Gold bullion to be produced, traded by state-appointed monopolies

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Báo Tuổi Trẻ English - 30 month(s) ago 18 readings

Gold bullion to be produced, traded by state-appointed monopolies

The production and trading of gold bars/bullion in Vietnam will only be licensed for state-appointed organizations, according to a recent decree.

gold For illustration purposes only

Only state monopolies are approved to produce gold bars, export gold and import raw material to produce gold bars, according to Government Decree No.24 on the management of gold trading activities, set to take effect on May 25, 2012.

Regarding the aforementioned provision, Nguyen Khac Quoc Bao, of the Ho Chi Minh City University of Economics, said people will be able to feel secure about the quality of state-branded gold bars.

"However, this provision will only be easier for management agencies to monitor management business, trading, import and export of gold production,” he said.

“With the monopoly of the State, competition in the gold trading activities will be eliminated. This shows the limitations of state management of physical gold ", Bao told Tuoi Tre.

The decree has also specified several conditions that the organizations and individuals must satisfy in order to obtain a permit from the State Bank of Vietnam (SBV) .

Accordingly, they must have a charter capital of at least VND100 billion with operational experience in the field of purchasing and selling gold from two years on.

As for credit institutions, they must meet three conditions, including that charter capital of at least VND3 trillion, having registered for gold trading to the central bank, and having a trading network in five provinces under central authority .

With regulations defined as above, Vu Minh Chau, general director of the Hanoi-based Bao Tin Minh Chau Jewelry Co Ltd, said that there will only be a handful of businesses and banks able to satisfy the conditions.

“This means that there will be thousands of businesses and gold shops shutting down their gold trading activities. Currently, there are some 10,000 enterprises trading gold, but most of them are very small scale in terms of capital as well as operational network," he told Tuoi Tre.

After a few dozen drafts , the final decree on the management of gold trading activities, a very important document with a strong influence on the domestic gold market, has been signed by the Prime Minister.

Accordingly, the legal ownership of gold of organizations and individuals is recognized, while the use of gold as a means of payment, as was allowed in the past, is now considered against the law.

Individuals who carry gold exceeding a quota without a permit issued by the SBV when leaving or entering the country are also considered violators. However, the SBV has yet to point out the specific quota.

SBV said it would offer information and guidance for implementation for specific contents of the decree.

Timely requirements

The State Bank has also asked 5 commercial banks empowered to trade gold, and the Saigon Jewelry Co (SJC) , Vietnam’s biggest gold trader, to give brief reports on their gold trading networks nationwide in preparation for a new plan.

Specifically, written request 1873/NHNN-QLNH was sent to Asia Commercial Bank (ACB), the Export-Import Bank of Vietnam (Eximbank), Saigon Thuong Tin Commercial Bank (Sacombank), DongA Bank (EAB) and the Vietnam Technological and Commercial Joint Stock Bank (Techcombank).

The State Bank said that the above requirements are used for the urgent deployment of gold trading networks to meet the demand for purchase and sale of gold bullion of people across the country.

Such reports must be sent to the State Bank before April 9, 2012.

The requirements of the State Bank were made concurrently with the the Prime Minister signing the decree on the management of gold trading.

Accordingly, the five banks and SJC will be the first group to participate in the decree on gold trading. The "urgency" that the State Bank mentioned in the request is intended to create a seamless transaction and avoid disruptions in the market once the decree takes effect.

They are also the groups selected by SBV for the implementation of measures to stabilize the gold market in October 2011 .

Rate hikes

Many financial institutions have started offering gold keeping service and mobilizing gold via short-term gold deposit certificate with higher rates .

Phuong Dong Bank is currently the preferred service, with dividend ratios and interest rates both staying at 1.7 percent for one- and two-month terms and 2 percent for three, six, nine and eleven-month terms, said a clerk at a Hanoi-based transaction office.

As for gold deposit certificates, the minimum gold amount is not required and premature withdrawal is not allowed. However, people should have at least one tael of gold to be kept at the banks.

Moreover, non-term interest rates would be applicable for early withdrawal.

Also, gold keeping services have been found at other lenders with dividends as high as the interest rates of gold certificates of deposit.

Some even put an end to gold mobilization via short-term certificates in order to develop this new product.

Regarding due deposit extension, such deposits will be transferred to the gold trading service, said an officer of a Hanoi-based SCB branch. This bank offers rather long terms including 12 months, 15 months and 18 months, with a highest dividend of 4.6 percent.

Similarly, like gold deposit certificates, the highest yield of gold keeping service stands at 3.7 percent with terms ranging from one month to three months at Nam A Bank. The prevailing dividend of longer terms is 1.8 percent.

Likewise, the rate stays at 2 percent-2.1 percent at Sai Gon Hanoi Bank (SHB), and 3 percent for twelve-month term and 2.95 percent for a one-month term at Dong A Bank.

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