The government of HCMC has proposed the State Bank of Vietnam (SBV) establish a physical gold trading center as a measure to raise gold from the public, stabilize the bullion market and control smuggling.
The central bank should work with the Ministry of Finance and the Ministry of Industry and Trade to consider issuing rules governing the origin of gold for production of jewelry, artworks and handicrafts, the city said in a document sent to the central bank last week.
According to the document, the SBV should strengthen inspections and deal with violations of gold import rules. The agency should weigh the possibility of allowing banks to lend to jewelry, fine art and handicraft producers in an easier way.
The HCMC government said that though the bullion market has stabilized, it remains vulnerable to global market volatility and a lack of consumer confidence.
In addition, the nation has no specific rules on the origin of gold used as a feedstock by processors, making it difficult to monitor and inspect gold processing activity.
In May, the Vietnam Gold Traders Association also sent a petition to the central bank over the issue. According to the association, the nation has long been a net gold importer as gold exports have been insignificant. Therefore, an estimated 500 tons of gold is being held by the public.
The Government has several times asked the central bank to find ways to raise gold from the public to finance socio-economic development activities but nothing has been done. The Ministry of Finance said Vietnam may find it harder to access official development assistance (ODA) loans from July 2017.
Therefore, the central bank should mull a national gold exchange where the State could issue gold certificates or bonds to mobilize the yellow metal from the public.
In addition, the center will help reduce physical gold trade, do away with illegal gold transaction points and fight smuggling. Jewelry makers will be able to buy material gold at the center, instead of importing it.
Regarding credit for jewelry, fine art and handicraft companies, banks can lend to these entities but prior approval from the central bank governor must be secured on a case-by-case basis.
However, no enterprises in the sector have taken out bank loans in the past four years. The central bank has yet to give guidelines on lending conditions and procedures as well.