Seoul Envisions Gold Exchange
By Lee Hyo-sik
Staff Reporter
Korea plans to launch a commodities exchange where gold and other precious metals are to be traded as early as 2011.
The state-run Korea Institute of Public Finance (KIPF) said Tuesday that the country should set up a commodities exchange as early as possible to promote transparent transactions of such goods.
It suggested gold rings, necklaces and other gold works be exempted from value-added tax in a bid to further discourage the smuggling and illegal transactions of the precious metal.
It is estimated about 70 percent of gold bars and other gold products traded here are imported and circulated through the black market.
The institute submitted recommendations to the Ministry of Strategy and Finance after conducting a feasibility study on the establishment of a commodities trading venue here, similar to the Chicago Mercantile Exchange (CME), which opened in April.
The government plans to open the envisioned exchange as early as 2011 and is currently working on the scope of tax breaks and other details.
The institute examined various ways to boost the transparency of the trading of gold and other precious metals.
It concluded that setting up a separate exchange from the Korea Exchange (KRX) was the most effective scheme under the current circumstances.
Ultimately, the exchange is expected to deal in all types of commodities, ranging from crude oil to wheat.
But the institute said the planned exchange will not be able to become one of the world's leading gold exchanges.
"In global competitiveness, Korea lags far behind Britain and other advanced economies in gold and other commodities trading. It will be difficult for us to catch up with them. The envisioned venue will most likely deal with gold transactions here and in Southeast Asian countries."
KIPF added that a creation of a gold exchange would not automatically guarantee transparency in transactions, stressing the government should provide tax breaks and other support to both local and foreign buyers and sellers, encouraging them to trade gold and other commodities in an official domain.
"The government should also consider scrapping value-added taxes levied on gold and other valuable metals, as well as dramatically reducing import tariffs to nurture the envisioned exchange.
"The precious-metal processing industry should be fostered as one of the nation's new growth engines by offering metal workers and related businesses tax breaks and other incentives," it said.
The institute also suggested the government apply harsher punishments to those who illegally import and trade gold and gold products, as well as provide financial incentives to individuals informing law enforcement authorities of the illegal handling of the precious metal.