in company have turned to household sector. Agricultural household can be also changed to non-agricultural business activities in case of natural disasters and/or business difficulties. According to the total survey on non-agricultural production and business establishment of General Statistics Office in 2004, there were 2.9 2 million of non-agricultural business establishment nationwide, providing jobs for nearly 5 million labors (Figure 1.1). The number of business establishment and employees in this sector has increased gradually. In 2012, there were 4.6 million business establishment, providing jobs for 7.8 million labor in the nation. Figure 1.1. Number of Non-Agricultural Business Household and Employees in Non-Agricultural Business Household in 2004-2012 Period Unit: thousand household, thousand employee 7797 8000 7436 7065 7000 6700 6594 6000 5584 5766 4988 5000 4629 3748 4000 2914 3053 3869 3986 4125 3300 3000 2000 1000 0 2004 2005 2006 2007 2008 number of business establishments 2009 2010 2012 number of labors Source: Statistical Yearbook However, compared to business sector, the development of household is limited. Capital and human resources of business household is small and hardly change over years. On average, each household consists of 2 labors (Figure 1.1). The proportion of household with business registration is small, about 27.5% in 2007. There has not been a favorable business environment for business households (Phuoc Ha, 2006; IRC and IPSARD, 2011). Local authorities pay much attention to business households as this is the sector 3 which generates the most state budget revenues (from tax) for the provinces (IRC and IPSARD, 2011). Background of the Study There have been a large number of researches on business environment; however, these researches often focus on general business environment of the localities or the enterprises (eg. Freeman and associates, 2005; CAP, 2007). The number of researches focusing on household business, especially in rural areas is limited. Amongst previous researches on business environment, a notable research is on building Provincial Competitiveness Index (PCI) by VCCI collaborating with Vietnam Competitiveness Initiative (VNCI) funded by USAID. Since its debut in 2005, PCI has become an important tool to measure and evaluate business environment of private sector in 63 provinces and cities in Vietnam. It also helps local authorities point out restriction factors to business households, especially environment and institution. However, PCI is designed for business sector, not business household. Vinh Phuc and Bac Ninh, the two provinces adjacent to Hanoi (Vinh Phuc is bounded by the North of Hà Nội, Bac Ninh is bounded by the East of Hanoi), have made significant contribution to economic development of the capital city for the last years. In conformity to the National Plan by 2020, the two provinces shall provide support for Hanoi to get a sustainable economic development. Vĩnh Phúc City and Bắc Ninh City (2 central cities of the two provinces) shall be satellite cities to help Hanoi to settle issues of environment, materials and human resources. Therefore, socio-economic 4 development of the two provinces gets much attention from the Government. Being a province of long-standing culture with development of numerous traditional villages specializing in bronzing, carpentry, ceramics, Bắc Ninh has opportunities and challenges completely different from that of Vĩnh Phúc, a province having a lot of villages and communes with small trade of agricultural, forestry and aquatic products (rice, bean, peanut, vegetable ) in addition to its agricultural economy. Therefore, economic development of the province cannot be separated from development of household business. It is necessary to get a favorable business environment for development of household business. In urban areas, with development of enterprises of various types, business environment of the households also has significant improvement. However, in rural areas, business environment of the households doesn’t get much attention. Statement of the Problem Currently, there are two types of household business operating on these localities: unregistered business households and registered business households. Unregistered business households do transactions with subdistrict level authorities while registered business households do transactions with both sub-district and district level authorities. From the practical requirements above, the author conducted a study: “Determinants of Businesses households’ performance in the rural areas of Vinh Phuc and Bac Ninh provinces in Vietnam”. The main purpose of the research is to compute the FI measurement and estimate FI for the chosen province and district by using small-scale estimation method. The research sought to answer the following questions: 5 1. What are the situations of business activities and business environment of the business households in rural area of Vinh Phuc and Bac Ninh through survey data? 2. What is the method that could measure and estimate FI? What is the FI for provinces and districts? 3. What factors influence the decisions for expansion and development that influence the business performance of the business’ households? 4. What are some policy recommendations to improve business environment for private business households? Objectives of the Study Generally, this study aimed to study factors of business environment affecting formation and development of business households in the rural areas of Vinh Phuc and Bac Ninh province. Specifically, the specific objectives of this research are to: 1. Analyze and compare the business environment of business households in rural areas of 2 provinces through survey data; 2. Calculate the formality index (FI) of business households and use FI to assess business environment of business households in the rural areas of the 2 provinces; 3. Determine the role of the factors (9 factors) in the expansion, development and business performance of the business’ households; 4. Provide recommendations to improve the business environment of the business households in the rural areas of the 2 provinces. 6 Significance of the Study The findings of the study are expected to benefit the following: Researchers. Researchers may consider calculating the FI and use FI as a measure to assess the business environment of the households with other indicators. Policy Makers. The research’s results can be used to propose to the leaders of the two provinces, to review and make appropriate decisions to create a favorable business environment for households. Policy makers can use the result of the study to devise appropriate decisions in order to create a favorable business environment to help households develop their businesses. Scope and Limitation of the Study To measure FI, the author conducted a survey on the business environment of 500 households in 10 districts of Bac Ninh province and Vinh Phuc province in 2012, as the respondents of this research (the research collect data on household businesses which have the number of members of less than 10 employees). This included Tam Dương, Bình Xuyên, Yên Lạc, Vĩnh Tương, Lập Thạch in the districts of Vĩnh Phúc, while Yên Phong, Thuận Thành, Quế Võ, Tiên Du, Từ Sơn represented Bắc Ninh. These households were selected (registered business/unregistered business) with a ratio of 6/4. The study did not focus on business households which have more than 10 employees. Households in the urban area of the two provinces were not considered in the sample.