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No quotas for gold imports   2009-10-28 - VietNamNet/VNE

The domestic gold price is now higher by 0.5-1 million dong per tael than the world price. However, it seems that the State Bank of Vietnam does not intend to grant quotas for gold imports.


Since June 2008, the State Bank of Vietnam has not granted any more quotas for bar gold imports, saying that Vietnam needs to ‘economise’ on foreign currencies which should be used to import more essential goods for domestic consumption.


Since then, the domestic gold price has always been higher than the world price with the price gap sometimes reaching one million per tael. Meanwhile, gold traders could not import cheaper gold to sell domestically to take profit, because they could not obtain quotas from the central bank.


In fact, the central bank once allowed gold companies to export gold in mid 2009, when the domestic price unexpectedly decreased, in order to obtain foreign currencies to cover the foreign currency shortage on the domestic market.


According to the General Statistics Office (GSO), the gold exports in March, April and May were tens times bigger than exports for the whole of  2008, which helped raise the export revenue in the first five months of the year to $2.6 billion.


Following gold exports on a massive scale, estimated at 70 tonnes, the gold supply in the domestic market has become shorter, which has pushed up domestic prices.


The gold price was $1,042/oz on October 27, 2009, which was equal to 23.2 million dong per tael after tax and expenses, and lower by 500,000 dong per tael than the market price.


Experts have warned the big gap between the world and domestic prices will lead to the increase of illegal imports across the border. That would then lead to a dollar price increase on the black market, because gold traders will collect dollars on the market to make payment for import deals.


When asked if the central bank considers allowing gold imports, an official of the bank said it is still keeping a close watch over the market.


However, analysts say in the current context, when Vietnam still has to combat the trade deficit and foreign currency supply remains short, it is not very likely that quotas for gold imports will be granted.


It is also nearly impossible to export gold at this moment, because domestic supplies are limited. The central bank did not grant quotas for gold export in the first week of October, even when the domestic gold was cheaper than world prices also because the 100,000-200,000/tael price gap was not big enough for businesses to cover expenses.


Nevertheless, Do Minh Phu, deputy chairman of the Vietnam Gold Business Association, believes the central bank still keeps a close watch over the market performance to make suitable prices. He said that if the central bank still says ‘no’ to gold import even when the price gap becomes bigger, this will lead to uncontrollable illegal imports of gold and big problems for the foreign currency market.

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