By Robin Chan

EXPORTERS have received a shot in the arm from the Government with a new scheme designed to protect them against rising customer defaults and new initiatives to promote sales overseas.

Under the new Export Coverage Scheme (ECS), the Government will subsidise half the cost of insurance premiums for firms trading overseas and will also share risk with the insurance companies for the amount beyond their maximum coverage.

The scheme, which starts on March 1, will help some 1,000 Singapore-based exporters and insure up to $4 billion worth of trade revenue.

Separately, International Enterprise Singapore will also spend $66 million on boosting export promotion.

Up to 5,000 firms are expected to benefit from the IE Singapore schemes, which will include an Exporter Development Programme to develop export competency.

The issue of trade credit insurance has come to the fore with exporters increasingly needing insurance protection from overseas customers who have been hit by the global credit crunch.

There is a higher risk of a local firm's customers being unable to pay them. As a result, banks have also reportedly become less willing to lend to local firms with large exposures to clients based overseas.

Minister for Trade and Industry Lim Hng Kiang told Parliament yesterday: 'Exporters are now more wary of buyers' credit risks and hence want to get coverage to protect against the risk of buyers' default. But insurers have also become more selective. Furthermore the cost of insurance has been rising.'

With IE Singapore acting as underwriter, the Government will increase cover for firms beyond the maximum coverage that insurers will currently provide.

Four insurers are participating - Atradius, Coface, Euler Hermes and QBE - while insurance broker Aon (Singapore) will act as programme manager.

Firms must have at least three strategic business functions located in Singapore to qualify. These are important activities such as their marketing and business planning, research and development or manpower training.

The Government, through IE Singapore, will also subsidise 50 per cent of the cost of insurance premiums of up to $100,000 per company for businesses with sales of less than $80 million.

Mr Renny Yeo, president of Singapore Manufacturers' Federation (SMa) welcomed the move, saying: 'Once the company is exposed, the bank lending to them is also exposed. This scheme reduces the exposure of the banks, so hopefully, it will assist in the overall financing of companies.'

Mr Lawrence Leow, president of the Association of Small and Medium Enterprises (Asme), agreed.

'There's no downside to this scheme,' he said.

The Government's $66 million export promotion funding allows IE Singapore to support trade associations and business chambers in organising international trade fairs and overseas business missions, said Mr Lim.

This will help companies to go into new export markets where opportunities lie or markets where the Singapore brand is strong.

This article was first published in The Straits Times on February 10, 2009.