According to analysts, they are set to decline further since the difference in the global and domestic rates is still rather big at around VND3.7 million ($176.2) per tael.— Photo dantri

On December 3 domestic gold prices continued to fall sharply, closing down by more than VND200,000 (US$9.5) a tael of 37.5gm at just above VND35 million ($1,667).

According to analysts, they are set to decline further since the difference in the global and domestic rates is still rather big at around VND3.7 million ($176.2) per tael.

On November 25 too gold prices fell drastically, by around VND700,000 ($33.3), to stand at the lowest level since 2011.

Since the beginning of the year prices have fallen by almost a third from VND46.66 million ($2,222).

The analysts blamed the steep fall on global markets where the metal now trades at below US$1,242.4 an ounce as investors responded negatively to fears that the US Federal Reserve decided to cut its $85 billion a month bond buying.

The domestic gold rates are thus expected to see a stronger drop.

In addition, the economy has begun showing signs of recovery, making other asset classes like securities and real estate more attractive to investors. The two stock markets have already begun to attract more cash flows and seen liquidity improve significantly in recent sessions.

Gold trading has become riskier than ever for retail investors after the Government recently announced several new management policies.

According to the State Bank of Viet Nam, the demand for bullion has dropped significantly in recent months from 8,500 taels per day to just 2,000-2,500 taels.

A gold expert, who declined to be named, told Viet Nam News that until early 2014 domestic gold prices are likely to tread water but decline later, and so many buyers have taken a wait-and-watch attitude.

"The demand often increases when there is a strong fall in prices. For instance, on November 25, when both global and domestic prices fell sharply, trading at a major jewellery company in HCMC rose sharply to 600-700 taels per day, much higher than normal."

Multi-level marketing

Multi-level marketing, as it is euphemistically called, refers to retailing goods directly to end-users through a network of distributors who are also "members".

It is very popular in many countries, and since being legalised in Viet Nam 11 years ago, the industry has seen sharp growth, with almost 96 companies setting up shop.

Ha Noi has the highest number of direct selling companies – 47 – while HCMC is second with 42.

According to the Ministry of Industry and Trade, 90 per cent of the firms sell functional food. It is followed in popularity by cosmetics, fashion products, and home appliances. The number of products has increased greatly in recent years to around 4,500 now.

Despite the economic meltdown, sales through the multi-level marketing system has steadily increased as the number of participants increased by 4.6 times last year to over one million.

According to the Viet Nam Competition Authority, the sales reached VND4.05 trillion last year, equivalent to some US$193 million, up 170 per cent year-on-year.

The sector's strong growth is attributed to many reasons, including the economic situation which has caused many people to get involved as a way of earning an additional income.

In practice, the business offers some advantages like low investment, few risks, and flexibility of time, which attracts more and more people.

Theoretically, direct sales saves on intermediaries' cut and advertisement costs and offers flexible jobs.

On the flip side, direct selling operations have given rise to many scams.

Direct sales firms usually make money by luring people to join their distribution network with a promise of high incomes, and persuade them to buy goods to resell and coax others to become their sub-agents with the same promise. In other words it means taking money from some to pay another.

The legal framework lags the developments in the market, enabling operators to take advantage of loopholes.

Multi-level companies exaggerate their product quality and functions to push up prices at the expense of consumers.

But it is not easy to monitor them since they have no shops.

Many also cause inconvenience to the community by often organising boisterous seminars that attract the participation of thousands of people.

In 2005 the Government issued Decree No 110/ND-CP/2005 to manage multi-level sales of goods, which includes many regulations to oversee firms and participants engaged in multi-level sale of goods.

But it lacks stringent regulations required to ensure effective management of this model.

For instance, the companies are required to report on their business every six months but only to the Department of Industry and Trade at the location they register their business, making it harder for authorities in places where they expand to.

Recently authorities found several multi-leveled marketing companies committing violations and arrested their bosses for fraud.

To date 26 multi-level firms have been shut down by authorities or had their operations suspended. Five others have had their licences revoked.

Dau Tu (Vietnam Investment Review) reported that the Viet Nam Competition Authority is working on a draft decree to replace the current one.

The draft includes new regulations, one of which is to cap commissions, bonuses, and other benefits since the current rates are too high and are borne by customers.

The new decree will also strictly control the issue of licences, making them non-transferable and liable to revocation if a business does not begin operations.

Managers of multi-level marketing firms found to flout laws will not be allowed to set up new firms.

City revives online

The HCM City government plans to soon revive online business registration of companies after a two-year hiatus.

The city suspended online business registration when the Ministry of Planning and Investment launched a unified National Business Registration Portal.

But the new system has failed to meet expectations due to complicated registration formalities and the need for digital signatures.

The city Department of Planning and Investment proposed reviving the system to make life easier for businesses.

Relevant agencies have been ordered to complete procedures and databases by mid-December so that online registration can begin in January.

With the resumption of the online system, companies can complete business registration applications online before submitting them to the department, which will then transfer them to the MPI also online.

The agencies are working with the Post Office and postal companies to set up a delivery service for sending approvals to companies' registered addresses.

This service will obviously help save time and cost for applicants and ease overcrowding at the investment department office — VNS