With great efforts Vietnam has removed gold from the payment system, but now gold can possibly return to its former role if the State Bank allows the mobilisation of gold with interests. Whether or not National Gold Transaction Office is established, it is a subject of hot discussion.
The story started when Gold Business Association recommended the State Bank to establish a National Gold Transaction Office to mobilise some 500 tonnes of gold from the people.
Resources to be exploited
The recommendation started from the fact that the Government has repeatedly asked the State Bank to mobilise the gold resources from the population for socio-economic development, and so far no solution is available.
The amount of 500 tonnes of gold owned by the people is still debatable but it is clear that Vietnamese people by tradition always keep gold in their home and gold continues to be the source of investment. The Gold Business Association believed that by July 2017 Vietnam will have no more ODA credits, shift to privileged credits and gradually to market credits of high interests. As capital demand for socio-economic development remains very big, the mobilisation of reserved gold among the people becomes urgent. The establishment of National Gold Transaction Office will help make the mobilisation of gold more efficient. Through such an office, the State can mobilise gold by gold certificates or gold bonds.
By doing so, the Association can help minimise gold transaction, reduce the import of gold by foreign currencies, prevent illegal gold transaction, and prevent cross-border illegal gold business. Meanwhile the State can increase budget revenue with taxes, supervise gold transaction and regulate monetary policy.
However, this initiative caused certain concerns that gold transaction could be counter-productive to economic goals.
Dr Nguyen Duc Do, Deputy Director, the Financial Economic Institute at the Ministry of Finance's Finance Academy, believed that the establishment of National Gold Transaction Office to mobilise gold from the people is unrealistic as it can be misused by manipulators and the people keeping their gold is to preserve their property without interest in daily change.
Therefore, to make use of the resource cannot be simply by establishing a national gold office.
Beaten track
Some people think that gold can be of some help to the economy but commercial banks must not be involved as it can “goldenise” the economy against the policy of the government. If the State mobilizes the gold and invests somewhere and cannot get it back to pay the people, the gold price will fluctuate and cause dangerous risk.
As a matter of fact, in the 2000s with high interest rate, the people increased gold reserve. The government permitted the gold mobilisation for credits, thus reducinginterest rate.
In early 2000s, the world gold price was some US$250/ounce; in 2011 it was US$1,800/ounce. Thereby in nearly 10 years, the gold price increased nearly 10 times, or 20 per cent a year. It was a great burden for certain banks to overcome in several years.
A financial expert analysed that, given gold mobilisation without interest, nobody would offer their gold in such a payment system. Dr Nguyen Duc Thanh, Director of Vietnam Institute for Economic and Policy Research (VEPR) said: “Paying interest to gold mobilisation will increase “goldenisation” which we had escaped it with greatest effort; we should not do it again.”
Mr Thanh analysed that the gold kept by the people is similar to other property. Now if gold is used as credits, the people will keep it, increasing the “goldenisation” of the economy.
In the past, when the State Bank allowed commercial banks to mobilize gold, many commercial banks became “sharks” manipulating gold trade, importing gold by foreign currencies, causing crisis in interest rates and macro-economy. The State had to organize auction to end the crisis.
So far the State Bank has not decided on the proposal of the Gold Association. In fact, the idea was initiated in 2011 and the Government has asked the State Bank to study the issue.
Le Minh
Vietnamese
