The Role of Valuation in a Market Economy

In addition to the concept of state pricing as above, there is also the self-pricing of organizations and individuals for their own products to conduct transactions in the market, which the author does not have the opportunity to mention within the scope of this thesis.

The difference between valuation and State valuation in a market economy is distinguished by the following basic characteristics:

First, on the nature, role, significance and authority of valuation and appraisal

As mentioned above, valuation is the decision of the competent state agency on the price of assets in accordance with the market at a certain time according to certain procedures and order.

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Valuation is the assessment or re-assessment of the value of assets and goods in accordance with the market at a certain location and time according to Vietnamese standards or international practices recognized by the Vietnamese State.

From the above concept, it can be seen that valuation is only performed by competent State agencies such as the Government, Prime Minister, Ministers, People's Committees of provinces and centrally-run cities; while price appraisal is performed by

performed by units and organizations that are not state management agencies, that is, valuation enterprises.

State valuation is carried out in the following forms: specific valuation, standard price, price range, limit price (minimum price, maximum price); valuation only determines a single specific price of assets and goods at a certain location and time according to standards prescribed by the Ministry of Finance. The prices prescribed by the state are stable and have both economic and social characteristics; valuation results are only advisory and strongly market-oriented.

Second, on the legality of valuation and appraisal.

Pricing is only carried out by competent State agencies, so the prices regulated by the State are highly legal, requiring all subjects subject to price decision adjustment (production, consumption) to strictly comply, as shown in the following basic aspects:

- Must post purchase and sale prices of goods and services according to regulations.

- Must comply with regulations on reporting price forming factors to price authorities for goods and services priced by the State.

- Must buy and sell goods and services at listed prices.

- Must buy and sell goods and services at specific prices, limited prices decided by competent authorities.

- Do not falsely report production costs and other factors related to the preparation of price plans for goods and services submitted to competent authorities.

- Must regulate the purchase and sale prices of goods and services in accordance with the price levels and price limits prescribed by competent authorities.

- Failure to comply with pricing regulations or prices set by the State must be subject to administrative sanctions or criminal prosecution.

For price appraisal, the appraisal price is only for consulting purposes with customers and is used for a specific purpose stated in the price appraisal contract. According to the Price Ordinance, the price appraisal result can be used as one of the bases for considering and approving expenditures from the State budget, calculating taxes,

Determine the value of assets to secure bank loans, purchase insurance, lease, transfer, sell, contribute capital, equitize, dissolve enterprises and use for other purposes specifically stated in the valuation contract.

Third, on the scope of valuation and appraisal

The scope of valuation is shown in the list of assets (goods, services) priced by the State. In the current market economy in Vietnam, the State only prices a few important goods and services, monopoly goods and services that affect the national economy (such as postage stamps, port fees, electricity prices, etc. ), so the scope of valuation is very narrow.

Regarding price appraisal, in addition to the scope of goods and services priced by the State, state assets (if not through bidding or auction), assets of organizations and individuals are all subjects of price appraisal, including:

- Assets are purchased in whole or in part from the state budget.

- State assets given, transferred, sold, contributed as capital and other forms of transfer.

- Assets of state-owned enterprises for lease, transfer, sale, capital contribution, equitization, dissolution and other forms of conversion.

- Other state assets as prescribed by law must be appraised.

- Assets and goods formed from other capital sources when agencies, organizations and individuals request valuation.

Therefore, the scope of valuation is very broad, it can be said that most assets, goods and services in the national economy are subjects of valuation.

Fourth, on the order of decision making on valuation and appraisal.

For valuation: The procedure for valuation of goods and services strictly complies with the provisions of law, and is shown in the following steps:

- Enterprises with assets to be valued must develop a plan for pricing assets, goods and services according to state regulations and submit it to competent authorities for approval.

- After receiving the price plan, the competent authority must conduct an appraisal of the price plan, based on current regulations and policies to decide on the price level.

- The competent authority may hold a meeting with relevant sectors before issuing a price decision.

- The competent authority announces the price decision.

For valuation: The valuation process usually goes through the following basic steps:

- Customers send documents and property records requesting valuation.

- The price appraiser studies the documents to determine the purpose of the appraisal, develops the appraisal process and methods prescribed by the state to determine the price.

- Valuation enterprise signs valuation contract with customer.

- Conduct investigation and survey of the valuation object, domestic and foreign market situation of the property to be appraised, collect information related to the property to be appraised, and on that basis apply appropriate valuation methods.

- The price appraiser writes the valuation report and the valuation enterprise notifies the client with a valuation certificate. The valuation certificate is signed by the price appraiser and the director of the valuation enterprise.

Fifth, about professional qualifications.

The issuance of price decisions by the Head representing the competent authority (pricing) is based on the consultation and proposal of lower-level civil servants to higher-level officials, so its results are collective.

For valuation: The valuation result depends on the proposed opinion of the appraiser (not a civil servant). Therefore, valuation work requires a high level of expertise, professional experience, and professional ethics of the appraiser.

Sixth, on organization and implementation apparatus.

The price-setting organizations are the competent state agencies: State price management agencies at the central level; Ministries, ministerial-level agencies; Provincial and City People's Committees; production and business units have the right to self-determine prices for assets, goods and services they produce and supply outside the list of state-priced goods in accordance with the law.

Regarding price appraisal, according to the provisions of the Price Ordinance, price appraisal is only performed by enterprises with price appraisal functions.

Seventh, on the legal basis for implementation.

Unlike state valuation, valuation is carried out according to the valuation standards system and other legal documents issued specifically for the valuation profession (such as the system of legal documents issued specifically for the auditing and securities professions, etc. ) . Organizations with valuation functions as well as valuation appraisers are subject to regulation and must comply with this legal framework when practicing valuation.

Thus, valuation is a consulting service in the market economy performed by organizations and enterprises with valuation functions through economic contracts with valuation clients. Valuation work is performed by trained professionals with knowledge and experience in valuation; in other words, valuation is performed by valuation experts according to valuation standards prescribed by the state.

1.1.2 The role of valuation in a market economy

Implementing the Party's innovation policy, our country's economy has shifted from a centrally planned mechanism to a socialist-oriented market mechanism, which has led to changes in the State's price management mechanism. Previously, the State directly determined the prices of all goods and services in the national economy. Currently, the State mainly uses macroeconomic tools to manage and stabilize market prices through financial policies, monetary policies, trade policies, income policies , etc. Direct pricing has been greatly reduced, the State only determines the prices of a very few monopoly goods and services that have a great impact on production and consumption, such as: electricity, postal and telecommunications fees, clean water, air fares , etc. Thus, the State's price management mechanism has changed.

However, it is necessary to recognize and affirm that the State still has a very important role in price management. Due to the change in price management mechanism as mentioned above, price appraisal or asset value assessment is a necessary tool, one of the important contents of state price management, in order to improve economic and social efficiency, ensure the operation of organizations, economic units of the State, economic components effectively and reflect the true value of assets.

The market economy in our country on the way of construction and development has its own characteristics. That is, State ownership is still very large, State enterprises still occupy an important position in the national economy. The State is still the biggest buyer and seller. Although the market price mechanism has its advantages, the exploitation of the market price mechanism according to the agreement between buyers and sellers has given rise to many negative effects. Many enterprises, organizations and individuals have taken advantage of inflating and raising prices a lot for personal gain, causing great damage to the State. Therefore, State management of prices is necessary, but we cannot return to the old mechanism where the State sets the prices of all goods and services, but must move towards price liberalization, with State control and management through price appraisal activities to prevent negative behaviors of buyers and sellers.

In fact, the property market in general and the real estate market in particular have appeared in our country. In particular, the real estate market is still very new, but quite active, especially in urban areas. The activities of the property market in our country, especially the real estate market, in recent times have contributed to significantly improving people's housing conditions, increasing the efficiency of land and factory use and business, turning land into a truly great resource for the country's economic development. However, in recent times, our country's real estate market still has many shortcomings and defects. In addition to some defects that are inherent in the nature of the market, most of those defects are caused by the management and policy mechanisms for this market that have not been completed, including defects in valuation activities. Due to limited valuation capacity and not based on

Scientific bases, standards, norms and methods of asset valuation of asset market operations in our country.

Asset valuation in general, including real estate, is a requirement of the market economy. In order for valuation activities to meet market requirements, it is necessary to gradually establish a legal framework, establish effective and scientific valuation organizations and improve the ethical level as well as professional qualifications of this activity . The specific roles of valuation activities are:

1.1.2.1. Valuation is a basic tool for implementing state management of

price

Valuation contributes to building a reasonable price level and accurate accounting.

Realize production and business costs, save social costs; fight against monopoly prices or dumping, create conditions for healthy competition in the market; contribute to the development and health of the market of production factors. Valuation contributes to creating conditions for international economic integration in terms of prices, contributes to creating the premise for the Vietnamese currency to be convertible and is a factor contributing to the development of an economy operating according to the laws of the market economy.

In a market economy, valuation is applied for many different economic purposes. Corresponding to each economic purpose as above, at the same time, an appraised asset will give different valuation results. Therefore, valuation results will be used to make decisions in many different situations: purchasing, transferring, leasing, mortgaging, tax insurance, compensation, liquidation of assets...; as a basis for approving foreign direct investment projects, construction investment projects using state capital, equitization projects of state-owned enterprises, budget allocation estimates, asset procurement from the state budget, borrowing from the government, borrowing from foreign countries with government guarantees ...; as a basis for merging, separating, bankrupting or dissolving enterprises ...

In the context of global economic integration and WTO accession, more than ever, Vietnam's economy clearly demonstrates its market orientation. Every measure of value must be based on the main foundation, which is the market, and the process of operation is

regulated by market rules, in that context valuation with its role is considered an effective tool to make the market transparent as its market nature.

The transformation of our country's economy from a centrally planned mechanism to a socialist-oriented market mechanism has changed the state management mechanism on prices. However, it is necessary to recognize and affirm that the State still has a very important role in price management. Due to such changes in the price management mechanism, the birth of price appraisal in the early period was an extremely necessary tool, one of the important contents supporting state management on prices to improve socio-economic efficiency; ensuring the effective operation of state economic organizations and units, and economic sectors through the correct reflection of the market value of assets.

1.1.2.2. Valuation is a tool for asset management and state budget management.

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Our country has land, resources and many properties owned by

The state, especially the number of state-owned enterprises is still quite large, in the process of reform and transformation. Every year, the state budget provides capital for basic construction investment and asset purchase of hundreds of thousands of billions of VND. Organizing price appraisal as a basis for considering and approving foreign direct investment projects, construction investment projects using state capital, enterprise equitization projects, budget estimates allocated from state budget capital, government loans, foreign loans with government guarantees is very necessary.

In the early years of our country's renovation period and in recent years, there have been many cases where foreign parties contributed capital to joint ventures using old, outdated equipment, revaluated too high, in some cases the price difference was up to 20% - 30% compared to the actual value. Through practical summaries, foreign joint ventures usually inflate the price of machinery and equipment by about 15 - 20%. As a result, in most joint ventures with foreign countries, we often suffer losses due to incorrect determination of the value of assets used as capital contribution, which is increased. In the procurement estimate as well as in the final settlement of projects from the state budget, there are many items related to prices, such as machinery, equipment, unit prices, etc.