File photo dated last year shows a man putting gold into a molding machine at the Sacombank gold bar factory in
Ho Chi Minh City
. All gold bar producers, except SJC, are expected to completely stop bullion production.
Huge losses and unemployment for hundreds of workers loom as gold bullion producers prepare to deal with the central bank's announcement that it would take over the production of gold bars.
Although the decision is yet to take effect, its impacts have already been felt by gold firms.
Late last month, State Bank of Vietnam Governor Nguyen Van Binh said that Saigon Jewelry Co., the country's largest gold trader, would soon operate under the direct management of the central bank. Its brand, SJC, would become a national asset and may later be changed to SBV.
The governor said the move aims to enable more effective control of the domestic market.
"This is a good move by the central bank, helping avoid the monopoly of any gold company," said Le Tham Duong from the Ho Chi Minh City Banking University.
"It will also enable the State Bank to quickly intervene in the market when it sees big price fluctuations, and effectively monitor the quality of gold bullion."
Nguyen Thanh Truc, general director of Agribank Gold Corp., said the central bank's decision is rational, as the state monopoly would help moderate the market better, and reduce speculation and price manipulation.
However, the change should be made as soon as possible, because a long transition period could see SJC make enormous gains, given the uncertainty surrounding other firms in the market, he said.
SJC now holds up to 90 percent of the market share.
Some gold bullion producers such as Agribank Gold and Sacombank Jewelry Company said they have stopped processing gold bullion, under an order from the central bank.
The head of one gold firm said the State Bank's decision would create a monopoly for SJC gold bullion and eliminate other gold brand names, causing huge losses.
Truc of Agribank Gold Corp. said suspending the processing would heavily damage his firm.
Many of his company's machines for processing gold bullion have only been in operation for a few years, and one, valued at thousands of US dollars, was imported recently. It has been mothballed without being used even once.
"It would cause a big waste in terms of investment in gold bullion processing facilities, as well as the branding," he said.
Truc also said dozens of his firm's employees involved in gold bullion processing now face unemployment. "We are looking at ways to deal with each case. We may send them to learn other work in order to offer them suitable jobs."
Other gold bullion processors are dealing with similar difficulties.
Vu Minh Chau, general director of Hanoi-based Bao Tin Minh Chau, said his company has invested VND30-40 billion (US$1.4-1.9 million) in importing machinery, building workshops, and training workers.
"If we have to stop producing gold bars, our losses will be huge. Hundreds of our employees may lose their jobs," he said.
Chau said although the draft decree has yet to take effect, his firm's business has been adversely affected. Many consumers mistakenly believe that only gold bars of SJC are allowed for circulation in the market, so they have been scrambling to sell off products of all other brands.
Bao Tin Minh Chau's customers, over the past few days, have been mainly sellers, so the company has had to lower its prices to boost sales while trying to reduce divestments.
Despite the price plunge, gold transactions remained low, with sellers still outnumbering buyers, said Chau. "Our turnover in recent days has been down 50 percent."
To minimize the losses of gold bullion processors, the central bank should allow them to make use of their machinery to produce gold for the SJC brand, Chau said.
However, some experts said such a proposal may not be feasible, as it would be difficult for the central bank to closely monitor the outsourcing.
Chau said the central bank could also purchase production facilities of gold companies, which could make it easier for it to monitor the quality and quantity of gold bullion.
Some gold processors said they may focus more on producing and trading in gold jewelry. However, to do this, the firms need to spend more money on renting shops, training employees, and buying machines and equipment, Chau said.
"The business would not bring profits as big the trade in gold bullion. Meanwhile, workers would have to spend a long time getting acquainted with new jobs," he said.
According to some experts, tightening control over gold production would not be enough to stabilize the market.
It's also necessary to find ways to narrow the gap between domestic and international gold prices, and to put individual gold holdings to good use, they said.
The local price of gold tends to trade at a premium to the international price. Gold prices in the domestic market sunk to below VND44 million per tael on Thursday morning, the lowest level since late October. The gap between domestic and global prices widened to some VND3 million a tael. One tael is equal to 1.2 ounces of gold.