Chapter 1 - Introduction

Gold has played an extremely important role in Vietnamese society. Besides its standing during cultural events and weddings, it has been a key store of value for the Vietnamese public during various crisis. For about 150 years, Vietnam was under colonial rule, during which time gold was often used as a currency, as the public did not want to save using the local currency because of fear of the colonial government. Post-independence, Vietnam witnessed two decades of bloody war; during which the country witnessed extreme poverty, hyperinflation, and a run on the currency. This encouraged some sections of the population to once again have more faith in gold than the Vietnamese Dong (VND), during which time it became quite common for gold to be used as a medium of exchange. The fact that the VND is not freely convertible has also encouraged investors to utilise gold. As one example, during this time a range of assets, including vehicles and houses were bought with gold.

Ultimately, the Vietnamese gold market can be divided into three phases: pre-liberalisation, 1988-2012 and from 2013 onwards when Decree 24 has been in place. During the first phase, which lasted from 1945-1987, the government maintained a tight hold over the gold market, including import restrictions and control over its sale domestically. Post-war, as hyper inflation took hold, the VND collapsed, and so gold remained a key form of exchange until the government introduced Doi Moi, or renovation (liberalising the economy), in December 1986. This time was marked by a series of economic reforms, which helped position the Vietnamese economy as market-driven, but framed with socialist principles.

These reforms helped pave the way for the development of the country’s modern gold market, with the establishment of the Saigon Jewellery Company (SJC) in 1988, which offered various jewellery and investment products. Eventually, other companies entered the market, offering minted products for investors. However, SJC tael bars (in Vietnam, gold is sold in units of Tael, where 1 Tael = 37.5g) have remained the most popular.

Between 1988 and 2012, as detailed in the next chapter, the government implemented several reforms in the gold market, notably: allowing free trading and imports, margin trading, reducing import taxes and permissions for banks to open gold accounts. However, an increase in official and parallel imports, a rising current account deficit, and further currency depreciation saw the government re-introduce several restrictions on the gold market, notably the imposition of Decree 24 in 2012 (which is also set out in Chapter 2).

Despite these restrictions, Vietnam still has a vibrant gold market. Last year, combined physical investment (covering small bars and coins) and jewellery demand reached 56t of gold, making it the second largest market in East Asia and the ninth largest globally. However, this hides somewhat the impact that Decree 24 has had on the gold market.