Local businessmen and traders are still waiting for promised government help in setting up export credit insurance for trade with Portuguese-speaking countries.
Local companies involved in trading with Portuguese-speaking countries are still waiting for the Export Credit Insurance mechanism previously discussed by the government.
In his last policy address, Chief Executive Fernando Chui Sai On announced that his administration would discuss a possible Export Credit Insurance Regulation for the Macau SAR, to promote trade and services between Mainland China and Portuguese-speaking countries using Macau as a platform, under the ‘One Belt, One Policy’.
Export credit insurance is an insurance policy offered by private insurance companies and governmental export credit agencies, to business entities wanting to protect their accounts receivable from loss due to credit risks such as protracted defaults, insolvency or bankruptcy.
In the first five months of the year, China exported goods worth US$10.4 billion (MOP83.0 billion), to eight Portuguese-speaking countries, a 14.6 per cent decrease year-on-year.
Macau has been hailed as a connecting bridge between Mainland China and Portuguese-speaking countries, however so far no concrete plans have been made by the government to set up a mechanism to help local traders get export credit insurance.
Not that dangerous
Local businessmen and traders told Business Daily they still face issues when getting export insurance because banks and insurance companies consider some export destinations too risky, or because they don’t consider covering Macau exports to be profitable enough.
“It’s an issue we can improve and Macau could do it, we just need to study the best method to achieve it,” Afonso Chan, vice-president of Charlestrong Engineering Technology told Business Daily.
Charlestrong has been involved in construction projects in the African country of Mozambique, and its vice-president told Business Daily that some local businessmen have faced problems getting export insurance because banks and insurance companies have a wrong perception of the risk level when it comes to exporting to Portuguese-speaking countries, especially those in Africa.
“[Export insurance] is hard to get and I think the Monetary Authority of Macau (AMCM) could ponder to speak to banks and insurance companies and incentivise them to provide insurance, or maybe there could be a government fund. I know in Hong Kong the local government under the ‘One Belt, One Road’ created a department for helping out with trade insurance. We could study this mechanism and bring it here,” Afonso Chan told Business Daily.
Traders unite
Both the International Lusophone Markets Business Association (ACIML) and the Macau Importers and Exporters Association have told Business Daily that getting export insurance is indeed a big problem for local traders in Macau, and that the mechanism promised by the government should be created as soon as possible.
“Macau should have such an insurance scheme to safeguard the interests of exporters/traders with overseas trading partners. This issue has been discussed and cooking for years without positive results,” the Macau Importers and Exporters Association told Business Daily.
According to the association, the reason why export credit insurance is so hard to obtain is that “no insurer is interested in taking the cover” because they consider business volumes exiting Macau are too small to be worthwhile, and so they ask for premiums that are “extremely high to accept” for local traders.
“Consolidating the insurance cover with Hong Kong and China is another option for negotiation, but due to technical problems, no compromise could be reached,” the Macau Importers and Exporters Association told Business Daily.
Whose responsibility?
For Lin Zhijun, Professor at the School of Business at the Macau University of Science and Technology (MUST), Hong Kong and Singapore are exceptions in terms of government assistance in insurance, since in most of the world export insurance is up to the private sector.
However the professor thinks the MSAR government could install some “guarantees or backup for the insurance companies, so as to help diminish the risk,” and advises local traders to improve the marketing of the countries deemed too risky, so as to change the perception of those countries in the eyes of insurance companies and banks.
Malam Becker Camará, Guinea-Bissau Delegate at the Forum for Economic and Trade Co-operation between China and Portuguese-speaking Countries (Forum Macao) told Business Daily that he has heard local businessmen complain about the issue at the Forum Macao events, but he believes that the government is currently only discussing the possible mechanism, and maybe in November a plan will be proposed for the policy to be launched in the next years.
“I think local businessmen should be more active in finding alternative solutions and grab opportunities by themselves,” Camará told Business Daily.
When questioned about this issue, the AMCM told Business Daily that in order “to assist the government in this initiative, AMCM has made feasibility studies on how to set up the mechanism, taking into consideration the current situation of the Macau SAR.”
“At the moment, the Government is still considering different options and has been working towards the goal that was originally set,” the AMCM told Business Daily.
In a previous interview with Business Daily, José Félix Pontes, a retired member of AMCM stated the creation of a public instrument to implement trade credit insurance should be one of the priorities in supporting SME’s and diversifying the economy.
Do as thy neighbour
Some of Macau’s neighbours, such as Hong Kong and Singapore, have already established departments that help local exporters get export insurance.
In 2015, the Hong Kong government assured coverage of statutory maximum liability of US$40 billion for insurance contracts of The Hong Kong Export Credit Insurance Corporation.
This corporation provides trade credit insurance protection against non-payment risks arising from commercial and political events such as bankruptcy or insolvency, payment defaults, refusal to take delivery of goods, or even war, revolutions, riots or natural disasters.
In the case of Singapore, the local government has also set up the Trade Credit Insurance (TCI) by International Enterprise (IE) Singapore, which enables Singapore companies to support up to 50 per cent of the minimum premium for trade insurance policies by Singapore-registered credit insurers until a maximum amount of US$74,217.
