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New gold market management mechanism to close doors to many gold traders
Once the new gold market management mechanism takes effect, only one or two enterprises capable to make bullion gold will be able to exist, while the number of bullion gold traders would be modest.
The State Bank of Vietnam has made public the draft decree on the gold market management, which says that bullion gold trading must be a kind of conditional business, and enterprises in the field must be licensed by the State Bank of Vietnam. The bank will also keep a strict control over the gold market performance and gold production, from the input materials to production and distribution.
Bullion gold producers must have the minimum chartered capital of 500 billion dong, must have sufficient material facilities and production equipment.
Especially, they must account for at least 25 percent of the bullion gold market share in the last three consecutive years. The volume of bullion gold to be put out will depend on the quotas to be granted by the State bank. The enterprises will have to follow the requirements on the gold material origin, the measure which aims to prevent the use of illegal imports.
As for bullion gold traders, enterprises must have the minimum chartered capital of 100 billion dong, have at least two years of experiences in gold trading, and have paid at least 500 million dong in tax for their gold trading activities in the last two consecutive years.
It is clear that the State Bank of Vietnam hopes to cut down the number of bullion gold producers and traders. Once the new mechanism is applied, only a few enterprises and credit institutions which have financial capability, experiences and prestige, would be able to exist on the market instead of the current 12,000 gold traders and 8 producers nowadays.
Vu Minh Chau, Director of Bao Tin Minh Chau, a big gold company, said that if referring to the suggested conditions, Bao Tin Minh Chau will have to stop producing bullion gold, because it cannot meet the strict requirements.
Also according to Chau, the requirements are so strict that only one or two gold traders and a few bullion gold traders can survive.
“It is a reasonable to cut down the number of gold producers and traders, but overly high requirements would lead to the monopoly, which is not good for the market,” Chau commented.
Not agreeing with Chau,Tran Trong Quoc Khanh, Director of the Gold Center belonging the Asia Commercial Bank ACB, said that the solutions proposed by the State Bank need to be followed strictly.
“The government’s resolution clearly stipulates that it is necessary to narrow the gold market to stabilize the macro economy. Therefore, cutting down the number of gold traders and producers is inevitable,” he said.
“Enterprises need to think carefully about whether to join the market, and they should join the market only when they have enough 500 billion dong,” he said. “Regarding the worry about the existence of monopoly, I believe that the central bank can anticipate the problem and it would have solutions to this”.
Phi Dang Minh, former Deputy Director of the Foreign Currency Management Department under the State Bank, also said that cutting down the number of gold traders and producers is a reasonable decision, because gold, by the nature, is a kind of money.
Analysts also say that the new strict requirements would both help the State control the quality and prevent from gold speculation which is believed the main culprit behind the market chaos.
High taxation planned
Not only trying to cut down the number of bullion gold traders and producers, the State Bank also plans to impose high tax on gold production and trading. The Ministry of Finance will join forces with the State Bank to set up import and export tax policies, VAT, luxury and corporate income tax policies. The central bank is also considering applying the taxes which aim to reduce the attractiveness of the bullion gold trading and speculation.
Nguyen Hoang Hai, Secretary General of the Vietnam Association of Financial Investors VAFI, thinks that it would be better to impose the VAT at 10 percent on bullion and jewelry gold trade, the tax rate being applied in many countries.
vietnamnet, TBKTVN
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