What is the State Capital Investment Corporation - SCIC

The State Capital Investment Corporation (SCIC) is a state-owned investment fund formed by the Communist Party of Vietnam in 2006 to invest in state enterprises.

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

Vietnam, also referred to as the Socialist Republic of Vietnam, is a communist state with a centrally planned economy, but in recent years it has implemented economic reforms to introduce elements of the free market. The Vietnamese government created the SCIC at the height of these reforms. The SCIC’s creation is one way that the Vietnamese government works to bring the benefits of the free market to its economy.

BREAKING DOWN State Capital Investment Corporation - SCIC

The State Capital Investment Corporation manages businesses in sectors including financial services, energy, manufacturing, telecommunications, transportation, consumer products, health care and information technology.

The SCIC has a broad mandate aimed at making the state’s use of capital more efficient. By making the state’s financial dealings more efficient, the SCIC aims to strengthen the role of the public sector in Vietnam.

Today, the SCIC manages a portfolio of over 500 different enterprises. In 2014, the SCIC drafted and issued divestiture regulation, laying the foundation for a divestment process. In 2017, the SCIC divested from 38 companies, bringing in VND 21,208 billion, equivalent to $875,442,100. That same year, the SCIC began the process of amending and revising its divestiture regulation with the aim of making the process clearer in the future.

Other Sovereign Wealth Funds

Sovereign wealth funds (SWFs) are pools of reserved money that governments set aside to be invested for the benefit of their citizens and economy. The money in SWFs comes from central bank reserves accumulated through budget and trade surpluses.

Each country’s SWF has different regulations on allowable types of investments. Countries concerned about liquidity often limit their SWF’s investments to public debt instruments with high liquidity.

Countries sometimes create SWFs when they need to diversify their revenue streams. For example, the United Arab Emirates (UAE), relies heavily on oil exports for revenue. If the global oil market suffers, the UAE’s economy will be extremely vulnerable, since it has so little diversity. To prevent this vulnerability, the UAE devotes a portion of its reserves to a SWF. This SWF then invests those reserves in assets unrelated to the oil market.