The Vietnamese government is looking for ways to boost foreign trade by providing exporters with more financing options and guaranteeing export payments.

Vietnamese exporters currently sell mainly on letter of credit (L/C) or cash terms and appear to be declining other financing options.

Credit insurance

In November 2010, Vietnam's finance ministry announced a trial programme that aimed for a minimum of 3 per cent of the country's exports to be guaranteed against non-payment.

The ministry is now reporting that it is failing to meet that target and is pressing more firms to utilise credit insurance to guarantee that they are paid for their exports.

L/C usage

An estimated 90 per cent of Vietnam's exports are paid for on L/C terms according to the ministry, but exporters have apparently been reluctant to take up alternative or additional financing options such as credit insurance.

At a December meeting organised jointly by the ministry of industry and trade and the finance ministry, delegates heard that some firms were unfamiliar with credit insurance while others found this option too expensive.

Limited success

So far, credit protection contracts worth just US$77.55 million have been signed with just 14 firms.

This does not even account for 0.1 per cent of the total country's export turnover and falls substantially short of the finance ministry's target of guaranteeing US$3 billion of exports annually.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.