This Post considers the Vietnam State Capital Investment Corporation.
(SCIC charter capital likely to be increased, Vietnam News, Sept. 18, 2013)
Chairwoman of the State Capital Investment Corporation recently explained the official position:It’s my great honour to be here today to speak on behalf of the State Capital Investment Corporation (SCIC for short) to both domestic and foreign senior representatives from numerous agencies, enterprises and investors at the 2nd Annual Vietnam Investment Forum organised by Euromoney Conferences and supported by SCIC. I would like to take this opportunity to share with you some
highlights of the role of SCIC in the process of SOE reform.
As you may know, the year 2006 witnessed significant achievements Vietnam has successfully obtained in many areas, particularly in international integration and economic development. This is the result of the all faceted reform that Vienam has been strongly committed to. In that context, the establishment of SCIC is seen as a pivotal breakthrough.
SCIC is a special financial institution of the Governemnt that is created with a view to reforming the relationship between the State and its invested enterprises, changing from a purely administrative management undertaken by the line ministries and local authorities to commercially viable and professional financial organisation operating in conformity with market rules and contributing to
enhancement of effectiveness and autonomy of SOEs in accordance with the new unified Enterprise Law.
SCIC’s missions and main functions include:1. Taking over and exercising State shareholder rights in state invested enterprises (including join-stock companies, one member limited liability companies or limited liability companies with two members and more). It is planned that by the end of 2007 and 2010, approximately 1,300 and 3,000 state invested enterprises respectively will be transferred to SCIC.
2. Managing state invested capital, generating added value and maximizing capital efficiency, raising more funds from internal and external sources to strengthen state investment capacity instead of granting preferential and free credits from State budget.
3. Investing State capital in key industries inside and outside Vietnam with a view to preserving and maximizing the value of state capital; and thus facilitating socio-economic development and enhancing the competitiveness of enterprises and the economy as a whole.
4. Providing financial services such as investment consultancy, equitization consultancy, corporate restructuring, divesture consultancy and business support services; managing entrusted funds.SCIC has officially begun its operations since August 1st, 2006 with a strong focus on professionalism, young and talented staffs who are fully qualified, experienced and well educated in the fields of financial investment and capital market.
As of 07 February 2007, SCIC has taken over the state interest in 294 enterprises in different sectors and industries with a total book value of VND 2,961 billion and estimated market value of approximatively VND 29,251 billion.
SCIC’s objectives and visions can be briefly summarized as follows:1. To fulfill its role as a dynamic and active state shareholder without intervening into daily management of SCIC-linked enterprises; to improve the way to select and appoint representatives for the state interests in enterprises; strengthen the relationship between managers, representatives and SCIC in properly handling challenges facing the enterprises; exchange information and share experience in corporate governance; focus on sustainable development and create added value for SCIC-linked enterprises through its flexible investments, restructuring investments with emphasis on reducing the number and raising quality, efficiency and scale of investment.
2. To play as a strategic investor; mobilize and concentrate resources on key sectors, thereby contributing to sustainable growth and development, enhancing the economy’s competitiveness and maximizing investment returns. In that spirit, SCIC will focus its efforts on attracting domestic and foreign investors to projects that are of national significance and investing in highly potential sectors both at home and abroad through joint ventures, issuance of bonds and exchangeable bonds.
3. To act as a professional financial consultant; facilitate both domestic and foreign investors to access to potential sources of funding; assist enterprises in selecting strategic investors, accessing to the capital market and applying the best practices of corporate governance. In that capacity, SCIC would advise the government in policy making, promoting businesses, developing capital market,
and selecting the most efficient investment projects.
4. To build SCIC’s image as a professional financial institution with good corporate governance, strong leadership, highly competent staff, advanced management and the much needed transparency.Ladies and gentlemen,
SCIC is a very new business model that is closely associated with the strong reform programme of the Government. We all well know that reform is not an easy and rosy process. However, it is our firm belief that with strong determination of the Government in promoting reform and economic development, Vietnam will continue to be an attractive destination for investors worldwide and SCIC will make its best efforts to assert its roles and fulfill its mandate in that reform process. (Le Thi Bang Tam, KEYNOTE ADDRESS, Role of the State Capital Investment Corporation and the SOE reform, 2007 ).
That focus tends to play a critical role in the SCIC's operations, and has been a cause for controversy. "The state once put a high hope on SCIC when it made its debut in 2005. However, the business performance of the “super corporation” has been disappointing. What SCIC has been focusing on since its establishment is selling the state’s capital contribution in the enterprises and business fields where the state’s investment is not necessary. " (State’s “super-corporation” also bears competition pressure, Vietnam.net, May 21, 2013). That controversy tends to revolve around the fear that the SCIC will not be able to recover its investment in Vietnamese SOEs.
Many economic experts have recently suggested that there are many aspects of SCIC’s operations that need reviewing.
In 2012 the company disbursed VND1.25 trillion for investment, more than VND1 trillion of which went to increase capital at the debt-ridden Vietnam Construction and Import – Export JSC (Vinaconex).
The disbursement has become controversial as it remains to be seen whether SCIC can recoup the investment given the troubled financial state of Vinaconex.
The massive profits in 2012 do not reflect the effectiveness of SCIC in managing its capital because 96 percent of profits are from deposit interest and dividends, economic experts said.
Only a few successful businesses contribute to the profits, while SCIC’s investment in a number of other companies may fail to produce profits, or even result in huge losses, the experts said. (How State Capital Investment Corp uses its money, Tuoitrenews, 03/07/2013).