Lukewarm response to export credit insurance

Tuesday, Mar 18, 2014 09:08

The export credit insurance pilot programme during the period between 2011 and 2013 initially targeted to insure 3 per cent of the country's import-export turnover.— Photo vietstock

HA NOI (Biz Hub) — Only 46 export credit insurance policies were taken after three years of implementing a Government's pilot prog-ramme, according to the Ministry of Industry and Trade's Export and Import Department.

The insurance was applicable for the export of products worth VND12.59 trillion (US$572.36 million). The total premium for the exported goods was VND17.23 billion ($820,000), while compensation was VND13.33 billion ($634,000).

The export credit insurance pilot programme during the period between 2011 and 2013 initially targeted to insure 3 per cent of the country's import-export turnover. As the country's annual export value hit US$120-130 billion, the pilot programme failed to meet its set target.

The department acknowledged that the number of insurance policies taken by the exporters in the pilot programme was modest, though such insurance is considered an effective measure to help domestic exporters to minimise their payment risks.

The department attributed the restriction to the challenges faced by both the exporters and insurers during the implementation of the programme.

The insurance companies still lacked the necessary experience in promoting the export credit insurance, while the local exporters failed to pay due attention to the insurance, as it has remained unfamiliar to them, the department claimed.

Online news Vietnam-Net quoted Nguyen Thi Thu Ha, the general director of Saphia Packaging Company in Long An province as saying that she lacked information about the insurance products.

"I tried to contact a lot of Vietnamese insurance companies to seek information about the export credit insurance, but the staff there told me they did not know about this," she said.

In 2010, the Government launched the pilot export credit insurance scheme, under which it committed to prop up 20 per cent of the original insurance premiums, in an effort to encourage export companies to opt for export credit insurance policies. For instance, if the insurance policy is valued at $20,000, businesses will only have to pay $16,000.

However, the financial support is not enough to persuade businesses to spend money on insurance policies.

Seven out of the total 30 non-life insurers in Viet Nam are eligible to provide insurance policies under the pilot programme.

The beneficiaries of the Government's financial support are a group of 8 farm and seafood producers and a group of 14 industrial producers, manufacturing products, such as garments, shoes, electronics, and computer parts.

However, Huynh Thi My, the secretary general of the Vietnam Plastics Association, admitted that very few plastics companies have their exports insured, or have the intention of taking export credit insurance policies, according to VietnamNet.

To boost insurance, the department emphasised that the insurers must streamline rules on export credit insurance, while the Government should continuously offer support to the insurers to raise awareness about insurance among the local exporters.

The finance ministry has also proposed the Government to entrust it and the State Bank of Viet Nam the task of mapping out support initiatives related to the export credit insurance in the country's investment and export credit policies.

The ministry has also planned to revise the debt provision regulations so that the exporters using the export credit insurance will not have to set aside money for provision. — VNS

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