Late last week, when the world’s gold price fell to the deepest low so far this year, the domestic dollar price unexpectedly skyrocketed. The phenomenon has been explained by the fact that with the domestic gold price higher than the world’s price (because the State Bank of Vietnam has not granted import quotas for six months), people were prompted to collect dollars for gold smuggling.

Experts have said that the unsuitable gold import and export policy, which allows gold to be imported in large quantities on some occasions, but completely halts imports at other times, has caused big losses for the national economy.

Losing $320mil?

Currently, Vietnam still prohibits solid gold and material gold exports. It only allows inconsiderable exports of jewellery gold. Meanwhile, the State Bank of Vietnam (SBV) is managing gold imports with a quota scheme.

In the first months of the year, the inflation rate was high and the world’s gold price was at a record high, and experts said that Vietnam should limit gold imports in order to save foreign currencies. However, SBV did not do this. 

On the contrary, it granted big quotas to allow enterprises to import gold in big quantities. Before SBV decided to stop granting quotas, four months later, enterprises had imported 62 tonnes of gold worth $1.8bil. 

Vietnam surpassed China and India to become the biggest gold consumer in the world in the first five months of the year.

During that time, gold prices were between $860/oz and $1,030/oz, and Vietnamese companies imported gold at $900/oz on average. The massive imports of gold were explained by the panic of people when they saw inflation skyrocketing and the financial market falling into turmoil. A lot of people spent money to purchase gold to keep in order to preserve their assets.

However, the situation is quite different now. At 9 am on November 17, the gold price was $740/oz (it was $710/oz on November 14), which means $160/oz less than the average price at which gold was imported into Vietnam.

Experts have pointed out that the panic caused the loss of $320mil on 62 tonnes of imported gold, or 2mil oz. The sum of $320mil is equal to 530,000 tonnes of 5% broken rice for export.

Import, export activities should be liberalised

Huynh Trung Khanh, a representative of the World Gold Council in Vietnam, said that to date, only Vietnam in the ASEAN bloc still controls gold imports and exports, while other countries all allow free imports and exports. 

An open mechanism allows gold trading firms to easily deal with problems. When the world’s prices go down, enterprises push up imports, while when the world’s prices go up, enterprises can export gold to make profit. The liberalisation of the gold import and export policy would also help limit smuggling, while helping stabilise the foreign currency market.

The unsuitable gold import and export management has also caused difficulties for customers as well. Gold trading companies have been colluding with each other to keep gold prices at levels much higher than the world’s prices.

Khanh said that as inflation is not the biggest worry any longer and the supply and demand of foreign currencies is in balance, SBV should consider resuming granting quotas and slash the import tax from 1% currently to 0.5% and promulgate regulations on gold import and export liberalisation.