Vietnam’s SCIC Turns Five

Ashby Monk

Did you know that Vietnam’s sovereign fund is turning five this month? Better question: Did you know Vietnam had a sovereign fund?

I assume that readers of this blog know all about Singapore’s Temasek and Malaysia’s Khazanah. And I also assume you’ve heard of Bahrain’s Mumtalakat and Kazakhstan’s Samruk-Kazyna. But I’m guessing that there are few among you who have spent much time, if any, reading or thinking about Vietnam’s State Capital Investment Company (…probably because it doesn’t have a catchy name like its peers). To be clear, I’m not trying to shame anybody here; I haven’t spent much time thinking about the SCIC either. In fact, in my three years doing this blog, I don’t think I’ve ever written a word about the SCIC. And that’s regrettable, as the SCIC clearly falls into the “development fund” category of the IMF’s SWF typology.

So today is the day. Given the SCIC is turning five, I decided to expend some intellectual effort getting to know the Vietnamese SWF. And I’m really glad I did. After digging around through some of the publicly available research and reports, I think the SCIC will be popping up on all of our radars in the near future. I’ll come to that, but, first, here’s some background:

The fund’s operations began in August 2006 with the overarching idea to reform the relationships between the government and its invested enterprises — to shift the focus from administrative and central planning to commercial and professional support. With that, the SCIC set out to manage state-owned enterprises and act as a sort of holding company. Interestingly, however, the fund actually was given a much broader mandate. The leadership of the fund said (back in 2006 anyway) that the objective was to build an investor along the lines of Temasek or Khazanah, to have a Vietnamese fund that could be an active domestic player with the ability to invest overseas when appropriate. More precisely, the leadership envisaged the fund participating in international M&A transactions, investing in global stock markets, and even providing mandates to third party fund managers.

In other words, the intention was to build a modern institutional investor capable of operating globally. I think that’s fascinating. But let’s come back to the fund’s five-year anniversary celebration, as it offers some details on what the SCIC’s been up to and what its plans are. Here are a few blurbs from the SCIC’s website:

“During 5 years from 2006 to 2011, SCIC took over state holdings in nearly 1,000 enterprises…So far, SCIC holdings in 520 companies were divested, with holdings in 466 having been divested totally.”

“On 26 July 2010, the Politburo adopted Conclusion 78-KL/TW on continuing to promote and improve the role of SCIC, stressing that: SCIC’s performance results assert that it is a rightful policy of the Party on SOE reform. In the time to come, it is necessary to continue to improve and upgrade the legal framework for SCIC to operate more efficiently by further clarifying its legal status and strategy.”

“The general direction for SCIC development towards 2020 is: “Becoming a strategic investment arm of the Government, investing in important industries/sectors with the aim of retaining and multiplying state capital, improving the competitiveness and sustainable development of the Vietnamese economy”.

In short, the government is quite pleased with the SCIC and is prepared to bolster and reinforce its operations through 2020. So, while the fund only has around $1 billion in assets under management today, it could soon end up with quite a lot more.

This means that it will be increasing its imprint on global financial markets through direct investments and third party mandates. Moreover, it will continue to forge relationships with other SWFs. (The SCIC has already created some rather interesting ties with other organizations, such as the QIA, Temasek and Khazanah). No doubt these relationships will help the fund improve its internal governance, management and operations, in addition to sharing insights as to how a domestically oriented development fund can mature into a global institutional investor. That’s all to the good.

So I guess the only thing left for the SCIC is to come up with a catchy new name. Ideas?

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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