Singapore Bullion Market Association

Website Sponsor

Article List

Article List

Vietnam’s Gold Market

By SBMA

Published on September 25, 2017

Vietnam, a country of 93 million, is one of Asia’s fastest growing economies. In the past few decades, a shift to a mixed economy and a construction boom has contributed to rapid economic growth, though the Vietnamese government still holds a tight rein over major state sectors, including the gold market.

Background

Gold has played a historically important role in Vietnamese life and the country’s economy. In the 20th century, Vietnam experienced war, high inflation, economic instability and currency devaluation. As a result, Vietnamese gold still has the status of a physical currency to a certain extent, and it the preferred investment asset class among the population.

Before 1975, gold was used as a medium of exchange and a unit of measurement. In the 1960s, a Honda Cub motorbike was priced to 3 taels of gold, and the monthly salary of senior government official was pegged to 2 taels of gold (1 tael = 37.5 grams).

Kim Thanh was a famous refiner and bullion deader in Southeast Asia before and during the Vietnam War (1 Nov 1955 to 30 April 1975). Its gold bars (1 tael, with 99.99% purity) were used as a means of exchange and a store of value. After the Vietnam War, Kim Thanh gold bars, or Swiss bars, were portable assets for the Vietnamese boat people and other refugees.

The period after the Vietnam War was a time of hyperinflation, and double-digit inflation was common from 1975 to the early 1990s, reaching its peak in 1986 (875%). In the late 1980s to the early 1990s, real estate, motorcycles, televisions, livestock and even agricultural products were priced and traded in gold. However, as inflation eased in the early 2000s, gold’s exchange and price measurement functions gradually decreased, alongside the use and exchange of the Kim Thanh gold bar.

Currently, SJC gold bars dominate the market in Vietnam. According to Vietnam Gold Consultants Vice Chairman Mr Huynh Trung Khanh, SJC has produced 20 million gold bars to date.1

Development of the gold market since 1986

The development of the Vietnamese economy began with the introduction of Doi Moi, or “Renovation”, in December 1986. The set of economic reforms aimed at transforming Vietnam’s centrally planned economy into a market-driven one with a socialist orientation.

The early 1990s witnessed the first wave of foreign direct investment (FDI) into Vietnam, which pushed its GDP to 8-9% by the mid-1990s. In 1997, the currency crisis hit Asia hard, particularly Thailand and Indonesia. Vietnam suffered less than its neighbours as the country’s financial market was not open to foreign countries. The damage in Vietnam was limited to a 4% fall in GDP in 1999.

In the 2000s, FDI flowed back into Vietnam. This pushed GDP growth above 8% in 2005, a level that was maintained for three years, while FDI grew by 8.5%, exceeding US$20 billion in 2007. Economic growth created a new-found appetite for investment among the Vietnamese. Gold, real estate and stocks became popular asset classes for investments.

In relation to the regulation of gold, the government abolished all administrative licensing for the management of gold trading activities in 1999, and the following year, the State Bank of Vietnam, the country’s central bank, allowed credit institutions to mobilise gold in term deposits along with Vietnamese dong deposits guaranteed by gold. Besides that, the import of gold was permitted in 2001.

In 2005, the Finance Ministry reduced the import tax on gold bars from 1% to 0.5%, and the following year, the Central Bank approved margin trading on domestic and foreign gold.

In 2007, the Asian Commercial Bank opened leveraged gold trading facilities, and many banks followed suit in opening similar trading facilities. However, while this increased gold imports, it also increased the country’s trade deficit.

In June 2008, the government decided to stop the import of gold. However, this created a surge in gold prices and resulted in more parallel imports. In November 2009, the government resumed gold imports, which resulted in a sharp drop in reserves.

The gold market today

After years of active and free trading, particularly from 2008 to 2010, the central bank decided to take actions to cool the gold market. It issued control measures, which included the closure of more than 20 gold trading floors.

The market has been stable since the Vietnamese government issued a decree in 2012 to enable the central bank to directly intervene in the gold market, effectively making the State Bank of Vietnam the sole controller of gold trading in the country. The new rules meant that only companies with a minimum capital of 100 billion Vietnamese dong, annual tax payments of 500 million dong, and branches in a minimum of three provinces would be allowed to trade gold and import gold bars. However, this put many small gold traders out of business. The number of gold traders fell from over 10,000 to around 2,500.

Some credit institutions and jewellery manufacturers had to close as a result of the new rules, which stated that a credit institution must have a charter capital of at least 3 trillion dong, be registered for gold bar trading, and be based in at least five provinces and municipalities. In order to qualify as a gold jewellery manufacturer, the company must be lawfully established, possess a business registration certificate to make gold jewellery, and have the necessary production facilities and equipment.

According to information found at the State Bank of Vietnam website, the gold market is still tightly controlled, and there is not much freedom to import and export gold.1 The Vietnamese government is solely authorised to produce gold bullion, and it is also the only entity authorised to import and export raw gold for bullion production. Companies can import raw materials used in gold jewellery production, but this requires a license from the central bank, which is also required for trading gold bullion in Vietnam.

The following list of prohibited acts was published in Vietnam Law & Legal Forum magazine on 27 April 2012:

Prohibited acts in gold trading under Decree No. 24/2012/ND-CP of April 3, 2012

  1. Producing gold jewellery and art craft without a certificate of business legibility granted by the State Bank;
  2. Trading in gold bars; or importing or exporting gold material without a State Bank license;
  3. Individuals bringing gold upon entry or exit in excess of prescribed limit without a State Bank license;
  4. Using gold as a means of payment;
  5. Producing gold bars in contravention of this Decree;
  6. Engaged in other gold trading activities without the Prime Minister’s permission and a State Bank license;
  7. Violating this Decree and other related laws.

The decree created problems for local gold jewellery manufacturers as they could no longer import gold. The central bank later permitted a few firms to import gold materials under their strict supervision, but as yet no gold import quota has been granted.

Despite the strict rules governing the gold trade, there is no shortage of imported gold bars in the market as there is a “healthy underground market” for gold from Cambodia, Laos and China, with a higher premium of US$40/troy oz. Additionally, while the gold retail distribution network has changed superficially on the surface, the core business remains strong – 10,000 gold shops operate in the country, selling gold chi rings over the counter and gold tael bars under the counter.

Summary

On the surface, the gold market in Vietnam is highly regulated, with the State Bank of Vietnam controlling nearly all aspects of gold trading and manufacturing. However, the market is still strong, with a physical demand of 85 tonnes of gold per year, and a potential Gold Mobilisation Plan of 500 tonnes minimum in the pipeline. Additionally, the future Vietnam Gold Exchange has a large trading potential, seeing that daily margin trading volume already reached 2 million ounces in 2008.2

Sample SJC bars

Sample SBC bar

Sample SJC bars

Note: the bar comes as a set containing three bars – two 15 gram bars and one 7.5 gram bar.

Economic data (2015)

Population: 92 million
GDP Growth: 6.7%
GDP/P: US$2,036
CPI: 0.6%
Exports: US$162 billion
Imports: US$166 billion
Foreign Reserves: US$34 billion
Foreign Debt: US$39 billion

Units of gold trading in Vietnam

10 chi = 37.5 grams = 1 tael
5 chi = 18.8 grams
2 chi = 7.5 grams
1 chi = 3.8 grams
½ chi = 1.9 grams

Source: FocusEconomics

Notes

  1. Current regulation on gold can be found at the State Bank of Vietnam website (www.sbv.gov.vn/webcenter/portal/en.home)
  2. http://asiapacificpmc.com/presentation/10_khanh.pdf
NEXT ARTICLE
BACK TO INDEX

SECRETARIAT SBMA-Emily-Oh

Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

SECRETARIAT SBMA Clara-Chang

Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

SBMA Committee-Photo-john-levin

Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

SBMA Secretariat-Fabian-Lew

Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

SBMA-margare-secretariat

Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

SBMA-Albert-secretariat

Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

SBMA-Shaokai-Fan

Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

SBMA-Committee-Alan-Liew

Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

SBMA-Committee-Nikos

Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

SBMA-Committee-khun nuttapong

Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

SBMA Committee-Photo-Raman-Walia

Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

SBMA Committee-Photo-Andrew-Clarke

Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

SBMA Committee-Photo-Kazuya-Naoki

Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

SBMA Committee-Photo-Vinh-Nguyen

Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

SBMA Committee-KL-Yap

Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.