The state’s monopoly on gold bullion production exclusively under the Saigon Jewelry Company (SJC) brand has fostered a public preference for holding SJC bullion. As a result, whenever gold prices fluctuate, SJC bullion shortages amplify market fluctuations.

The State Bank of Vietnam’s (SBV) report on Government Decree No24 on gold trading management found that the exclusive mechanism for producing gold bullion and exporting and importing raw materials for gold production has revealed problems. 

Reliance on Saigon Jewelry Company (SJC), with outdated technology and equipment, has posed challenges for SBV in managing the SJC gold bullion supply when and if large-scale market interventions are necessary.

With an exclusive role in SJC gold bullion production, SBV holds the only official supply source. Thus, when supply shortages occur, the agency must make direct intervention to stabilize the market by using foreign currency from the exchange rate stabilization fund to import gold, process it into bullion, and sell it to the market.

The gold bullion distribution system is mostly controlled by private enterprises.

The market also sees high-purity (99.99 percent) gold jewelry products, such as Phuc Long Gold or Kim Giap by DOJI, used for investment and accumulation like gold bullion. These products are priced similarly to SJC gold bullion and can be exchanged for it.

Through inspections, the SBV has detected cases of purchasing gold raw materials of unclear origin to produce high-purity (99.99 percent) gold jewelry used as investment-grade gold, akin to bullion, with prices equivalent to SJC bullion. 

This has occurred amid continuously rising global gold prices and a significant price gap between SJC bullion and global gold prices.

SBV attributes this to global gold price fluctuations, with rising trends and less attractive alternative investment channels, increasing gold speculation and hoarding by individuals and enterprises.

Gold is not listed as a price-stabilized commodity, while foreign currency is prioritized for more essential purposes. Consequently, in the 2014-2023 period, SBV did not supply additional gold bullion to the market.

Additionally, some provisions in Decree No 24 have become outdated, and state management regulations for gold trading are inconsistent.

Purchasing gold bullion is considered an investment, yet individual gold bullion transactions are not taxed. There is no distinction in tax policies between gold bullion and gold jewelry, complicating efforts to combat the “goldenization” in the economy.

Ending monopoly, issuing licenses with quotas

To address these issues, SBV has proposed amending Decree No24 to eliminate the state monopoly on producing, exporting, and importing raw materials for gold bullion production.

Instead, gold bullion production would become a conditional business activity requiring SBV licensing. The mechanism would shift from a production monopoly to a licensing system.

Under the new proposal, credit institutions and enterprises with sufficient financial capacity and legal compliance would be licensed to produce gold bullion. The regulator would adopt a system of annual quotas and per-instance import/export licenses for gold bullion and raw materials. 

Under the proposal, enterprises producing gold jewelry would have to issue electronic invoices for raw gold purchased from credit institutions, maintain full records, and connect data with regulators.

Credit institutions and enterprises producing gold bullion would be required to ensure transparency in the origin of imported gold, establish and report internal processes to the SBV, and take full legal responsibility for the quality of gold bullion and imported raw materials.

SBV also proposed abolishing its role in organizing raw material gold exports and imports for bullion production, fully eliminating the state monopoly on raw material gold exports.

To be licensed for gold bullion production, enterprises would have to meet specific conditions, such as a minimum charter capital of VND1,000 billion.

Nguyen Quang Huy from Nguyen Trai University said the SBV’s decision to eliminate the monopoly on gold bullion production and raw gold import-export for bullion production can be seen as a historic milestone, ushering in a new development phase for Vietnam’s gold market.

This will make the gold market more open, competitive, and integrated, but it also raises new demands for risk management, quality, and market sentiment.

Huy believes Vietnam’s gold bullion market will gradually see new brands produced by commercial banks or large enterprises meeting SBV standards, ending SJC’s exclusive dominance.

Manh Ha