SCIC wastes VN’s capital in real estate projects

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The State Audit of Vietnam has released an auditing report on the State Capital Investment Corporation, which says the government’s stake-holding representative in state-owned enterprises has made inappropriate investments in some projects that have proven inefficient. VIET NAM NEWS/cafef.vn

The State Capital Investment Corporation (SCIC) has made inappropriate investments that led to inefficient use of Vietnamese state capital, according to the State Audit of Vietnam (SAV).

According to the state audit agency, a number of projects and joint ventures, which had been set up by the SCIC and its partners last year and years before, haven’t started operations.

Among the projects and joint ventures was a building in Ho Chi Minh City’s Tan Binh district, covering an area of 5,055sqm. The land was assigned to the SCIC in November 2009 with a 50 year term and cost the firm 110.3 billion dong ($4.84 million) to obtain the land use licence.

The SCIC in the same year signed an agreement with three other partners to establish the joint venture Thang Long Investment and Services JSC to construct, manage and run the building complex.

The SCIC held a 48 per cent stake of the joint venture, which had 170 billion dong in charter capital. Its capital was guaranteed by a part of the SCIC’s land use licence on the land area.

The SCIC on July 2015 signed another agreement to use its whole land use licence as guaranteed capital in the joint venture.

The construction of the building hasn’t started as the city authorities haven’t yet confirmed the SCIC’s land use licence as a guaranteed asset at Thang Long Investment and Services JSC.

“The SCIC tried to use its land use licence as guaranteed capital in the joint venture, but it has failed to complete the procedures to transform the land use licence into the joint venture ownership,” the state auditor said in the report.

In addition, the SCIC’s 2009 agreement to use a part of its land use licence as guaranteed asset in the joint venture is ineligible as the Law of Land 2003 only mentions the transformation of the whole land use licence into a business stake, not a part of the licence, the auditor said.

“The SCIC signed an agreement in 2015 to make its ownership in the joint venture comply with regulations,” the SAV added.

Plus, the land valuation was made in September 2009 and was valid for only six months. The land area was valued at 112.8 billion dong.

But when the agreement between the SCIC and the three partners took effect in November 2011, the valuation had already expired and the stakeholders have not made another land valuation.

In May 2018, the SCIC decided to re-negotiate with other shareholders of the joint venture about its guaranteed asset. The 47 per cent stake of the joint venture has been sold.

The SCIC in 2007 invested 199 billion dong to hold a 50 per cent stake in the Financial Tower project, which was a combination between the SCIC and Bao Viet Life. In 2015, the SCIC invested 49.5 billion dong in a project with the Vietnam Broadcasting Tower Investment JSC.

According to the state auditor, the SCIC’s investment portfolio has remained inappropriate as 93.3 per cent of its earnings come from dividend payouts made by large-cap enterprises such as dairy company Vinamilk, construction firm Vinaconex and DHG Pharmaceutical JSC.

The SCIC had held the controlling stakes in those state-owned enterprises (SOE) prior to November this year when those firms were transferred from ministries and sectors to the committee on state capital management. The committee was launched in October to monitor around $5 billion worth of state assets in SOEs.

In its investment portfolio, 61 of the 122 SOEs did not earn a profit and did not make dividend payouts last year for reasons such as suffering losses or having their business licences revoked. VIETNAM NEWS/ANN