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New programme promises export credit guarantees
Twenty-three commodities will receive export credit guarantees under a national trial programme, starting from the beginning of next year, in an attempt to ensure a maximum of 3 per cent of the total export revenues will be insured by the end of 2013.
Under decision 2011/QD-TTg issued by the Government last Friday, the pilot programme, which will be implemented during 2011-13, would prevent and minimise risks for exporters while ensuring financial security and enhancing exports.
Subject to the programme are enterprises exporting commodities including seafood, rice, coffee, fruit and vegetable, textile and garment, and footwear.
Those export commodities will be guaranteed regarding commercial and political risks.
Premiums will be computed based on the risk level, damages, management fees and other fees concerning the risks which are guaranteed.
According to the Department of Insurance Management and Supervision under the Ministry of Finance (MoF), Viet Nam now has 28 non-life insurance companies with the total charter capital of VND11.638 trillion (US$596.8 million). Of this, only three insurance companies – Petro Viet Nam Insurance (PVI), Bao Minh Joint Stock Corporation and QBE limited Company – were running credit guarantees for exports.
Meanwhile, a recent survey conducted by the Ministry of Industry and Trade (MIT) on over 200 companies out of 35,000 exporting businesses showed that only a few enterprises were involved in applying debt and risk payment management.
Around 68 per cent of risk that export companies confront was commercial risk, 17 per cent was political risk while the remaining concerned banks.
However, there were no enterprises involved in export credit guarantees.
The MIT's survey also found that 95 per cent of exporters wanted to be involved in export credit guarantees. Of them, 78 per cent wanted to be guaranteed regarding the commercial field, 12 per cent wanted to be insured regarding forex rate fluctuations or prices while 10 per cent wanted insurance against politics.
Businesses and banks
Foreseeing the lucrative market, several non-life insurance companies were preparing to run export credit guarantees programmes, including BIC and Bao Viet.
Deputy Director of BIC Tran Trung Tinh said that this year his company would be running the export credit guarantees programme as the market had potential and the export demand for products was increasing.
"So far, the Letter of Credit (L/C) method has accounted for 90 per cent of the global export and import revenues, but now exporters, including Vietnamese enterprises, tend to buy insurance services for the risks incurred when they export," he said.
Not only insurance companies, banks have also started exploiting this type of insurance product.
Under the factoring method, the bank will buy an export business's accounts receivable instead of lending against them, providing the exporter uses a L/C.
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