Low-quality gold bars could flood if licensing conditions are relaxed?

Enterprises and credit institutions wishing to be licensed to produce gold bars must have charter capital of VND1,000 billion and VND50,000 billion or more, respectively. Experts have opposing views on this regulation and are seeking opinions.

Charter capital too large?

According to Article 11a of the draft Decree amending and supplementing a number of articles of Decree 24/2012 on the management of gold trading activities, enterprises wishing to be licensed to produce gold bars must have a license to trade in gold bars and a charter capital of VND 1,000 billion or more.

For credit institutions, in addition to having a business license, they need to have a charter capital of 50,000 billion VND or more.

Giving comments to the State Bank, VCCI said that the regulation requiring gold bar manufacturing enterprises to have an additional gold trading license is unreasonable because these are two different types of activities.

Production is the first step in the supply chain, while purchasing and selling are commercial activities in the circulation stage. "Combining two types of licenses into one requirement creates the phenomenon of 'licenses within licenses', increasing compliance costs and administrative procedure time for businesses," the VCCI document stated.

There are many different opinions on the draft regulation on charter capital for enterprises and credit institutions to be allowed to produce gold bars. Photo: Minh Hien

Regarding the charter capital requirement, VCCI is not clear why the regulation requires a threshold of VND1,000 billion, because according to this agency, businesses have reflected that it is too strict and is a big barrier. This could lead to a situation where only a few businesses can participate in the gold market, limiting competition and not diversifying supply sources, thereby affecting the rights and choices of the people.

Therefore, VCCI recommends that the drafting agency reconsider these regulations.

Meanwhile, sharing with VietNamNet reporter, Associate Professor Dr. Nguyen Huu Huan (Ho Chi Minh City University of Economics ), said that to produce gold bars, one must have large capital and reputation. Therefore, the regulation on charter capital for enterprises and credit institutions to produce gold bars in the draft is not too large.

Mr. Huan said that before 2012, there were many units producing gold bars and there was a situation of low quality gold and under-grade gold flooding the market, causing losses to investors. That is also the reason why only SJC is allowed to process gold bars.

“Gold bar trading will only be a ‘game’ for the ‘big guys’. Large capital is reasonable and ensures liquidity, because when selling gold bars to the market, there must be responsibility to buy them back,” said Mr. Huan.

Lawyer Nguyen Thanh Ha, Chairman of SBLaw Law Firm, also said that gold trading is a field that requires a large amount of capital and depends heavily on fluctuations in the world market. Therefore, the draft stipulates that the charter capital of VND1,000 billion for enterprises and VND50,000 billion or more for credit institutions to be allowed to produce gold bars is appropriate.

Proposal to abolish gold import and export licenses

Article 14 of the draft regulates the import of gold bars under multi-level control, including: gold import-export licenses, annual import-export limits, and import-export licenses for each time.

VCCI believes that simultaneously requiring the above-mentioned licenses will create many “sub-licenses”, increasing administrative procedures, compliance costs and causing difficulties for enterprises’ production and business activities. Therefore, this unit proposed that the drafting agency amend the procedure to simplify the procedures while still meeting management requirements.

VCCI proposes to abolish gold import and export licenses and abolish import and export licenses for each time.

The reason is that gold import licenses are only issued to gold production enterprises. Meanwhile, gold production enterprises are already licensed and strictly managed by the State Bank. Therefore, requiring an additional separate import-export license is unnecessary, in the nature of a “license within a license”, increasing unnecessary procedures and costs.

"Requiring a license for each time, while the annual limit is already controlled, is unreasonable. In the context of the gold market being volatile and strongly affected by domestic and foreign factors, waiting for a license each time can cause businesses to miss business opportunities and reduce operational flexibility," VCCI argued.

The regulation on single-license issuance can be speculated to help management agencies have information about the import-export activities of enterprises and be proactive in management.

“This can be done by requiring customs agencies to link data with the State Bank, or requiring businesses to periodically report on the implementation of import-export limits,” VCCI suggested.

In addition, this unit also requested the drafting agency to explain and clarify the regulation that enterprises are only allowed to import gold bars and raw gold from manufacturers certified by the London Gold Market Association.

According to VCCI, this regulation is a form of trade restriction, narrowing the import market, affecting the right of enterprises to choose suppliers. From there, it can increase import costs, affecting product prices and the competitiveness of enterprises.

Source: https://vietnamnet.vn/vang-mieng-chat-luong-thap-co-the-tran-ngap-neu-noi-long-dieu-kien-cap-phep-2415357.html