The designation will allow SJC to stamp gold bars with the imprimatur of the State Bank, Binh said, giving SJC an exclusive licence to produce gold bars o­n behalf of the State.

Binh's announcement, however, has raised concerns that the central bank is essentially granting SJC a highly lucrative monopoly over the nation's gold market – a move which will drive many other gold producers entirely out of the market.

Binh told lawmakers, however, that SJC gold bars already accounted for 90 per cent of the domestic market and their quality had been widely recognised both domestically and internationally. Therefore, the designation of SJC gold bars as the national brand was appropriate and could bring many benefits to the national economy, he said.

A monopoly o­n gold bar trading would enable the State to more effectively control the local market, Binh said. The granting of an exclusive monopoly would help the State cut production costs, monitor the quality of gold bullion and control better gold bar inventories, as well as enable it to intervene more readily when the market becomes overheated.

In practice, gold bar production was already problematic for several enterprises since the central bank and the Ministry of Industry and Trade have tightly controlled gold imports in an effort to control an overheated domestic market o­n which gold prices have been outstripping already soaring global prices. This gap has created favourable conditions for gold smugglers to penetrate the market, with impacts o­n foreign exchange rates as well as gold prices. The central bank also vows that it would continue to create favourable conditions for other famous gold producers, including Bao Tin Minh Chau, Sacombank Jewelry, Agribank Jewelry, and Phu Nhuan Jewelry, to process State Bank-branded bullion, utilising their existing technology and preventing SJC from becoming overwhelmed by demand.

While agreeing that the State Bank needed to closely control gold trading, Phu Nhuan Jewelry Joint Stock Co general director Cao Thi Ngoc Dung said that the central bank should avoid granting a powerful monopoly to a single enterprise.

Agribank Gold chairman Nguyen Thanh Truc also said SJC should o­nly be granted such a monopoly if the company were operated o­n a not-for-profit basis.

He noted that it would be easy for other gold producers to make gold bars at the SJC standard with additional processing estimated to cost about VND30,000 (US$1.4) per tael. (One tael of gold is equivalent to 1.2 ounces.)

Some gold traders and investors, meanwhile, have voiced concerns that gold bullion not bearing the SJC brand could not be traded o­nce the exclusive licence is granted to SJC.

Senior economist Vu Dinh Anh urged individual investors holding gold with brands other than SJC not to be panic, assuring them that the State Bank would protect the rights and interests of citizens, and last week, the State Bank issued a similar reassurance that gold bullion already o­n the market could continue to be traded even when stricter regulations took effect next year. All of the changes in regulation of the gold market have been necessitated by Vietnamese citizens inveterate habit of hoarding gold.

By last June, Vietnam's total gold holdings were equivalent to 20-45 per cent of national GDP, said Le Xuan Nghia, deputy head of the National Financial Supervisory Committee. Most of the holdings were held by private individuals, since central bank reserves were insignificant, he added.

Under a decree o­n administration of the gold market, which has been in the drafting stage for almost a year, new traders in gold bullion, jewellery and ornaments would need to apply for a licence from the State Bank, while existing producers and traders in gold jewelry would need to re-register with the business licensing authority and then obtain a quality certificate from the central bank within 12 months of the decree taking effect.

Gold bullion traders would be required to go through the same process but within six months of the decree taking effect.

Only enterprises with at least VND500 billion ($23.58 million) in charter capital, and which hold at least a 25-per-cent share of the domestic gold bullion market for the previous three years, would be permitted to continue producing gold bars. The State Bank would set a production quota for each firm.

If approved, the new decree would replace Decree No 174/1999/ND-CP issued back in 1999. The pending decree, along with the State Bank's effort to encourage investors to deposit gold holdings and the issuance of Government Decree No 95 – which took effect last month and which imposes higher penalties o­n administrative violations relating to foreign currency and gold trading – is expected to establish a healthier and more transparent market o­n the basis of protecting both national and individual interests.