Thailand
Vietnam: Central bank studies measures to mobilize idle gold from public
The Hanoitimes – The State Bank of Vietnam (SBV) is working with other ministries and agencies to draft a project on encouraging gold holders to convert the asset into money to invest in business and production.
Under a report recently sent to the National Assembly’s deputies, SBV said that the conversion, which is a long-term process, needs consistent, synchronous and step-by-step solutions.
According to the SBV, turning idle gold into other assets will change the habit and demand of people regarding gold ownership, making gold less attractive and preventing the development of using gold as a means of payment in the economy.
It is important for people to voluntarily sell gold and switch to other assets so that they can avoid shocks, thus the country may be able to prevent a gold fever among its people, SBV noted.
Therefore, it said, besides solutions to manage the gold market, measures to stabilize macro economy, enhance the value of VND and improve the business and investment environment is the premise to limit the use of gold in the economy and gradually encourage gold holders to convert it into money for production and business.
According to SBV, commercial banks in 2001-2008 were eligible to raise capital and make loans in gold. The policy helped financial institutions raise a large amount of capital for the socio-economic development with a stable gold price level. However, as the world’s economy turned negative and unpredictable in 2008-11, gold prices suffered from massive volatility, increasing as much as 300 per cent from 2008’s average price level. As a result, gold traded in Vietnam also moved with high volatility, causing losses for both commercial banks and borrowers.
Therefore, the government decided to prohibit the mobilization of gold in 2011, which has contributed to restricting the use of gold as a popular means of payment in the economy and avoiding chaos in the market.
However, with the application of the policy, it is estimated that there are currently some 500 tons held by the local people, which would be very useful if converted into VND to invest in the economy.
Last year, Prime Minister Nguyen Xuan Phuc also required SBV to study measures to mobilize idle gold from locals to invest in business and production. At that time, some experts proposed that it was time to get rid of the policy while the USD/VND exchange rate was relatively stable and inflation was low.
To mobilize gold, banking and finance expert Can Van Luc proposed to issue gold free interest rate deposit certificates, which the holders could mortgage at banks for loans.
According to Luc, the measure was more flexible and would not increase goldenisation in the economy. He said other countries such as India had been successful in applying this measure; however, he noted that the application must be scrutinized and if it adopted, a suitable time must be chosen.
Experts affirmed that successful gold mobilization to reinvest in business and production would be beneficial, but it should have an appropriate policy as gold is quite different from money.
Gold mobilization is complicated and risky as its price depends on the global and domestic market, they said, adding careful scrutiny is required to make the mobilization effective.
Experts also agreed that the most important thing was to keep the macro economy stable and create a favorable business environment, explaining that gold and dollar holders would automatically convert it into Dong when they found profitable opportunities in a stable macro economy.
It is important for people to voluntarily sell gold and switch to other assets so that they can avoid shocks, thus the country may be able to prevent a gold fever among its people, SBV noted.
Therefore, it said, besides solutions to manage the gold market, measures to stabilize macro economy, enhance the value of VND and improve the business and investment environment is the premise to limit the use of gold in the economy and gradually encourage gold holders to convert it into money for production and business.
According to SBV, commercial banks in 2001-2008 were eligible to raise capital and make loans in gold. The policy helped financial institutions raise a large amount of capital for the socio-economic development with a stable gold price level. However, as the world’s economy turned negative and unpredictable in 2008-11, gold prices suffered from massive volatility, increasing as much as 300 per cent from 2008’s average price level. As a result, gold traded in Vietnam also moved with high volatility, causing losses for both commercial banks and borrowers.
Therefore, the government decided to prohibit the mobilization of gold in 2011, which has contributed to restricting the use of gold as a popular means of payment in the economy and avoiding chaos in the market.
However, with the application of the policy, it is estimated that there are currently some 500 tons held by the local people, which would be very useful if converted into VND to invest in the economy.
Last year, Prime Minister Nguyen Xuan Phuc also required SBV to study measures to mobilize idle gold from locals to invest in business and production. At that time, some experts proposed that it was time to get rid of the policy while the USD/VND exchange rate was relatively stable and inflation was low.
To mobilize gold, banking and finance expert Can Van Luc proposed to issue gold free interest rate deposit certificates, which the holders could mortgage at banks for loans.
According to Luc, the measure was more flexible and would not increase goldenisation in the economy. He said other countries such as India had been successful in applying this measure; however, he noted that the application must be scrutinized and if it adopted, a suitable time must be chosen.
Experts affirmed that successful gold mobilization to reinvest in business and production would be beneficial, but it should have an appropriate policy as gold is quite different from money.
Gold mobilization is complicated and risky as its price depends on the global and domestic market, they said, adding careful scrutiny is required to make the mobilization effective.
Experts also agreed that the most important thing was to keep the macro economy stable and create a favorable business environment, explaining that gold and dollar holders would automatically convert it into Dong when they found profitable opportunities in a stable macro economy.
Source: http://www.hanoitimes.vn/economy/2018/05/81E0C7B3/central-bank-studies-measures-to-mobilize-idle-gold-from-public/