Having established its bona-fides in restructuring and reforming SOEs, the State Capital Investment Corporation now seeks its own reform to become a government investment fund.

After nearly two decades of development, the State Capital Investment Corporation
(SCIC) has reinforced its position as a key player in restructuring and reforming
State-owned enterprises (SOEs). Though its initial role centered on receiving State
ownership rights, in recent years the SCIC has gradually emerged as a financial
investor, particularly during periods of economic volatility.

As Vietnam’s economy set its sights on double-digit growth in the years
to come, transforming the SCIC’s operating model has become increasingly urgent.
Beyond its traditional mandate of receiving and divesting State capital, the SCIC
has proposed converting into a government investment fund modeled, after Singapore’s
Temasek Holdings, to direct capital flows and accelerate strategic industries.

Big expectations, limited firepower

The SCIC’s more than VND14 trillion ($538 million) investment in Vietnam
Airlines stands out as a recent example of its impact. According to Mr. Dinh Viet
Tung, Deputy General Director of the SCIC, the decision was not simply a bailout
but a strategic move that helped the national flag carrier weather the worst of
the Covid-19 pandemic. By 2024-2025, it had indeed rebounded strongly and
posted impressive financial results.

The deal demonstrated the SCIC’s potential to act as a market stabilizer,
support key enterprises, and stimulate economic growth – core functions of government
investment funds globally. Yet, at a broader level, the SCIC’s size and influence
still fell short of the potential and resources available within the State-owned
sector.

Mr. Tung openly acknowledged several constraints preventing the Corporation
from becoming a large-scale strategic investor. First, its capital base remains
modest. The total asset value of SOEs stands at around VND4,200 trillion ($161.5
billion), with equity of VND1,800-1,900 trillion ($69.2-73.1 billion). By contrast,
the SCIC has managed only some VND70 trillion ($2.7 billion), equivalent to roughly
2 per cent of total State capital in enterprises.

This gap has deprived it of the scale needed to undertake national strategic
investment projects or major international MA deals. While Temasek managed
more than $300 billion and Malaysia’s Khazanah held $33 billion, the SCIC’s resources
were far too small to generate any meaningful macro-economic impact.

Second, mechanisms for receiving and divesting capital have remained inadequate.
The SCIC’s portfolio continued to shrink because of ongoing divestments, while plans
to transfer new enterprises were slow and unclear. The divestment mechanism itself
was rigid, limiting the SCIC’s ability to time sales according to market conditions
to maximize returns.

Third, financial and personnel mechanisms failed to create strong incentives.
Though the SCIC functioned as a financial investor, Mr. Tung noted that it remained
constrained by administrative regulations. Investment performance was still evaluated
annually rather than on three to five-year cycles, as is the case in international
practice. Meanwhile, compensation remained insufficient to attract top asset managers
and financial specialists from the private sector or overseas.

Unlocking structural bottlenecks

To address those limitations, the SCIC studied and proposed transitioning
to a government investment fund modeled after Temasek, as its success offered several
lessons applicable to Vietnam.

First, separating management from ownership. Temasek operates as a commercial
entity that does not face administrative intervention in investment decisions. The
Singaporean Government sets long-term objectives but does not dictate day-to-day
management – a direction the SCIC hopes to emulate.

Second, a strict adherence to market principles. Temasek did not seek special
privileges for its portfolio companies and operated entirely on market mechanisms,
contributing to its long-term annual returns of 14-15 per cent.

Mr. Adrian Chung, Director of Institutional Relations at Temasek, said that
allowing proactive corporate governance was key to its performance. Beyond holding
capital, Temasek actively supported restructuring, business separation, as seen
with Sembcorp and Keppel, and digital transformation efforts, including AI adoption.
“We did not involve ourselves in day-to-day operations, but we cared about final
outcomes,” he said. “We contributed to strategy, supported business model transformation,
and provided financial resources for sustainable growth.”

Adding to the discussion, Mr. Andrea Campagnoli, founding Partner of Bain
Company Vietnam, noted that modern government investment funds operate under
a “hybrid” model – neither solely profit-driven nor purely tasked with political
mandates. Instead, they serve as bridges between national policy and international
capital. “Foreign capital seeks a reliable guide when entering emerging markets,”
he explained.

He added that the SCIC needed to become a partner capable of negotiating,
speaking the language of international investment and ensuring transparent governance
so investors felt secure deploying capital into long-term infrastructure and technology
projects in Vietnam.

Roadmap for transformation

The SCIC has prepared a proposal for the Ministry of Finance and the government
outlining specific recommendations to elevate its operations.

First, regarding capital and scale, it proposed classifying SOEs into four
groups and transferring all Group 4 (commercial enterprises) to its control. This
would consolidate management and prevent resource fragmentation. The SCIC also requested
approval to retain maximum after-tax profits to reinvest and build sufficient scale
for national strategic projects.

Second, on institutional and operational mechanisms, it sought greater autonomy
in investment decisions: the ability to time and price divestments based on market
conditions; permission to launch venture funds for innovation, AI, and semiconductors;
and the adoption of portfolio-level, long-term performance evaluations.

Third, regarding personnel, the SCIC recommended autonomy to design competitive
compensation aligned with financial market standards. It also proposed adding independent
members from the private sector and international experts to its Members’ Council
and Investment Committees.

Regarding the implementation timeline, Mr. Tung noted a two-phase plan.
“With the proposed solutions and roadmap, the SCIC hoped the government investment
fund model it was targeting would operate more effectively,” he said.

Specifically, for Phase 1 (2026-2028), the SCIC would continue capital transfers
and divestments under existing plans while shifting more aggressively towards investment
activities. It would pilot new mechanisms for performance evaluation, personnel
systems, and legal and technological frameworks.

For Phase 2 (2028-2030), the focus will be on the full operation as a government
investment fund. It would operate under a dedicated legal framework, expand investments
abroad, establish sub-funds and venture funds, and direct capital into core technologies
and strategic infrastructure.

Quotes

Mr. Cao Anh Tuan, Deputy Minister
of Finance

After nearly 20 years of operations,
the SCIC has established itself as an effective representative of State capital
ownership. Between 2014 and 2025, it received 120 enterprises with total State capital
of nearly VND25 trillion ($961.5 million) and completed divestments at 396 enterprises,
collecting nearly VND48 trillion ($1.85 billion), or 4.4-times the original capital.

Beyond preserving State assets, the SCIC
also proactively invested more than VND55 trillion ($2.11 billion) in critical sectors
such as energy, infrastructure, and finance. These results demonstrated the advantages
of a centralized, professional capital management model compared with previous administrative
structures.

However, to meet development requirements
in the new era, the SCIC needs to continue innovating and strengthening its capabilities.
The government and the Ministry of Finance have orienting the Corporation towards
becoming a government investment fund, drawing on successful international models
such as Temasek in Singapore and Khazanah in Malaysia. The goal was to build a financial
institution strong enough to lead, connect, and stimulate the development of other
economic sectors, consistent with the State sector strategy currently directed by
the Politburo.

In the time to come, the Ministry of
Finance will lead the drafting of a decree on a specialized operational mechanism
for enterprises engaged in capital investment and management, with the SCIC at the
core. This aims to create a more enabling legal framework, enhance autonomy and
transparency, and allow the SCIC to maximize its resources.

Mr. Nguyen Chi Thanh, Chairman
of the Board of Members at the State Capital Investment Corporation

The value of the SCIC does not lie only
in our financial statements but also in the responsibility we shoulder for major
political and economic mandates. In recent years, we directly took part in four
nationally-significant projects under the Politburo’s direction: rescuing Vietnam
Airlines during the pandemic, resolving longstanding issues at the TISCO 2 and VTM
steel projects, and making a strategic investment in Vung Ang Port to provide Laos
with access to the sea. These transactions reaffirmed our role as an effective macro-economic
policy instrument.

While Temasek needed 34 years (1974-2008)
to complete its portfolio restructuring, we required only 19 years to streamline
our portfolio from 1,000 enterprises to roughly 100. This pace shows that we have
essentially fulfilled our initial “mission” and are now at a pivotal moment to transform
into a truly professional investment organization.

However, to make this leap possible,
we believe several core reforms are essential to remove existing barriers. On governance
and institutional design, the SCIC needs to be stabilized under the government investment
fund model after nearly two decades of operations, and our long-term development
strategy for 2030-2035 should be codified in legal documents. More importantly,
the State should grant us the autonomy to make commercial decisions according to
market principles and reduce administrative intervention.

The most pressing challenge for us is
resources. Though we are the national capital management corporation, we have been
assigned only some 2 per cent of total State capital in enterprises. The fastest
way to increase our scale is to transfer major existing State groups, such as Vietnam
Airlines, Song Da, and Vinaconex, to us rather than creating new entities for investment.

At the same time, we need a dedicated
financial mechanism that allows us to retain all after-tax profits and proceeds
from divestments for reinvestment. Current regulations permit us to allocate only
up to 30 per cent of profits to our development fund, which significantly constrains
our ability to operate and prevents us from building the financial capacity required
to play the role of a leading investor in the economy.

Dr. Can Van Luc, Chief Economist
at BIDV and Member of the Prime Minister’s Policy Advisory Council

The SCIC has operated fairly effectively
in recent years, but its results still do not match its potential and a stronger
breakthrough is needed. The biggest “bottleneck” we have faced does not lie only
within the SCIC itself; it stems largely from the very slow pace at which ministries
and local authorities transfer capital. Though the SCIC has achieved an impressive
return on equity of 13 per cent – on par with major funds such as Temasek – its
governance model still needs modernization to ensure long-term sustainability.

To address these shortcomings, I believe
the key lesson from international experience is that transforming the SCIC into
a government-affiliated fund requires a solid legal foundation and a high degree
of financial autonomy. The SCIC should diversify its resources through five capital
channels – the State budget, natural resources, investment dividends, divestment
and equitization proceeds, and retained earnings – with particular emphasis on establishing
a mechanism that allows us to retain profit above plan for reinvestment.

Strategically, the SCIC’s management
mindset must shift decisively from rigid capital preservation in short-term, project-level
decisions to medium and long-term preservation and growth across the entire portfolio.

My recommendation is that 80 per cent
of resources be allocated to domestic infrastructure and 20 per cent to overseas
investments to access technology. Starting now, the SCIC must begin this transformation
so that by its 20th anniversary, on August 1, 2026, we can unveil a new model that
operates with the mindset of a true investor, backed by the necessary financial
and human resources to ensure State capital truly generates growth and leads foreign
capital inflows.

Dr. Nguyen Dinh Cung, former
Director of the Central Institute for Economic Management (CIEM)

State-owned enterprise (SOE) reform in
recent years has seen positive progress as the government narrows scattered investments,
concentrates resources on key sectors, and largely achieves the objective of preserving
capital. However, these successes are only early steps and have not addressed the
most fundamental bottleneck: the mindset of governance.

Though Vietnam has attempted to separate
the three powers – business operations, State ownership, and State management –
in practice, the system continues to operate under a heavy “administrative command”
mindset. As a result, we find ourselves stuck in a paradox: wanting to develop a
market economy while managing capital flows and enterprises through rigid administrative
tools instead of the mindset of a professional investor.

This governance mindset has led to widespread
passivity across the system. Every stage, from equitization and valuation to capital
transfers, is overly procedural, turning the goal of “capital preservation” into
a defensive, conservative and short-term approach. Therefore, the key to “unlocking”
the SCIC and the broader SOE sector is a decisive shift from an “administrative
supervisory” mindset to the position of a “professional owner and strategic investor.”

To realize this vision, Vietnam requires
a breakthrough institutional solution – abandoning the mindset of “requesting” ad-hoc
special mechanisms. A national investment institution of the SCIC’s stature should
not remain in a position of seeking fragmented exemptions.

Instead, its mandate and instruments
need to be formally codified through a new law – the Law on State Capital Investment
– to replace current management-oriented legislation. Such a law must embody a shift
from a focus on “control and supervision” to one on “development and value creation.”
It should include a dedicated chapter on the SCIC, establishing its clear legal
status as the national representative owner of invested State capital and operating
in line with international standards.

VET-Ngan Ha