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Agriculture insurance an economic measure, not social policy: expert

Update: December, 25/2014 - 10:17

Agriculture insurance can help minimise risks for farmers, Tang Minh Loc, Office Chief of the Central Committee for the National Rural Development Programme, tells the Vietnam News Agency.

What is your opinion regarding the agriculture insurance market in Viet Nam and the bottlenecks hindering its development?

We just finished a three-year pilot programme introducing agriculture insurance to farmers. The Government designed the programme to test the system before applying it on a national scale.

Twenty provinces across the nation were chosen to participate with Bao Viet Insurance and Bao Minh Insurance covering crops, live stocks and seafood. It attracted over 300,000 farmers and cost VND7.7 trillion (US$360 million). We've learnt many valuable lessons as a result of the programme.

However, 92 per cent of the participants in the programme were from poor or near-poor households. People must understand agriculture insurance is an economic measure and not a social policy.

Insurance for seafood has proven to be particularly tricky. The programme's insurance companies reported a loss of VND200 billion ($9.5 million). In addition, it would seem that insurance companies do not have a good understanding of seafood production. There is definitely room for improvement when we apply it on a larger scale.

From a farmer's perspective, what do you think of agriculture insurance as a policy?

Agriculture activities are inherently risky, especially in Viet Nam, where the implementation of advanced science and technology is still limited. We need to establish a mechanism to protect them from all that risk.

Insurance companies must compensate farmers if they use correct production procedures, sometimes for up to 100 per cent of the damage. This is highly important if we are going to encourage farmers to ramp up production and apply advanced technologies.

Many farmers wanted to participate in the programme. They also wanted the programme to be expanded to cover more crops and animals.

Why hasn't the Government created a mechanism to balance the interests of all involved parties in regards to the agriculture insurance policy?

While the Government may not choose to dictate how transactions should be made between farmers and insurance companies, it may still create policies and incentives to indirectly affect the system. It may also serve as a judge, should conflicts arise. We may say the Government is the driving force behind agriculture insurance policy.

What do you think about the fact that most farmers who participated were in poor or near-poor households?

While it is an economic policy, agriculture insurance also includes social aspects to support poor and near-poor households. Overall, though, it is a policy to guide farmers, and help them apply science and technology in their farming. In order to do this, we must give large-scale farms and other agricultural enterprises incentives to join.

Another key factor is how to promote and communicate the advantages of being covered by insurance to farmers. How will the Government do this?

Agriculture insurance is relatively new in Viet Nam. Farmers must be informed, and understand that being covered will greatly help them recover from adverse circumstances – but only if they participate.

On the business side of things, insurance companies must see the bigger picture, and not focus merely on making a profit. Training should be provided to insurance employees so they can understand agricultural production.

Lawmakers must realise the importance of insurance policy in our effort to attain sustainable development. The Government should closely monitor the market to identify problems that may become bottlenecks and address them.

Prime Minister Nguyen Tan Dung has ordered the Ministry of Finance and the Ministry of Agriculture and Rural Development to prepare a proposal to promote and develop agriculture insurance. What's your opinion on that decision?

The pilot programme has shown some promising results for crops and live stock insurance. We should capitalise on that. The seafood industry, however, will require more consideration and improvement before we insure it on a larger scale. We hope to see the Government playing a more active role in encouraging farmers to participate in the policy. — VNS

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