In a somewhat ironic development, local jewelers are asking the government for tighter control over their business
A jewelry shop in Ho Chi Minh City. Many jewelry companies said they are undercut by competitors who do not care about the quality of their products.
All that glitters is not fully gold.
This is what many local jewelers are saying as they call for the government to intervene with a quality management policy that they feel is needed to protect their business and reputation in both domestic and export markets.
The jewelers are troubled by unfair, corner-cutting practices by some of their peers who they say are not paying enough attention to quality or credibility.
Cao Thi Ngoc Dung, director of Phu Nhuan Jewelry (PNJ), said she was worried whenever her firm launched new products because they could be undercut by counterfeits offered at lower prices.
Dung said competitors were "dumping" their products to win consumers and in order to do this they compromised on the quality of their products to lower production costs.
There was no national standard for jewelry that they needed to adhere to, so they are able to deceive consumers, she said.
Nguyen Van Dung, director of My Linh Ngan Jewelry, said it was easy for consumers to buy rings, chains and other jewelry with lower gold content than claimed in several jewelry shops in Vietnam.
For example, he said, 18-carat jewelry should have 75 percent gold content but jewelry sold in many shops had a lower content of the precious metal at just 65 to 68 percent, and in some cases, even 51 percent.
Along with China and India, Vietnam is among the world's largest consumers of gold and local consumers prefer 14, 18, 20, 22 and 24 carat jewelry. Typically, jewelry cannot be made with 24 carat gold. It is mixed with other substances to make it stronger. Some jewelry shops claim that their items are made with 24 carat gold when the actual content could be 23 or 22 carats.
Dung of My Linh Ngan, who is also chairman of the Saigon Jewelry Association, said it was difficult for local consumers to assess gold content in jewelry or other products because there was no state monitoring agency to protect them.
He said producing and trading in gold jewelry that was "under standard" has become an accepted practice in Vietnamese shops, and shopkeepers agree to sell jewelry despite knowing that the claims of gold content are wrong.
Typically, explained one shopkeeper, they only buy back from customers the jewelry they themselves have sold, and if the item is from another shop or source, they check the gold content before making payment.
The government should issue national standards for gold like governments in Hong Kong, the US, Malaysia, India and Singapore to protect consumers and the jewelry industry alike, Dung said.
Pham Van Tam, deputy chairman of Vietnam Gold Association, said national quality standards for gold products and jewelry would increase liquidity in the market because it would boost confidence among both consumers and shopkeepers.
As of now, jewelry products are priced lower in Vietnam than in other markets because local consumers were unwilling to pay high prices for products that they used as assets, and not for fashion purposes, said local firms.
They said lowering the gold content in jewelry allowed cheaper prices and higher profits.
Hoarding gold in the form of jewelry is sometimes preferred to gold bars and coins because they are easier to transport, one shopkeeper explained.
Such practices impacted the export market because importers would not believe in the quality of jewelry made by local firms, major jewelers and traders complain.
Vietnam exported US$900 million worth jewelry in the first five months of 2010, the Vietnam Gold Association said without releasing any comparative figures. The country shipped $2.3 billion worth of gold bars and materials last year.
About 3,000 businesses process and trade in gold products in Vietnam, employing 10,000 workers, according to the Saigon Jewelry Association.
Jewelry industry ignored
Nguyen Thanh Long, chairman of Vietnam Gold Association, said although local jewelers were developing the industry and adding value to the national economy, they did not get any support from the government.
Long said local firms were installing the latest technology to develop the industry in the domestic market and to boost exports.
Gold should be considered a commodity like any other, rather than a "currency," like US dollars, which must be controlled and put on restricted lists, he said.
The Chinese government had changed its mind to open the gold market for its businesses and the Vietnamese government should follow suit, he added.
Dung of PNJ said the gold industry created more value in a product and brought in more foreign exchange than the garment industry, so it deserved to be supported by the government.
The country's biggest gold jewelry firms earned thousands of billions of Vietnamese dong from jewelry a year, she asserted.
Late March, the government banned gold trading on exchange floors in Vietnam and imposed quotas on gold imports in a bid to control the rising trade deficit.