With monopoly, someone can fish in troubled waters, others put in bad fix

Posted on October 11, 2012


One would easily make a profit of billions of dong if he obtains the license from the State Bank of Vietnam to convert non-SJC into SJC gold. The monopoly in bullion gold production would bring fat profits to some “insiders.”

The “godsend delivered by the State Bank”

Prior to September 20, the day when the State Bank decided to allow processing 13 tons of gold to put into circulation to stabilize the market, non-SJC gold products were always traded at the prices lower by several millions of dong per tael. Vang Rong Thang Long brand gold of Bao Tin Minh Chau company, for example, was 3 million dong per tael cheaper than SJC brand gold.

Non-SJC gold products have become cheaper than SJC gold since the day the State Bank announced the application of the state monopoly in bullion gold production and the decision to choose SJC brand as the national bullion gold brand.

People have been rushing to sell non-SJC gold to buy SJC gold for fear that non-SJC gold would not be accepted in the future, even though non-SJC gold is also… gold which have the quality levels as stated by the manufacturers.

Some enterprises which own non-SJC gold suddenly “received gifts from the God” when they got the permission from the State Bank to convert their gold into SJC gold.

An enterprise in Hanoi which has 5000 taels of gold in stocks got the permission from the central bank in September to process 1000 taels of gold bearing SJC brand.

It is estimated that the enterprise can make a profit of 3 million dong per tael, which means that it gets the revenue of 3 billion dong from the deal. As such, the real profit is really fat if noting that it has to pay less than 100,000 dong for every tael of gold in official expenses.

“We automatically receive a huge sum of money after deducting expenses. The gold after the conversion, though lying in stocks, is still making profit,” the director of the enterprise said.

“We are seeking the permission to convert all the remaining gold into SJC brand gold by the end of the year,” he added.

The “ask-and-grant mechanism” returns on the gold market

Observers have commented that in a market economy, the monopoly always makes enterprises suffer.

The State, which holds the monopoly in bullion gold production, has the right to assign enterprises to process SJC gold. However, the bank has never made public about the criteria it considers when deciding that these enterprises can, and those cannot process bullion gold. This means that the State has full powers to “give favor” to enterprises.

Sources have said that all the non-SJC gold brands got their “pieces of cake” when the State Bank allowed converting non-SJC gold to SJC gold on September 20. However, the “quotas” granted to enterprises were quite different.

The State Bank stated that only 13 tons of gold, or 350,000 taels has been converted into SJC brand gold, now ready to be put into the market. Of these, SJC Company was allocated the quota of 30,000 taels (it re-processed distorted gold bars), while the remaining has been divided to other enterprises and banks.

Agribank Gold Company asked for the permission to convert 60,000 kilos of AAA brand gold, but the State Bank gave the quota for 40,000 kilos, or 11,000 taels. Another enterprise in Hanoi asked 5000 taels and got 1000 taels. Meanwhile, the figures about the enterprises in the south remain a secret.

Tien Phong