VietNamNet Bridge – The chartered capital of the State Capital Investment Corporation (SCIC) will be raised to VND50 trillion, but it is not clear whether the organisation will succeed, analysts say.

The Prime Minister approved the organization and operation charter of SCIC, called a “super corporation” in Vietnam, stipulating that SCIC will have chartered capital of VND50 trillion. The capital will increase gradually during its operation.

The new capital level is 10 times higher than the chartered capital specified in SCIC’s regulations in 2005.

SCIC has the right to call for capital from domestic and foreign institutions and individuals, provided that it preserves the state’s capital.

SCIC will go bankrupt or be dissolved in case it takes a loss for three consecutive years and has cumulative losses equal to three-quarters of the state’s capital, or fails to fulfill the tasks assigned by the State within two years.

If it stops operation, it must pay all debts and other asset duties.

SCIC is called a “super corporation” in Vietnam because of its large operating scale, the power it has, and the important role it plays.

Many years ago, SCIC was established with the task of investing the state’s capital in for-profit enterprises and implementing specific tasks to be assigned by the State when necessary.

At that time, SCIC’s operation was described as similar to that of Temasek Holding, a Singaporean state-owned group, and SCIC was predicted to become a “giant”.

Nevertheless, SCIC still has not become a giant as expected. Though SCIC still could preserve the state’s capital and make profits, the corporation has not played any special role in enterprise restructuring and the national economy, as initially expected.

While thousands of businesses went bankrupt in recent years due to a lack of capital, SCIC deposited VND19.6 trillion in banks to make a profit.

Dang Quyet Tien, a senior official of the Ministry of Finance, said SCIC did not violate laws when depositing money in banks to preserve the state’s capital and make profits, if  it could not find any reasonable investment projects.

However, a banking expert said that the money deposited at banks can be done by any small institution which receives such large amounts of capital from the state, and that Vietnam does not need a “super corporation” to undertake such simple work.

The SCIC’s finance report showed that in 2012, it received VND1.568 trillion worth of profit from bank deposits.

In order to receive interest, analysts estimated that SCIC would have deposited VND19.6 trillion (the average interest rate was 8 percent in 2012).

Meanwhile, SCIC is believed to have deposited VND10.5 trillion in banks in 2011, earning VND1.479 trillion in profits, thanks to a higher average deposit interest rate, at 14 percent per annum.

In fact, a part of SCIC’s profit is from investments in businesses. The stakes it holds in FPT Telecom (a subsidiary of the largest technology group in Vietnam), Vinamilk (dairy producer), Vinare (re-insurer) and Hau Giang Pharmacy alone bring huge profits.

However, experts believe that these enterprises operate in business fields where the state does not need to invest.

Dat Viet