According to the State Bank, the agency will have to submit to the government A draft decree on managing the gold market, and a plan to restructure the market in a way that will not cause chaos in the market.

For example, in the first step to restructure the bar gold market, the central bank may not grant more licenses to enterprises to make bar gold any more. After that, the central bank many not allow enterprises to buy bar gold, but may still allow to sell bar gold. The period may last 18 months, during which people still can sell gold when necessary. The "transitional period" will allow the market to be stabilised, if not, people will rush to sell bar gold immediately, thereby forcing prices down and making the market chaotic.

Hearing the news, Nguyen Thanh Long, general director of the Saigon Jewellery Company SJC told Thoi Bao Kinh Te Saigon that the decree, once issued, will have big impacts on the gold market and the operation of gold companies, including SJC. Currently, SJC provides the largest volume of bar gold to the market through wholesaling and retailing. SJC is also processes gold for many other enterprises. The main income of the company comes from the two jobs. Therefore, if the company cannot make and trade bar gold any more, its operation will surely be influenced.

As for SJC, jewellery products can only bring 10 percent of the company's total revenue, while inspection and other services can bring an additional percentage of turnover.

According to Long, if the State plans to narrow the bar gold market, the company will focus on making jewellery products (it is trying to speed up the construction of the jewellery processing workshops in 2011 as previously planned), while it will also look for other business fields to invest.

However, Long said SJC is still awaiting the government decree to be issued, so that it can have more information to restructure its business.

As for Sacombank Jewellery Company SBJ, according to Nguyen Ngoc Que Chi, general director of the company, bar gold could bring more than 50 percent in the turnover of the company in 2010. The other 50 percent of revenue was brought by jewellery products and other services. This means that when the new decree takes effect, the company's operation will be badly affected.

"Our company will pay more attention to making jewellery products as the main source of income. We are investing in a processing workshop and are going to market the new jewellery product lines with many special characteristics different from the products now available in the market, so as to compete with rivals," Chi said.

"We are also considering moving to other business fields, maybe fashion, or other new business fields. However, we still hope that the State Bank will give us suitable time, so that we can contrive our business," she added.

The Phu Nhuan Jewellery Company PNJ had a turnover of 13 trillion dong in 2010 and the post tax profit of 206 billion dong, an increase of 17.3 percent over 2009. According to Nguyen Thi Cuc, deputy general director of PNJ, the gold import deals in 2010 brought more profit to the company.

In 2011, Cuc said, the company's operation will be influenced because the company will not have income from bar gold. Therefore, PNJ will seek income from jewellery products, which is also the big advantage of the company so far. The turnover and profit of the company are expected to increase by 15 percent in comparison with 2010.

Commenting on the feasibility of the decision to narrow the bar gold market, most gold companies think that the decision will have big impacts on the market, because the habit of keeping bar gold has existed for many generations.

The general director of gold company thinks that after the new decree takes effect, people will still keep gold as a habit. However, a lot of gold investors will inject money in other investment channels which have higher liquidity.

After the government announced the plan to control the gold market as a part of the Resolution No 11, the market has had weak reactions to the news. The transactions at gold shops and big trading companies have been slowing down. Most investors are still keeping the "Wait-and-see" attitude, i.e they are still awaiting further moves by the government before making decisions on purchasing or selling the precious metal.

Thoi Bao Kinh Te Saigon - March 12, 2011