HANOI,
Vietnam -- Vietnamese gold traders have sent billions of dollars worth
of high-grade gold jewellery to be smelted in Switzerland over the past
two years to circumvent government restrictions on bullion exports.
Before
2008 Vietnam exported minimal amounts of gold ornaments to Switzerland,
which dominates the global gold smelting industry, turning items from
rings to candlesticks into international standard bullion.
But
that changed over the past two years, as Vietnam became Switzerland's
biggest single source of imported gold products, much of which ended up
in the furnaces operated by leading refiners Argor-Heraeus, Metalor, MKS
Finance, and Valcambi.
Cameron
Alexander, a senior analyst at GFMS precious metals consultancy, said:
"In Vietnam, banks haven't been able to export bullion freely, so they
have made jewellery out of it so they can export it. There's a loophole
and people who need the dollars have taken advantage of it."
Last
year, Vietnam exported nearly 61 tonnes of precious metals -- mostly
gold products -- to Switzerland, generating SFr2.6 billion ($2.8
billion), according to the Swiss Federal Customs Administration. In
2009, Vietnam exported 54 tonnes, generating SFr1.9 billion, already
well up from 3.2 tonnes valued at SFr71 million in 2008. The figures do
not include bullion, which is treated as "monetary gold."
Hasan
Demir, who works in the statistics department at Swiss customs, said:
"Swiss firms enjoy an excellent reputation for smelting pure gold bars.
The high level of the gold price at the moment, reinforced by the
depreciation of the Vietnamese currency, has stimulated gold owners in
Vietnam to sell their gold."
In
recent years, gold in Vietnam has tended to trade at a premium because
of import restrictions designed to stem the flow of money out of the
Vietnamese currency, the dong.
Anxious
consumers and businesses have hoarded dollars and gold to protect
against high inflation and devaluations of the dong. Economists believe
Vietnam suffers from significant unrecorded capital flight.
The
sale of gold jewellery to Switzerland has spiked on the rare occasions
when the onshore gold price was lower than the international price,
according to Nguyen Ngoc Que Chi, chief executive of Sacombank Jewellery
Co., which is owned by a local bank, as are many other jewellery and
gold traders in Vietnam.
Many analysts say that government attempts to control Vietnam's gold market have been counterproductive.
"When
there are restrictions, people will always smuggle it in, and over the
last couple of years, we've seen a large proportion of gold coming in
unofficially through Thailand, Laos, and Cambodia, as well as pretty
healthy flows from China," said Mr Alexander.
Official
Vietnamese data show a net gold outflow of $2 billion to $3 billion per
annum over the past two years, mostly to Switzerland. But statistics
from the World Gold Council, a mining industry lobby group, suggest a
net inflow of $2 billion to $3 billion per year, according to Scott
Robertson, founding partner of Asia Markets Group, an advisory firm.
Analysts
believe this discrepancy is the result of "capital flight," with
Vietnamese people selling dong to buy gold that has been smuggled in and
does not appear in official statistics.
The
International Monetary Fund's analysis of the "errors and omissions" in
government balance of payments data suggests that last year Vietnam
suffered an unidentified outflow of $12 billion to $13 billion, around
12 per cent of GDP.
"Either
the current account deficit is understated or capital inflows are
overstated or there's been resident capital flight that isn't picked up
in the official data," said Benedict Bingham, the IMF's senior
representative in Vietnam.
"All
three probably contribute to the problem but only the last is likely to
explain such a big discrepancy. It's basically residents shifting from
dong into dollars and gold and keeping it out of the banking system."
Vietnam -- Vietnamese gold traders have sent billions of dollars worth
of high-grade gold jewellery to be smelted in Switzerland over the past
two years to circumvent government restrictions on bullion exports.
Before
2008 Vietnam exported minimal amounts of gold ornaments to Switzerland,
which dominates the global gold smelting industry, turning items from
rings to candlesticks into international standard bullion.
But
that changed over the past two years, as Vietnam became Switzerland's
biggest single source of imported gold products, much of which ended up
in the furnaces operated by leading refiners Argor-Heraeus, Metalor, MKS
Finance, and Valcambi.
Cameron
Alexander, a senior analyst at GFMS precious metals consultancy, said:
"In Vietnam, banks haven't been able to export bullion freely, so they
have made jewellery out of it so they can export it. There's a loophole
and people who need the dollars have taken advantage of it."
Last
year, Vietnam exported nearly 61 tonnes of precious metals -- mostly
gold products -- to Switzerland, generating SFr2.6 billion ($2.8
billion), according to the Swiss Federal Customs Administration. In
2009, Vietnam exported 54 tonnes, generating SFr1.9 billion, already
well up from 3.2 tonnes valued at SFr71 million in 2008. The figures do
not include bullion, which is treated as "monetary gold."
Hasan
Demir, who works in the statistics department at Swiss customs, said:
"Swiss firms enjoy an excellent reputation for smelting pure gold bars.
The high level of the gold price at the moment, reinforced by the
depreciation of the Vietnamese currency, has stimulated gold owners in
Vietnam to sell their gold."
In
recent years, gold in Vietnam has tended to trade at a premium because
of import restrictions designed to stem the flow of money out of the
Vietnamese currency, the dong.
Anxious
consumers and businesses have hoarded dollars and gold to protect
against high inflation and devaluations of the dong. Economists believe
Vietnam suffers from significant unrecorded capital flight.
The
sale of gold jewellery to Switzerland has spiked on the rare occasions
when the onshore gold price was lower than the international price,
according to Nguyen Ngoc Que Chi, chief executive of Sacombank Jewellery
Co., which is owned by a local bank, as are many other jewellery and
gold traders in Vietnam.
Many analysts say that government attempts to control Vietnam's gold market have been counterproductive.
"When
there are restrictions, people will always smuggle it in, and over the
last couple of years, we've seen a large proportion of gold coming in
unofficially through Thailand, Laos, and Cambodia, as well as pretty
healthy flows from China," said Mr Alexander.
Official
Vietnamese data show a net gold outflow of $2 billion to $3 billion per
annum over the past two years, mostly to Switzerland. But statistics
from the World Gold Council, a mining industry lobby group, suggest a
net inflow of $2 billion to $3 billion per year, according to Scott
Robertson, founding partner of Asia Markets Group, an advisory firm.
Analysts
believe this discrepancy is the result of "capital flight," with
Vietnamese people selling dong to buy gold that has been smuggled in and
does not appear in official statistics.
The
International Monetary Fund's analysis of the "errors and omissions" in
government balance of payments data suggests that last year Vietnam
suffered an unidentified outflow of $12 billion to $13 billion, around
12 per cent of GDP.
"Either
the current account deficit is understated or capital inflows are
overstated or there's been resident capital flight that isn't picked up
in the official data," said Benedict Bingham, the IMF's senior
representative in Vietnam.
"All
three probably contribute to the problem but only the last is likely to
explain such a big discrepancy. It's basically residents shifting from
dong into dollars and gold and keeping it out of the banking system."