The Vietnam Gold Traders Association (VGTA) has said the central bank’s gold import monopoly has driven up the local price of the yellow metal at the expense of residents and jewelry processors and exporters.

In the past few years the State Bank of Vietnam has kept a tight grip on import of gold ingots which are locally processed into bars weighing 1.2 troy ounces each and jewelry for local sale and export.

According to a review of Government Decree 24/ND-CP which VGTA sent to the SBV last Friday, the SBV’s role as the country’s only gold ingot importer/exporter and gold bar maker has caused the difference between local and international gold prices to widen.

At one point, the SJC gold price was VND5-7 million higher than the world level. In 2012, the SBV converted SJC, the nation’s then leading gold bar brand with market share of over 90%, into a national gold brand, marking the start of the central bank’s monopoly of the gold market.

Gold jewelry processors and exporters have racked up huge losses as their input prices are higher than global levels.

The high local price has sparked gold smuggling, spelling trouble for market management authorities and affecting monetary policy.

The difference between local and international gold prices has recently narrowed, said VGTA, but due mainly to a sharp surge in the global price following Brexit. Meanwhile, SJC gold has edged up slowly because of feeble domestic demand.

Businesses approved as gold jewelry makers by the SBV are banned from importing gold ingots. Thus, some of them have had to purchase gold of unknown origin on the domestic market at a price higher than the world level, pushing up production costs and disenabling them to compete with imported or smuggled jewelry.

VGTA said Decree 24 had given rise to plenty of sub-licenses and pushed up costs of enterprises. For example, an addition or change of location for gold bar trading must be approved by the central bank, which is seen as a sub-license.

Nearly five years has passed since Decree 24 came out, with the gold market basically stable now and a number of new investment and business rules going into force. Some provisions of the decree are no longer appropriate, so it is time to amend the decree to ensure the gold market will develop in a sustainable manner and operate in line with international practices.

Therefore, VGTA proposed the SBV eliminate the licensing requirements for certain activities, including import of gold ingots for jewelry manufacturing, and temporary import of gold ingots for export jewelry production.

SGT