Need to stop “play football and blow the whistle”
Recently, when consulting to amend Decree 24, the State Bank of Vietnam branch in Ho Chi Minh City proposed a series of suggestions, recommendations for the State Bank of Vietnam to consider, study and build policy mechanisms and regulations to limit the risk of payment for buying gold in cash. This proposal aims to prevent risks, potential risks arising in the gold business activities of businesses, gold trading units, ensuring compliance with regulations on Anti-Money Laundering.
The monopoly of SJC gold makes the price of gold stay high. Photo: Nhu Y.
In addition, the State Bank of Vietnam branch in Ho Chi Minh City also proposed to consider appropriate management mechanisms, avoiding monopolies, group interests for self-listed gold trading units.
In a discussion with the Financial Times, Mr. Nguyen The Hung, Vice Chairman of the Vietnam Gold Business Association, said that according to the current regulations on Anti-Money Laundering, organizations, individuals trading gold worth over VND 400 million must report to the State Bank. “The Government’s policy is to promote non-cash payment. I think the legal corridor is in place and gold cannot be an exceptional commodity. Therefore, the above proposal does not have much impact on the gold market,” Mr. Hung said.
According to Mr. Hung, the important issue in managing the gold market lies in the monopoly and import of gold. Previously, the Vietnam Gold Business Association had many opinions with the State Bank of Vietnam regarding the amendment of Decree 24 on this issue. At present, in the decree, the State Bank of Vietnam participates in gold business, gold production to supply to the market. Accordingly, the State Bank of Vietnam both has the monopoly of gold imports and exports, and the monopoly of SJC gold production.
“So, the State Bank of Vietnam is currently playing football and blowing the whistle at the same time. The State should only manage, not do business …,” said Mr. Hung.
Mr. Hung added that the State Bank of Vietnam cannot provide raw gold because to have gold for production, it must import gold. To import gold, it must take national foreign exchange reserves. Accordingly, the State Bank of Vietnam cannot intervene in the market by using foreign exchange to buy gold.
“The State Bank of Vietnam not allowing the import of gold is reasonable for them. Therefore, there is no source. Meanwhile, the domestic supply is in shortage, causing the price of gold to rise as it is now,” Mr. Hung said.
Mr. Hoang Van Cuong, Member of the National Assembly’s Financial and Budget Committee, said that the management agency cannot engage in gold business as it is now. In 2012, people used gold for payment, so the State Bank of Vietnam engaged in exclusive business. “I think this is a situational solution. However, now that the goldization is no longer there, there is no need for a monopoly,” Mr. Cuong said.
According to Mr. Cuong, gold trading businesses must all be equal. “It is absurd that only because of the monopoly, the price difference between SJC gold and other types of gold is over VND 10 million per tael. When there is competition, no one imposes it, the price of gold will balance. If done so, immediately the price of SJC gold will decrease to the same level as other gold,” Mr. Cuong said.
Mr. Pham Xuan Hoe, former Deputy Director of the Institute of Banking Development Strategy, said that currently, the price difference between SJC gold and gold in the world market is up to VND 18 million per tael, even reaching nearly VND 20 million per tael at times. “This is too unstable. Because this price difference affects social psychology, it can cause risks, negative effects on the safety of financial, monetary, and economic markets …”, Mr. Hoe said and that the policy on gold market management Decree 24, which was issued 12 years ago, has solved the “chaos” of the gold market at that time. Accordingly, the State Bank of Vietnam is the agency exclusively producing gold, monopolizing the import and export of gold materials for gold production, and SJC is the national gold brand.
“It must also be admitted that Decree 24 was issued very timely and has had quite good effects. Up to now, when the market has stabilized, balanced, gold is also a commodity, so the gold market needs to develop normally,” Mr. Hoe said.
