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Deputy Minister of Finance Tran Xuan Ha said seven insurers have been selected to carry out the pilot programme including Bao Viet, Bao Minh, PetroVietnam Insurance (PVI), Bao Viet Tokio Marine, QBE, Chartis and the United Insurance Company of Vietnam .
Under the programme, which will be implemented during 2011-13, about 23 commodities groups will receive export credit guarantees, minimising risks for exporters while ensuring financial security and enhancing exports, he said.
Subject to the programme are enterprises exporting certain commodities including seafood, rice, coffee, fruit and vegetables, textiles and footwear.
Commercial and political risks associated with these commodities will be guaranteed and a premium will be calculated based on risk, damages and management fees.
Many insurers have expressed concern about the programme's feasibility as exporters have not recognised the importance of credit insurance in export operations and insurers will face adaptability issues regarding technology and human resources.
Before the programme was launched, Bao Viet, PVI, Bao Minh, Chartis and QBE had conducted small-scale credit insurance activities with mixed results.
Until April this year, QBE had attracted only two credit insurance contracts worth VND4 billion ($192,300) and Bao Minh had struck only six deals worth VND3 billion.
Director of the Institute for Business Development under the Vietnam Chamber of Commerce and Industry Pham Thi Thu Hang said Vietnamese exporters should use credit insurance to boost export operations and mitigate risks involved in contracts with foreign partners.
Hang said there are many risks inherent to export activities such as timely delivery and political stability and Vietnamese exporters have not taken adequate precautions to avoid such risks. As a result, domestic exporters are unable to fully tap into the potential offered by the export business.
"As the country integrates into the global economy, Vietnamese exporters may fail unless they use credit insurance tools for their foreign trade activities," Hang said.
Representative for the VCCI's International Arbitration Centre Vo Nhat Thang said only 20-30 per cent of domestic businesses are aware of credit insurance.
Thang said Vietnam's export turnover reached over $70 billion last year but only 15-16 per cent was Cost Insurance and Freight (CIF), meaning the shipper or trader had to pay costs of transport to the ship, insurance of cargo and freight costs to the destination port, adding that local enterprises can claim larger profits from foreign trade activities if CIF increases to 30-40 per cent the total export revenue.
Director of the Ministry of Finance's Insurance Supervisory Authority Trinh Thanh Hoan said in order to help insurers and exporters begin implementing the programme, the state will support part of insurers' costs and 20 per cent of the premium for exporters.
Deputy Minister Ha said credit insurance for exports is totally new in Vietnam and requires input from authorities, insurers and exporters.
Ha said this month a draft of regulations on credit insurance guarantees for exporters will be considered by the Ministry of Finance, in addition to a plan to train insurers and exporters.