State Capital Investment Corporation (SCIC)

What Is the State Capital Investment Corporation (SCIC)?

The State Capital Investment Corporation (SCIC) is a government-owned investment fund shaped by the Communist Party of Vietnam in 2005 to invest in the country's state-owned enterprises (SOEs).

SCIC's stated objectives as a sovereign wealth fund are to be an active shareholder in state ventures, to be a professional financial consultant, and to earn returns that can be reinvested in the government and public services. According to its mission, the SCIC's primary values are dynamism, productivity, and sustainability.

Vietnam, likewise alluded to as the Socialist Republic of Vietnam, is a socialist state with a centrally planned economy, yet it has executed economic changes to present components of the free market. The Vietnamese government made the SCIC at the level of these changes to acquaint market efficiencies with state-owned companies. The SCIC is one of several state economic gatherings through which the Vietnamese government executes economic planning and coordinates the communist market economy.

Figuring out the State Capital Investment Corporation (SCIC)

The State Capital Investment Corporation is one of several economic gatherings that regulate the nation's state-owned ventures. Despite the fact that Vietnam has executed some market-situated changes, SOEs actually account for around 33% of the nation's GDP. A large number of these companies operate in key economic sectors, for example, financial services, energy, manufacturing, telecommunications, transportation, consumer products, medical care, and data technology.

SCIC has some $2.4 billion in assets, according to the Sovereign Wealth Fund Institute. In 2020, the SCIC reported estimated revenues of VND 7.9 trillion, an amount around equivalent to $346 million dollars, After taxes, the net profit was VND 6.2 trillion ($270 million).

The SCIC has a broad command to further develop management and capital allocation in SOEs that have been equitized or somewhat privatized. It addresses the government as a shareholder, giving management and capital in these companies while observing market guidelines. By making the state's financial dealings more efficient, the SCIC plans to fortify the job of the public sector in Vietnam.

Fast Fact

33% of Vietnam's GDP comes from state-owned ventures.

SCIC Divestment and Reform

In 2017, the Vietnamese government approved a rundown of 406 state-owned companies for divestment, to raise revenue and further develop proficiency in the state sector. This decision proceeds with a slow trend towards privatization, by which SOEs are switched over completely to joint or private ownership. Under this plan, there would be just 103 completely owned SOEs by 2020.

In 2014, the SCIC started to strip from a portion of its holdings. It sold its stake in 253 companies somewhere in the range of 2015 and 2020, raising 42 billion VND ($1.8 billion) from the sales. 145 endeavors stay under SCIC control.

As per the new course of economic planning, the SCIC is expected to reposition itself from capital management to another job as a strategic investor in key industries. By 2025, it is expected to change from its current job to a government-owned investment fund, like Singapore's Temasek.

Other Sovereign Wealth Funds

Sovereign wealth funds (SWFs) are pools of held money that governments set to the side to be invested for the benefit of their residents and economy. The money in SWFs might come from central bank reserves, trade overflows, or other public resources.

Each SWF has various regulations on passable types of investments. Countries worried about liquidity frequently limit their SWF's investments to public debt instruments with high liquidity.

Countries in some cases make SWFs when they need to differentiate their revenue streams. For instance, the United Arab Emirates (UAE), depends vigorously on oil exports for revenue. Assuming that the global oil market endures, the UAE's economy will be very helpless, since it has so little diversity. To forestall this weakness, the UAE dedicates a portion of its reserves to a SWF. This SWF then, at that point, invests those reserves in assets unrelated to the oil market.

Highlights

• The State Capital Investment Corporation (SCIC) is a sovereign wealth fund owned by the Vietnamese government that was established in 2005.
• In spite of the fact that there have been market changes, state-owned undertakings account for around 33% of Vietnam's GDP.
• The SCIC is currently endeavoring to strip itself from a number of state-owned corporations and selling its stakes to private investors.
• The SCIC is the 60th biggest sovereign wealth fund, with total assets worth $2.4 billion according to the Sovereign Wealth Fund Institute.
• In 2020, the SCIC reported estimated revenues of VND 7.9 trillion, an amount roughly equivalent to $346 million dollars, After taxes, the net profit was VND 6.2 trillion ($270 million).