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
Business & Investment Opportunities
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