VietNamNet Bridge – The State Bank of Vietnam (SBV) does not intend to encourage people to deposit gold at commercial banks to take full advantage of the huge source of capital, but it would encourage people to sell gold to banks.
The “one-stone-kills-two-birds” solution
A solution to the gold market management has been found, which can satisfy the two most important requirements: it allows mobilizing the huge capital from the public for economic development, while it does not encourage people to keep gold, which may make the “goldenization” more serious.
Governor of the State Bank of Vietnam Nguyen Van Binh said the bank is drawing up a 3-step plan to fight against the goldenization (people tend to keep gold instead of dong for fear of the dong depreciation).
In the first stage, a legal framework on the gold market management would be set up. After that, commercial banks would be forced to stop mobilizing and lending in gold. And in the third stage, the resources from gold would be mobilized on the buy-sale basis instead of the borrowing-lending one.
Binh said that the first two steps have been fulfilled, while the central bank is entering the third stage–encouraging people to sell gold definitively instead of depositing gold.
Collaborating on this, Le Minh Hung, Deputy Governor of the State Bank of Vietnam, said the State Bank would treat gold like foreign currencies. Credit institutions won’t be able to mobilize gold, while people have to pay storage fees to banks if they leave gold at the banks.
However, analysts have warned that it would not be easy for the State to persuade people to sell gold, because Vietnamese people have the long-standing habit of hoarding gold instead of cash to preserve their assets. They would not give up the habit right now, when the national economy still shows uncertainties.
Dr Tran Du Lich, a well-known economist, said that in the immediate time, the State Bank should keep mobilizing gold deposits from the public.
“The State Bank should allow commercial banks to raise gold deposits, but it would prohibit banks to lend in gold or convert gold deposits into dong for lending,” Lich said.
Dr Cao Sy Kiem, Member of the National Advisory Council for Finance and Monetary Policies also has doubts about the feasibility of mobilizing the public’s sources by encouraging people to sell gold at this moment.
Hastiness may make plan fail completely
Economists have warned that the State Bank should not be too hasty to mobilize the gold resource from the public until it knows for sure how the huge capital should be used.
Meanwhile, others have urged the State Bank to go ahead with the plan to mobilize gold from the public. Dinh Nho Bang, Secretary General of the Vietnam Gold Business Association, while agreeing that it would be better to keep cautious with the plan, said that it would be better to linger.
“Hundreds of tons of gold is being kept among the public, which could be a huge source of capital. Why don’t we think of turning the capital into the resource for economic development?” Bang said.
Pham Do Chi, a well-known economist, thinks that the best way to deal with the mobilized gold is to mortgage the gold at foreign finance institutions for loans.
Currently, Vietnam has to borrow money from foreign sources at relatively high interest rates. Therefore, the suggested method has been described as “feasible solution”.
Compiled by C. V
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