TRNG I HC M TP. HCM UNIVERSITÉ LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MBAVB4 DO NGUYEN SON KHIEM INVESTMENT PROJECT ANALYSIS OF E-CUSTOMS FOR THE AUTHORIZED ECONOMIC OPERATOR MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION (PART-TIME) Ho Chi Minh City (2011) i ACKNOWLEDGEMENT: I would like thank to all professors from Solvay Business School, they gave the value knowledge which help me a lot during doing the thesis and also in daily work. Besides, I would like to say thank you to professors, doctors of the Ho Chi Minh City Open University for the basic knowledge which I did not have during my engineering degree. The basic knowledge helps me a lot during most of courses of the MBA. I highly appreciate for all of the help from counselors of Solvay Business School and Ho Chi Minh City Open University. Especially, I would like to say thank you to Dr. Nguyen Minh Ha, my tutor of the final thesis. His guidance, information, patience are invaluable. My thesis will not be completed without his tutoring. My family, especially my daughter, supports a lot during past two and half years studying. With all of family‟s encourage, supporting, sympathizing, I finished the program. Last but not least, thank for all of patience, supporting, opening, guidance from my classmates and colleagues. ii COMMITMENTS With the academic knowledge learning from whole course of MBA and guiding from tutor, I applied in studying and doing the study. This study with topic “Investment Project Analysis of E-Customs for the Authorized Economic Operator” is my own work All data obtained in this study are true, confidential, might be the business opportunity and never announced in any other projects. iv TABLE OF CONTENTS ACKNOWLEDGEMENT: i COMMITMENTS ii TUTOR‟S COMMENTS iii TABLE OF CONTENTS iv LIST OF FIGURES vii LIST OF TABLES viii ACRONYMS x EXECUTIVE SUMMARY 1 CHAPTER ONE: INTRODUCTION 3 1.1 Problem statement: 3 1.2 Objective of the study 6 1.3 Scope of study: 7 1.4 Method and data of study 8 1.5 Significance of this study 8 1.6 The project structure: 9 CHAPTER TWO: INTRODUCTION TO COMPANY AND THE PROJECT 10 2.1 Overview of company 10 2.2 Overview of project 12 CHAPTER THREE: THE PROJECT ANALYSIS 15 3.1 Market analysis: 15 3.1.1 Demand from authorized economic operator in Vietnam 17 3.1.2 Supply to authorized economic operator in Vietnam 20 3.2 Technology analysis 21 3.2.1 Steps to make one declaration: 24 3.2.2 Technical requirement: 25 3.2.3 Investment: 27 3.2.4 Operating cost: 29 3.3 Labor and organization analysis: 32 v 3.3.1 Organization chart 32 3.3.2 Project team chart: 33 3.4 Financial analysis 35 3.4.1 Capacity of the application 37 3.4.2 Revenue of the project 38 3.4.3 Labor cost 39 3.4.4 Cost of Goods Sold (COGS): 40 3.4.5 Operating expense: 41 3.4.6 Pro income statement: 42 3.4.7 Working capital: 44 3.4.8 Pro cash flow statement: 45 3.4.9 Project evaluation: 48 3.4.10 Risk analysis 51 3.4.10.1 Financial perspective risk: 51 3.4.10.2 Technical perspective risk: 59 3.4.11 Simulation 60 CHAPTER FOUR: CONCLUSION AND RECOMMENDATIONS 65 4.1 Conclusion 65 4.2 Advantages of the project 66 4.3 Recommendations 67 REFERENCES: 68 APPENDIX 71 Appendix 1: Salary expenses 71 Appendix 2: Revenue and COGS 72 Appendix 3: Investment and Expenses 73 Appendix 4: Cash flow statement of the normal case 75 Appendix 5: Cash flow statement in the good case 77 Appendix 6: Cash flow statement of the bad case 79 vi Appendix 7: Cash flow statement of the case of volume of cargo reduced 50% 81 Appendix 8: Cash flow statement in the case of inflation 83 Appendix 9: Sensitive analysis of price and volume of CDS to NPV 85 Appendix 10: Examples of quotation 87 Appendix 11: IT equipment technical specifications 89 vii LIST OF FIGURES Figure 1-1: Topology of E-customs 6 Figure 1-2: Process of project 7 Figure 2-1: Corporate structure 11 Figure 2-2: Project timeline 14 Figure 3-1: Market share of freight forwarder 15 Figure 3-2: AFR market share 15 Figure 3-3: OFR market share 16 Figure 3-4: E-Customs message flow 22 Figure 3-5: XML routing for import 23 Figure 3-6: XML routing for export 23 Figure 3-7: Organization chart 32 Figure 3-8: Project chart 33 Figure 3-9: Operation team 34 Figure 3-10: Macroeconomic data and forecasts of Vietnam 49 Figure 3-11: Macroeconomic data and forecasts 56 Figure 3-12: Price assumption 60 Figure 3-13: NPV in the case of price changed 61 Figure 3-14: Volume of CDS changed 62 Figure 3-15: NPV in the case of volume of CDS changed 62 Figure 3-16: Price assumption 63 Figure 3-17: Volume of CDS changed 63 Figure 3-18: NPV in the case of volume of CDS changed and price changed 64 viii LIST OF TABLES Table 1-1: Real GDP growth 3 Table 1-2: Logistics Performance Index 4 Table 2-1: Customs declaration method comparison 12 Table 3-1: Volume of CDS of the project during 6 years 18 Table 3-2: Volume of CDS declared as service during 6 years 19 Table 3-3: Total investment 27 Table 3-4: Onetime cost 27 Table 3-5: ICT equipment 28 Table 3-6: Depreciation and amortization („000USD) 29 Table 3-7: Maintenance cost 29 Table 3-8: Power consumption 30 Table 3-9: Price of electricity for corporations 30 Table 3-10: Power consumption expense – operator usage 30 Table 3-11: Power consumption expense – IT usage 31 Table 3-12: Office rental expense for operator 31 Table 3-13: Office rental expense for IT 32 Table 3-14: Cost for labor during project implementation (in 6 months) 33 Table 3-15: Salary expenses, number of labor required for production 34 Table 3-16: Advantage and Disadvantage of financial evaluate method 37 Table 3-17: Revenue of the project ('000 USD) 38 Table 3-18: Salary expense during 6 years production („000 USD) 39 Table 3-19: Salary for direct labor for customs clearance service („000 USD) 40 Table 3-20: Salary for indirect labor of customs clearance service („000 USD) 40 Table 3-21: Expense for CDS per year 41 Table 3-22: Cost of Goods Sold (COGS, „000 USD) 41 Table 3-23: Operating expense in 6 years („000 USD) 42 Table 3-24: Pro income statement of the project („000 USD) 43 Table 3-25: Account receivable, account payable, cash balance („000USD) 45 Table 3-26: cash flow statement for freight supplier („000 USD) 46 Table 3-27: Financial figure in normal case 50 Table 3-28: Payback period in normal case 50 Table 3-29: Financial figure in good case 51 Table 3-30: Payback period in good case 51 Table 3-31: Financial figure in the case of increasing one line per year 51 Table 3-32: Payback period in the case of increasing one line per year 52 Table 3-33: Financial figure in the case of volume of cargo is reduced 52 Table 3-34: Payback period in case volume of cargo is reduced 52 Table 3-35: Sensitive analysis of price and initial investment to NPV 53 ix Table 3-36: Sensitive analysis of price and volume of CDS to NPV 54 Table 3-37: Financial of project with inflation impact („000 USD) 57 Table 3-38: Financial figure in the case of inflation impacts 58 Table 3-39: Financial figure in the case of no inflation impacts 58 Table 3-40: Payback period with inflation impacts 59 Table 3-41: Table of standard deviation 61 Table 3-42: Table of standard deviation 63 Table 3-43: Financial figures summary 65 Table 3-44: Risk cases summary 66 x ACRONYMS AEO : Authorized Economic Operator AFR : Air Freight AP : Account payable APEC : Asia-Pacific Economic Cooperation AR : Account receivable AS2 : Applicability Statement 2 ASEAN : Association of Southeast Asian Nations ASEM : Asia–Europe Meeting BCP : Business Continuity Plan BOM : Bill Of Material CDS : Customs Clearance Sheet COGS : Cost of Goods Sold CPV : Communist Party of Vietnam DB2 : Database 2 EDI : Electronic Data Interchange EDIFACT : Electronic Data Interchange For Administration Commerce And Transport EPV : Equity Points of View FCF : Free Cash Flow GDP : Gross Domestic Product IRR : Internal Rate of Return MDN : Message Disposition Notification MOF : Ministry of Finance NPV : Net Present Value OFR : Ocean Freight PBP : Payback Period SEV : Samsung Electronics Vit Nam SHTP : Saigon High-Tech Park SQL : Structured Query Language SSL : Secure Sockets Layer [...]... parallel with providing the customs clearance service under new procedure, E- Customs for authorized economic operator Not only to be the advantage to get a contract as key supplier, but also the E- Customs system is the advantage condition for contract renewal after three years and helps freight supplier wins another new business Therefore, to develop the E- Customs for authorized economic operator is the. .. business The process of project is described as figure 1-2 Figure 1-2: Process of project Source: Frailey, 2005 8 The E- Customs mentioned in this project is E- Customs for authorized economic operator Another customs declaration using internet which so-call ECustoms may be out of this scope Limitation of the study: In order to prove that the project of implementation system of E- Customs for authorized economic. .. requirement of Customs, then Customs system automatically gives acceptance ID If Export Declaration does not meet one of requirement of high level requirement of customs regulation then customs officer turns back the rejection, freight supplier has to submit another customs declaration; if all requirements are matched, then customs officer turns back the CDS number, right after that customs officer... basic information is correct, Customs system gives the Acceptance ID, then the approval on the Importable list c Create the Import Declaration to submit to Customs If the Import Declaration meets basic requirement of Customs, then Customs system automatically gives acceptance ID If Import Declaration does not meet one of requirement of high level requirement of customs regulation then customs officer turns... international standard, EDIFACT Decision 2869/2009/QD-TCHQ defines the standard structure of data file based on EDIFACT/XML, relevant parties have to follow The requirement for systems for relevant parties of the project: Set up the EDI systems in order to exchange the xml file which contains the information of the declaration between parties Secure the xml file by AS2 (Applicability Statement 2) technology... minutes minutes Depend on numbers of Within 30 Within 15 broker/company waiting to get minutes minutes relevant document CDS ID result, sometimes, have to wait few hours to get the result Lane result, sometimes, have to wait Three lanes: Two lanes: few hours to get the result green lane, green lane, red Three lanes: green lane, yellow lane, lane, but yellow lane, red lane red lane normally is green lane... technology 22 Secure the connectivity by the digital certificate (2048 bits) Figure 3-4: E- Customs message flow Each party may need the own system that can generate xml file: 1 The authorized economic operator system generates xml which contains the information about finished good to be exported then send to freight forwarder 2 The freight forwarder system generates xml which contains the information about... businesses which meet the high requirement about law and business (Phuong Diem, 2011); (N.Quang, 2011) Besides, declaration on behalf of another freight forwarder who has not broker certificate for authorized economic operator is a potential demand for freight forwarder who is holding the broker certificate Volume forecast for the project: To declare for the freight forwarder itself: As per internal... effectiveness perspective 21 Comparing between Demand and Supply Based on business forecast of the pilot authorized economic operator, and number of pilot freight forwarders, it is easy to recognize the demand is high Besides, when other authorized economic operators start to use an E- Customs for authorized economic operator standard, the demand increases significantly comparing with number of suppliers... business organizations but also is applied for the authorized economic operator (AEO) To 6 give more advantage for the authorized economic operator with huge investment, Vietnam Customs proactive to issue special decisions that help a declaration procedure simpler, clearer (i .e -TCHQ for pilot authorized economic operator) Figure 1-1: Topology of E- customs VAN Data Center Customs Officer Vietnam Customs . E- Customs for authorized economic operator is the key element for freight forwarders which provide services for authorized economic operator and the decision of investment this project is value decision whether investor should implement this project. 1.3 Scope of study: The project is a kind of the implementation of information technology project based on the need of business. The process of. areas is developing, a new method of customs management procedures is the need, it is the e- customs procedures. E- Customs not only changes the customs management method following the modernization