At the seminar “Gold trading floor – A solution for market transparency and macroeconomic stability” on November 18, Vu Hung Son, Chair of the Board of Directors of Bao Tin Manh Hai Jewelry JSC and Vice Chair cum General Secretary of the Vietnam Gold Trading Association, said that for the past 13 years, gold businesses have had no administrative mechanism to access official sources of raw gold.

Because of this, enterprises have had to rely on unclear gold sources and accept risks to maintain production and supply products to the market.

According to Son, the State Bank of Vietnam has granted about 6,800 licenses for the production of gold fine art jewelry to domestic production facilities, but these enterprises are not allowed to access official raw gold sources. Therefore, their raw material is entirely unaccounted for gold, leading to legal and management risks.

Furthermore, tight regulations on anti-money laundering management are challenging gold businesses. Over the past two years, regulatory agencies have inspected and examined gold trading activities.

"I am sure that if the Law on Anti-Money Laundering is applied, 100 percent of current gold trading businesses, from the largest to the smallest, will have violations,” he said “Especially the regulations on customer identification, customer classification, or the requirement to report transactions worth VND400 million or more.”

He warned that with the regulation requiring stores to obtain buyers' Citizen ID information, if regulatory agencies detect any information mismatch, they could suspect the business of importing smuggled goods and transfer the file to the police for investigation.

After Decree 232 amended some provisions of Decree 24, a few enterprises were licensed to import gold. However, the question of how many units are licensed and whether this will solve the raw material shortage remains a big question. 

Son proposed excluding the gold fine-art jewelry sector from the list of conditional business fields in order to lower costs and increase supply.

The representative of Bao Tin Manh Hai said that in foreign countries, when gold prices rise, people can still buy gold; but in Vietnam, gold is unavailable or very difficult to buy in this case.

“In reality, businesses are not unwilling to sell gold, but each person is only allowed to buy 0.1-0.2 taels of gold. If we sell 100–200 taels to large customers, small individual customers will not be able to buy, so  people have to queue to buy gold. In that context, we have to buy gold from people who are profit-taking to have gold to sell to the other buyers," he said.

500 tons of gold from the public

Nguyen Tri Hieu, a respected economist, noted that Decree 232 was issued to create a mechanism for transparent gold market management, in line with the spirit of a market economy. 

The core point of this decree is that the State plays a management role, ending the previous mindset of state monopoly on gold import, production, and distribution.

In reality, when Decree 24 was applied, the gold market achieved certain successes thanks to the tight control of the Government and the State Bank of Vietnam. However, the conditions have changed: the market requires management but no subsidization and no monopoly.

In Vietnam, a huge amount of gold is being hoarded by the public. Hieu estimated the figure could exceed 500 tons. But mobilizing this amount of gold cannot be done in the short term, but requires a long, cautious process and market confidence.

Hieu said that hoarding physical gold at home is a great waste for the economy and an outdated habit of the Vietnamese people. 

The estimated amount of gold stored by the public is equivalent to 8 percent of the GDP, but it is not being put into production or business.

“In the long term, we must move towards a model of ‘gold securitization’, where citizens hold gold assets in the form of equivalent value certificates. But for that to happen, the most important thing is to build trust. People must believe that the certificates are absolutely safe and have real value," Hieu said.

“Can Vietnam mobilize 300–500 tons of gold from the public into the economy? Possibly, but it requires time and trust," he said. 

HIeu suggested that reducing monopolies, expanding the participation rights of businesses and banks, ensuring transparent gold circulation, and providing safe gold investment products will gradually and voluntarily bring the gold flow from the public into the national economy.

Tuan Nguyen