Gold has played an important role in Vietnamese life and also Vietnam’s economy for many years. Vietnam went through war, high inflation, economic instability and currency devaluation. As a result, gold has been trusted more than its own currency and also the preferred asset class for Vietnamese as well as other Asians.

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

Kim Thanh Gold Bar (1 tael* with 99.99% purity) was a famous brand in Southeast Asian before and during the Vietnam War (01/11/1955~30/04/1975) and was used as a means of exchange and a storage of value. After the Vietnam War, the Kim Thanh gold bars or Swiss bars were used as portable asset of boat people or other refugees.

After the Vietnam War, there was a period of hyperinflation which saw double digit inflation from 1975 to early 1990’s, especially in 1986 (875%). Gold was a medium of exchange and a unit of measurement. In the late 1980’s to early 1990’s, real estate, motorcycles, televisions, livestock and even agricultural products were priced and traded in gold. However, as inflation eased to a lower level in early 2000’s, gold’s functions in exchange and price measurement gradually decreased, alongside the use and exchange of Kim Thanh Gold Bar.

Currently, SJC gold bars dominate the market share in Vietnam.

History of the Gold Market since Doi Moi Policy

The development of the economy was started after Doi Moi Policy in December 1986, shifting from a centrally planned economy to a market-driven one with a socialist orientation.
The early 1990’s witnessed the first wave of Foreign Direct Investment (FDI) into Vietnam and that pushed its GDP to 8~9% by the mid 1990’s. In 1997, the currency crisis hit Asia especially Thailand and Indonesia, but damage in Vietnam was less compared to other countries as Vietnam’s financial market was not open to foreign countries. The damage in Vietnam was limited to a decrease in its GDP, down to 4% in 1999.

In the 2000’s, the FDI flowed back into Vietnam and pushed its GDP above 8% in 2005 and this was maintained above 8% for 3 years. The growth rate of FDI was 8.5% and exceeded $20bn in 2007. Those growing sentiments in Vietnam created a new found appetite for investment amongst the Vietnamese. Gold, real estate and stocks became popular asset classes for such investments.

In relation to the regulation of gold, the government abolished all administrative licensing on the management of gold trading activities in 1999, and in the following year, the state bank of Vietnam allowed credit institutions to mobilise gold in term deposits along with VN dong deposits guaranteed by gold. Besides that, gold import was also permitted from 2001 onwards.

In 2005, Vietnam’s ministry of finance reduced the import tax on gold bars from 1% down to 0.5%, and in the following year, margin trading on domestic and foreign gold was approved by the state bank.

In 2007, the Asian Commercial Bank opened leveraged gold trading facilities, and many banks followed suit and opened similar trading facilities. However, while those activities increased gold imports, it also increased trade deficit.

In June 2008, the government decided to stop the import of gold. However, that created a surge on gold prices and resulted in more parallel import of gold.

In November 2009, the government resumed the import of gold but that created a sharp increase on import figures and a sharp drop on reserves.

The Situation Now

After many years of active and free trading of gold, especially from 2008 to 2010, the State Bank of Vietnam (SBV) (which is the central bank) decided to place control measures to cool the market down since 2010, which includes the closure of more than 20 gold trading floors.

Since the Vietnamese Government issued “Decree 24” on the management of gold trading in 2012, which enables the central bank to directly intervene in the local gold market, the market has become stable. SBV thus became the sole controller of gold trading in the country. However, the rules that have been passed pushed many small gold traders out of business, and these new rules mean that, only companies with a minimum capital of 100 billion Vietnamese dong, yearly tax payments of 500 million Vietnamese dong and with branches in a minimum of three provinces will be allowed to trade gold and import gold bars. Gold traders decreased sharply from over 10,000 units then to around 2500 now.

Also, these rules pushed some credit institutions and jewelry manufacturers to close, as the rules stated that a credit institution must own a charter capital of at least 3 trillion Vietnamese dong and have registered for gold bar trading and be based in at least five provinces and centrally run cities. In order to be qualified as a gold jewelry manufacture, one must be lawfully established, possess a business registration certificate for gold jewelry making, and have necessary production facilities and equipment.

From SBV’s home page, we understand that the gold market is still under very strict controls, and there has not been much freedom to import and export gold. We also understand that 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 jewelry production, but this requires a license from the SBV, which is also required for trading gold bullion in Vietnam.

The following list of prohibited acts is extracted from the news in Society & Law, Vietnam and Legal Forum Magazine on 27 April 2012.

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

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

Decree 24 which made SBV the only gold importer in Vietnam created some issues for local gold jewelry manufacturers when they could no longer have accessible gold material for import purposes. SBV therefore gave permission to a few firms to import gold materials under their strict supervision, but yet any gold import quota has not been granted.

Despite the strict rules over gold business, there is no shortage of imported gold bars in the market as there are hidden pathway for gold with higher premium of USD 40/troy oz from Cambodia, Laos or China, and another fact is the gold retail sales’ distribution network has changed superficially on the surface, but not in its core business, and about 10,000 gold shops are still there, selling gold chi rings on the counter and gold tael bars under the counter.

Appendix

Here is the link to the current regulation as may be found on the SBV home page.

The State Bank of Vietnam
http://www.sbv.gov.vn/webcenter/portal/en/home/sbv?_afrLoop=20025036777000#!%40%40%3F_afrLoop%3D20025036777000%26centerWidth%3D80%2525%26leftWidth%3D10%2525%26rightWidth%3D10%2525%26showFooter%3Dfalse%26showHeader%3Dfalse%26_adf.ctrl-state%3D6wqhmlxut_316

Section for Forex and Gold Management
https://www.sbv.gov.vn/webcenter/portal/en/home/sbv/fagm?_afrLoop=19431732271000#!%40%40%3F_afrLoop%3D19431732271000%26centerWidth%3D80%2525%26leftWidth%3D20%2525%26rightWidth%3D0%2525%26showFooter%3Dfalse%26showHeader%3Dfalse%26_adf.ctrl-state%3D6wqhmlxut_242

The following paragraphs are extracted from the sections on Forex & Gold Management

“Gold Management
– To manage the purchase and sale, import and export of gold and foreign exchange and SBV’s plan on gold bullion production for each period and other activities related to gold as assigned by the Government; to coordinate with relevant agencies in purchasing and selling gold bullion in the domestic market, to mobilize gold from organizations and individuals in accordance with laws.

Management of Gold Trading
The legal ownership of gold by entities and individuals are acknowledged and protected in accordance with laws.

Organizations and individuals engaged in the business of gold must comply with the Government’s regulations and other relevant provisions. The SBV, on behalf of the Government, manages gold trading for the aim of developing a stable and sustainable domestic gold market.

– For the gold bullion market:
The State is the sole producer of gold bullions, the sole exporter and importer of raw gold for gold bullions production. The SBV organizes and manages the production of gold bullions; exports and import raw gold for gold bullions productions; purchases and sells gold bullions in the domestic market in accordance with Decisions of the Prime Minister.

Gold bullion trading is a conditional activity licensed by the SBV.

– For gold jewelry market:
Gold jewelry production is a conditional activity under the certificate of eligibility and qualification granted by the SBV.

Gold jewelry trading is a conditional activity without granted certificate of eligibility and qualification of the SBV.

– For the export and import of raw materials for the gold jewelry production:

+ The SBV will consider granting license of importing raw gold materials to produce gold jewelry for those enterprises including: the enterprises with the certificate of eligibility and qualification granted by the SBV; the enterprises with foreign investment; the enterprises investing in gold mining abroad and having demand for importing their mined gold.

+ The SBV will consider allowing the licensed gold mining enterprises to export the raw gold.

+ Gold trading enterprises which have signed gold jewelry processing contracts with foreign enterprises are considered by the SBV to be granted the license of temporary import of raw gold and to re-export finished products.

– The other gold trading are operations under the list of restricted goods and services. Organizations and individuals shall be eligible to operate the other types of gold trading after getting the permission from the Prime Minister and license from the SBV.

– Individuals carrying gold when entering and exiting the country:

+ Individuals who travel with passport are allowed to carry gold jewelry, ornaments. They shall not be permitted to carry gold bars and gold material (except for the settlers).

+ Individuals who travel with other travel documents are not allowed to carry raw gold, gold bullion, gold jewelery (excluding jewelry for personal use).

+ In case of settling in Vietnam: Foreign individuals who are allowed to settle in Vietnam and Vietnamese individuals who are allowed to settle in other countries are allowed to carry raw gold, gold bars, gold jewelry when entering and leaving Vietnam.

The SBV have a rights and obligations to conduct the inspection and supervision of the production of gold jewelry; gold bullion and jewelery trading; the export and import of raw gold and other gold trading.”

Unit of Gold Trading in Vietnam
10 chi (tael) = 375 grams
5 chi (tael) = 187.5 grams
2 chi (tael) = 75 grams
1 chi (tael) = 37.5 grams
½ chi (tael) = 18.75 grams

Economic Data (2015)

Population 92 MM
GDP 6.7%
GDP/P $2,036
CPI 0.6%

Export 162 USD BN
Import 166 USD BN
Foreign Reserve 34 USD BN (2014)
Foreign debt 39 USD BN (2014)

Source: FOCUSECONOMIC