Export-Import (Exim) Bank of Thailand advocates the use of export credit insurance to safeguard against non-payment risks from overseas buyers, says first vice-president Apinut Chatusripitak.
Operating an export credit insurance business for 27 years, the bank has recorded accumulated export insurance turnover of 1.82 trillion baht and total insurance claim payments of 1.4 billion baht, with payment default by 263 foreign buyers.
"Some 70-80% of the 263 buyers who defaulted traded with Thai exporters for more than five years," said Mr Apinut.
"A long trade relationship doesn't eliminate risks."
The top three countries with the highest claim values are the United Arab Emirates at 28.5%, the US at 25.5% and Singapore at 14.2%.
Of the total claim payments, 75.8% were caused by foreign buyers' rejection of payment for goods, with 23.4% attributed to buyers' bankruptcies, while 0.78% were for buyers' rejection of delivered goods.
Exim Bank offers both export credit insurance and investment insurance.
Export credit insurance covers against default of payment caused by commercial risks, such as buyer bankruptcy, non-payment, refusal to take delivery of goods, and political risks, such as import bans, revocation of the buyer's import licences, as well as war, revolution or riots.
Investment insurance covers against political risk for losses related to overseas investment, such as losses from imposition of laws or any action taken by a host government that adversely affects project investment, or the investor's repayment ability.
The world's leading insurance agencies predict there could be a 14% annual uptick in the number of bankruptcies this year because of the effects of the prolonged pandemic and Russia-Ukraine war, he said.
Mr Apinut said firms trading overseas, particularly small businesses that have low negotiating power and little working capital, should manage the risk of non-payment of goods by shifting their export markets to those with high growth or increasing purchasing power, such as emerging markets in the Greater Mekong Subregion or South Asia, while employing financial tools to manage such risks.