It is time for the central bank to loosen its control over gold imports as a shortage of gold material in the domestic market has led to adverse consequences, the Vietnam Gold Trading Association (VGTA) said.
According to the VGTA, due to the shortage of gold material sources, domestic gold prices are generally higher than global prices, leaving domestic consumers disadvantaged.
In the past two weeks, for example, the gap between domestic and global gold prices was 2.7-3 million VND per tael and sometimes even going up to 4 million VND.
The shortage of material sources also caused local producers of gold jewellery and fine art to reduce their competitiveness as they had to buy gold material at costly prices.
Besides this, the shortage also forced local jewellery makers to go to the unofficial market for gold material, which in turn would encourage gold smuggling, according to the VGTA.
According to the VGTA, since the Government issued Decree 24 on management of gold trading in 2012, which enables the central bank to directly intervene in the local gold market, the market has become stable. However, the association said the decree, which also made the central bank the only gold importer in Vietnam, was causing a lot of trouble for local gold jewellery manufacturers when they could no longer access the gold material market for import.
The central bank only allowed a few firms to import gold material under its strict supervision. Without permission, others must buy gold from unofficial markets, which encouraged gold smuggling into the country.
VGTA vice chairman and general secretary Dinh Nho Bang said that besides minimising gold smuggling, gold material imports with certain itineraries, if allowed, would help boost the domestic jewellery industry to develop and increase exports. Bang estimated that the state could have an additional foreign currency source of roughly 8.68 million USD to 17.36 million USD yearly from jewellery exports and tax.
Since there are concerns that gold material imports would put pressure on the country’s foreign exchange market, Bang also said State management agencies should not worry as domestic demand of gold material is only some 20 tonnes, worth roughly 868 million USD yearly, insignificant compared with the country’s total import value of nearly 200 billion USD.
Besides this, as the gap between domestic and global gold prices would be reduced, no one would be interested in smuggling. At that time, domestic gold prices and the USD/VND exchange rate would be pulled down, Bang said.
