PM introduces crop insurance programme

Viet Nam, an agricultural country with 70 per cent of its population living in rural areas, is taking a new step to support agricultural production with the publication of a draft of the Prime Minister’s decision on farming insurance from 2011-13.

The Ministry of Finance last week released the draft decision, which would be effective during an experimental three-year period.

Under the plan, poor farming households will receive a subsidy of up to 100 per cent of the insurance premium. Support to other farming households will be 60 per cent. The percentage for agricultural production organisations will be 50 per cent.

According to the draft document, there are three main categories of cover, including cultivated crops (rice), domestic animals (buffalo, cows, pigs and poultry) and aquaculture (tra and basa fish, black tiger shrimp and white-leg shrimp).

Under the programme, rice insurance will be offered in provinces of Nam Dinh, Thai Binh, Nghe An, Ha Tinh, Binh Thuan, An Giang and Dong Thap.

Meanwhile, insurance for pigs, buffalos, cows and fowls will be available in Bac Ninh, Nghe An, Dong Nai, Vinh Phuc, Hai Phong, Thanh Hoa, Binh Dinh, Binh Duong and Ha Noi.

Insurance for fish and shrimp hatchery will be provided in Ben Tre, Soc Trang, Tra Vinh, Bac Lieu and Ca Mau provinces.

There will be conditions for cover, for example, the household must feed at least 10 dairy cows or 50 meat head herd.

According to Phung Dac Loc, secretary general of the Viet Nam Insurance Association, agriculture insurance premium value in Viet Nam is inconsiderable compared with the total non-life insurance figure.

The agricultural premium turnover in 2009 was VND1.7 billion dong, while total non-life insurance premium turnover was 13.6 trillion dong. The figures were VND958 million and VND8.2 trillion, respectively, in the first half of 2010.

There are many reasons behind the underdevelopment of agriculture insurance, which include the small scale of household farming, unexpected natural calamities and epidemic diseases that make the insurance too risky.

Due to high risks, insurance companies require high premiums that farmers cannot afford. Farmers, of course, find it difficult to calculate how much they can earn, which frightens them from spending money on insurance policies. Insurance management also adds to the cost.

French insurer Groupama arrived in Viet Nam in 2001 and provided insurance services for fowl breeding and shrimp and fish hatcheries in the Cuu Long (Mekong) Delta. But it was not successful, so they are providing insurance services to farms, rather than households, only.

Viet Nam Insurance Corp (Bao Viet) has also failed in its efforts to tap this segment of the non-life insurance market.

According to Nguyen Duy Luong, vice-president of the Viet Nam Farmers’ Association, agricultural insurance has proved useful in many countries, where it often receives significant assistance from their governments, up to 50 per cent in the US.

Rising interest rates

Interest rates for deposits in gold, US dollar and Viet Nam dong are all showing a rising trend.

After months of gold deposit rates standing at an insignificant level of 0.5 per cent and less per annum depending on banks and terms, and there were even suggestions of imposing some fee on gold deposits, banks are making adjustments in an upward direction, though the current level is still lower than early this year.

The joint-stock DaiABank announced last Thursday that the mobilisation rate for gold increased by between 0.15 to 0.6 per cent with a three-month term enjoying the highest one, of 400 per cent, going up to 0.8 per cent per year, from the previous 0.2 per cent.

Previously, larger banks like the ACB and Eximbank Viet Nam had similar actions. Eximbank offers 1 per cent for one-month term, from the previous 0.05 per cent. The ACB pushed up its rate to the peak of 1.1 per cent for the three-month and 13-month terms.

Eximbank deputy general director Dinh Thi Thu Thao said the increase was to satisfy customer demand for purchasing houses and trading the precious metal. The gold lending interest rate is much lower than the dong, which helps boost loans as debtors also hope that there will be no additional rises in the gold price, which is already high.

Meanwhile, ACB counterpart Bui Tan Tai said his bank’s effort was to avoid depositors moving to other banks as well as mobilising more deposits.

One reason is that the gold price has made a high record of VND30 million (US$1,540) per tael. Thus, mobilising gold will help banks increase significantly the value of mobilised capital to meet the requirement by Decree 13, which states that banks can provide loans no more than 80 per cent of the total mobilised capital (excluding no-term deposits), effective from early October.

In addition, for these purposes as well as international payment demand, the interest rate for the US dollar also has increased to the peak of 5.5 per cent. Curbed by the bar of 11.2 per cent, banks are offering various promotional programmes for deposits in dong.

Buying property overseas

Developers around the world are targeting Vietnamese, as well as other Asians, to acquire apartments outside their countries. They have recently organised events in the commercial hubs of Ha Noi and HCM City to introduce their projects.

They are targeting businesspersons whose business extends to overseas markets, families with children studying overseas, and investors.

The real estate services firm Savills UK is offering 115 apartments in two towers of the 375 Kensington Street, one of London’s most prestigious developments, at prices ranging from around US$1-9 million per unit of 34sq.m to 185sq.m. All of the Kensington apartments, owned by the company St Edward, will be completed in 2012. They will be offered a 999-year lease with a full 10-year build (construction) warranty, according to James Tabot, Savills UK’s international real estate business director.

A deposit of $7,500 will be required and in the first 18 months, buyers will pay 25 per cent of the cost. The remaining 75 per cent will be paid after the buyer receives the apartment.

The joint-stock firm NAC Real Estate has also introduced in HCM City the Sai Gon Villas apartments of the Bridge Creek company, in Westminster City in California.

Property prices in these two markets are said to have reached the bottom after the financial crisis. However, it will not be easy for Vietnamese who buy houses abroad in terms of legal regulations.

Currently Viet Nam allows only institutions, not individuals, to trade assets outside the country.

Foreign currency regulation is a main challenge. Individuals may transfer foreign currency cash to other countries for purposes including study, medical treatment and tourism via banks, after obtaining papers as required by laws. When going abroad, no more than $7,000 can be carried by each individual.

Further, investment of more than $4 million requires approval from the Ministry of Planning and Investment while lower figures need agreement from provincial authorities. — VNS

Tags: crop insurance programme, Vietnam insurance, Vietnam insurance industry, Vietnam insurance market