Gold is a popular saving option among people of every income level, especially during a time of economic and political uncertainty. Inflation is also one of many factors prompting gold saving. At present, the global average inflation rate is at 10.95%. With an inflation rate of 741%, Venezuela remains the country with the highest inflation rate in the world. Among all ASEAN countries, Myanmar is the country with the highest inflation rate of 9.94%. Such unstable situations pose possible risks of cash devaluation. Today’s cash of 100 baht may worth 95 baht on the next day. Possessing gold, gold articles or gold ingots, is one of many choices in maintaining wealth level, which is able to reach people of every income level. The choice also holds low risk of value loss. However, not every country allows liberal gold import and export as gold can effect currency value fluctuation. Therefore, CLMV countries such as Vietnam and Myanmar have to restrict import of gold to be done exclusively by governmental agencies.
Components driving CLMV consumers’ gold saving
CLMV countries have increasingly become urbanized. ASEAN countries, including Cambodia, Laos, Myanmar and Vietnam, are collectively called CLMV countries. They have been reaching urbanization following rising economic figures. During the past decade, Laos was the country with the highest average annual growth rate of urbanization or percentage of the population living in large cities at 3.50%. With an average rate of 2.10%, Vietnam came in the second place. The urbanization rate of the 10 ASEAN countries was merely at 1.38%. Myanmar was the country with the highest rate of annual per capita income growth of 8.40%. It was a result of the country’s opening up for investment in 2010, which caused the major economic reforms. Consequently, the changes have considerably transformed Myanmar consumers’ consumption style as Myanmar’s gross import value of luxury products reached 4,500 million US dollars in 2016. Prior to the country’s opening (in 2009) the products’ import value was merely at 400 million US dollars.
Growing number of middle-class consumers following economic expansion have demanded more luxury products. In the future, CLMV economies have great potential of growing from increasing number of workforce. Capital and workforce are key factors defining economic growth. They also direct development, especially for countries concentrating on labor-intensive activities such as developing countries, which use these production factors to build up number of middle-class consumers. The Boston Consulting Group has predicted that by 2020 Vietnam’s middle-class population will reach 21 million, which makes it a country to be observed.
The tradition of saving gold has infiltrated into every country’s lifestyle. Apart from the aforementioned factors, including inflation, value of money, urbanization and rising income, low bank access rate of people in rural areas also influences gold saving. Gold serves as security, investment and gift for every occasion. Regarding CLMV consumers’ gold consumption styles, people with high income (accounts for a few percentages) prefer collecting gold bars. On the other hand, people in general choose collecting gold jewelry. Vietnamese consumers are fond of 24k yellow gold jewelry in a complete set with flower, fruit and leaf motifs. They believe that saving in gold is the best saving method. Furthermore, they still prefer keeping gold at home over bank storage. Younger generations like single-piece gold jewelry to wear with national costume for social functions like consumers in Laos. Cambodian consumers like 24k gold jewelry for saving whereas 18k gold jewelry pieces are favored for everyday use. During the past decade, lifestyles and consumption behaviors of people in CLMV have changed following the increasing purchasing power. Consequently, gold consumption has rapidly grown. Laos’s import of gold bullion and gold jewelry grew with the highest average rate of around 2.80 folds. Cambodia was at the second place with an average growth rate of 2.56 folds as gold bar import increased in 2013. Cambodia’s gold import value of 654.98 million US dollars in 2016 was the highest. The country’s import of gold jewelry was at 9.03 million US dollars. Vietnam was at the second place. The country’s import of gold was at 97.70 million US dollars and its gold jewelry import value was at 40 million US dollars. Almost entire imported gold of CLMV was from Thailand, except for Vietnam. Over half of the country’s gold import was from Hong Kong.
Unofficial figures of gold imported by transnational labor force were quite significant. Although the figures have not been released officially, they can be estimated from number of most workforces, as many as 6 million (The Joint Standing Committee on Commerce, Industry and Banking), working legally and illegally in neighboring countries like Thailand. Each year they will wear jewelry pieces like gold necklaces and rings back to their countries. The pieces worn possess significant value despite Thailand and neighboring countries’ different preferences in gold standards.
CLMV’s Gold and Gold Jewelry Trading Regulations
Gold importation is still governmentally monopolized in some countries. Since gold bars and gold articles are products, which may cause fluctuation to countries’ currencies, some countries have established measures specifying that import of gold is restricted only to central banks. Vietnam has issued the Decree No. 24/2010/ND-CP stating that the State Bank of Vietnam (SBV) is authorized to import, export and produce gold. Any business operator wishing to produce gold jewelry must obtain permission from SBV. Importing gold by oneself is prohibited. Gold import is also monopolized in Myanmar. It is restricted to the government or state enterprise. On the contrary, Cambodia allowed liberal import and export of gold.
In regard to international trading, a MFN tariff is still applied to gold bullions and gold jewelry imported to the countries in CLMV. Laos and Myanmar specify gold (HS code 7108) customs duty rates at 5% and 15% respectively. Cambodia and Vietnam impose no customs duty for such products but their customs duty rates for gold jewelry (HS code 7113.19.90) are still high. Laos, Cambodia, Vietnam and Myanmar set customs duty rates for the product at 5%, 7%, 25% and 30% respectively. However, for inter-trading under the ASEAN Free Trade Agreement (AFTA), importers will be entitled of tax benefits or zero tariff, provided that it is carried out according to any of the rules of origin as follows:
- Goods wholly obtained or entirely produced with domestic raw materials (wholly obtained);
- Goods processed with sufficient transformation within the country according to the criterion of “change in tariff classification” at 4 digits; and
- Goods with uses of regional input materials totaling at least 40% of import FOB value or the Product Specific Rules of some product categories with details specified separately.
In order to obtain the benefits in any of ASEAN countries, a certificate of origin or Form D must be presented to customs of importer countries or using self-certification under the ASEAN Trade in Goods Agreement.
Gem and Jewelry Information Center
The Gem and Jewelry Institute of Thailand (Public Organization)
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