Together with the general Vietnamese preference of keeping gold as a means of reserve to hedge against inflation and risks, the monopolies cause an unbalance of supply and demand in the gold market, causing domestic gold prices to differ widely from world prices.
Vietnam should consider removing the monopolies in gold imports and production to ensure the transparency, efficiency, and sustainability of the gold market.
National Assembly Deputy Hoàng Văn Cường said at the forum about solutions to promote the safe and sustainable development of the gold market held by the Vietnam Government Portal on Thursday, that since the issuance of Decree 24 more than 10 years ago which was meant to fight back ‘goldisation’, things have changed dramatically, leaving the decade-old decree outdated.
Under the decree, the State Bank of Vietnam (SBV) has a monopoly on gold production and import, while Saigon Jewelry Company (SJC) was the sole maker of SJC-branded bullion.
Together with the general Vietnamese preference of keeping gold as a means of reserve to hedge against inflation and risks, the monopolies cause an unbalance of supply and demand in the gold market, causing domestic gold prices to differ widely from world prices.
At some points, the price gap was up to VNĐ20 million a tael, which was unreasonable, Cường said.
With huge gaps in domestic and world gold prices, smuggling for profit increases, which makes it difficult to manage the gold market, causes loss to budget, and poses risks to exchange rates. Speculation and manipulation are also distorting the domestic gold market, he said.
There is also no equality between gold bars and SJC-branded bullion which was guaranteed by the Government and often has higher prices, although the purities are the same.
It’s time to amend Decree 24/2012/NĐ-CP on gold trading, Cường said.
The monopoly of SJC-branded gold bars is no longer necessary, he said, adding that gold should be considered a normal product.
In addition, more enterprises should be allowed to produce gold bars to improve supply and change the general psychology of hedging SJC.
Importantly, the domestic gold market should be linked to the world market, including removing the State monopoly on imports but still regulating at appropriate levels to ensure a balance of foreign currencies and manage exchange rates, he said.
The gold trading market should be developed with diversification in methods rather than physical gold, such as gold derivatives and certificates, which would help ensure flexibility in management and prevent the hoarding of physical gold in safes.
“It’s time Vietnam developed radical solutions and made bold changes in management to promote the transparent development of the gold market. The equality of physical gold and the removal of SJC-branded bullion’s monopoly should be considered.”
“Gold should be considered a normal product. The State will still have to manage the gold market, but differently,” he stressed.
Nguyễn Thế Hùng, Deputy President of the Vietnam Gold Trading Association, said that in major economies, central banks do not manage gold trading directly, as gold is considered a normal product.
Economist Trần Thọ Đạt said that it is necessary to have solutions to unleash the huge volume of physical gold kept in safes of residents, which is estimated to total around 400 tonnes.
The jewelry gold market has high potential, Đạt said, adding that policies should be raised to promote this market, including reducing the import tax rate on material gold from currently one percent to zero.
He cited statistics that Vietnam exports around US$2 billion worth of jewelry gold, modest compared to the $8-10 billion export values of other countries in the region.
At a conference to implement 2024 tasks early this month, the SBV said that it will propose the Government replace the outdated Decree 24.
As gold prices skyrocketed to a peak of VNĐJe80.35 million a tael last month, Prime Minister Phạm Minh Chính on December 27 sent an official dispatch asking the central bank to take measures to manage the gold market to prevent ‘goldisation’ and negative impacts on exchange rates, interest rates, monetary markets and foreign currency market, as well as ensuring national financial and monetary security.
(VNS)