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The SCIC is not a publicly-owned institution, so its obligations
are to its owners: the State, and only indirectly to the public
at large. This means that the State, as owner, would want to
have a very clear understanding of the way the SCIC is governed.
But perhaps public disclosure is less relevant. However the SCIC,
as a big shareholder, should ensure that the governance of those
state enterprises is carried out in a transparent and
accountable manner, with the necessary degree of professionalism
and effectiveness. The SCIC also has the responsibility to
deliver a clear message of what the expectations of shareholders
are to all companies in their portfolio where the SCIC is on the
management board.
It is important that the leaders of the SCIC be responsible to
the National Assembly and the government. They have to fully
understand the rights, obligations and especially the targets of
the SCIC. It is necessary to develop systematic benchmarking to
help the SCIC monitor its performance regularly, in order to see
whether it has performed well and whether it can achieve its
targets. Targets here can be either financial returns or develop
new strategic industries or both! The SCIC can do both but it
should be clear how much resources to be allocated for each
target.
Mr. Dominic Scriven, Director
Dragon Capital Investment Fund
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The corporate governance of the SCIC follows a wide mandate. If
certain strategic projects require investment, then the SCIC
will be involved in the discussion about sources of funding. The
SCIC charter is not creating an independent organization whose
goal is to maximize returns. However, this does not mean that
the SCIC will not evolve into such an organization in practice.
The SCIC financial reporting and disclosure obligations follow
existing laws. These laws are adequate. The problem is not the
laws themselves, but their implementation. The Ministry of
Finance has approved auditors to facilitate the equitization
process, so it would be difficult for the SCIC to avoid similar
scrutiny. If the SCIC is to function properly, it will need to
make its financial information available to the public.
Mr Scott Cheshier, Specialist in Economics
UNDP Vietnam
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First, it is critical to transform the way the state supervises
the SCIC. The SCIC should be given specific targets - for
example, how much of a percentage increase should there be in
the value of state assets annually - and the autonomy in its
investment decisions to meet these targets. The SCIC has an
obligation to “pay dividends” to the state shareholder.
Second, it is urgent that the principle-agent problem that the
SCIC may face be resolved. In my opinion, in addition to a
market-based compensation package for the management of the SCIC,
a performance award fund must be set up to reward good
performers in the management team. It has been proven a good
strategy to retain good people and provide appropriate
incentives for them to objectively and professionally run the
SCIC and meet the ultimate goal of maximizing the state
shareholder's value.
Mr. Huynh The Du, Researcher
Fulbright Economic Teaching Program
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The governance structure of the SCIC complies with international
corporate governance practices under which transparency and
disclosure of financial information should be strictly observed
and be one of the key performance indicators. There are specific
requirements of periodical and ad-hoc financial reporting,
independent auditing, as well as for disclosure of financial
information in the SCIC charter and financial management
policies. The SCIC is the process of developing financial
operation manuals for its investment activities. Beginning 2007,
the SCIC will hire one of the “big four” international auditing
firms to ensure the transparency and objectiveness of financial
reports. The SCIC will also ask its (state-invested) companies
to apply these financial reporting requirements as the first
step toward being listed in the stock market.
Mr Le Song Lai, Deputy Director
State Capital Investment Corporation (SCIC)
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