First of all, you have to determine whether you're talking about the cement render coat, plaster coat or skim coat.
This is what's normally done in malaysia:
1st layer: Bricks (obviously)
2nd layer: Cement render (this means a mixture of cement and builder's sand and water, a good contractor will apply 2 thin coats of this instead of 1 thick one)
3rd layer: Plaster render (this means a mixture of cement and water only, applied in a very thin coat)
4th layer: Skim coat (this means a mixture of skim-coating powder and water. This stuff is usually white. Applied in thin coats. This is what makes the walls smooth)
Usually, the contractor will stop at the 3rd layer.
You have to ensure you and the contractor are on the same wavelength here, because if you ask for smooth walls, he will claim the plaster coating (3rd layer) is smooth enough.
So be sure to ask specifically for a skim coat.
Now back to the cracks on your wall...
If you determine the cracks are skim coat cracks, then a bit of wall filler will do the trick.
If they're plaster render cracks, then you'll have to hack out a groove on your wall and fill it up again. Basically, you're enlarging the crack.
I don't know what your contractor means when he says he'll be "covering it up" when painting because as far as I know, even the best paints
can only cover up hairline cracks. If you can see the cracks standing 2, 3 feet away, then it probably isn't "hairline" anymore.
Just remember: Paints are NOT fillers. Don't depend on them to fill up cracks. Barring special products, paints are decorative coatings only.
And just to get it out of my system, the main reason why cracks are there is because the contractor does the work in stages, mixing different batches with varying quantities of ingredients.
This makes the drying time different, thereby causing cracks when a particular area drys faster or slower than its neighbour.
Other causes would be soil settlement, whereby the earth underneath the house shifts or settles, thereby causing cracks in the walls, particularly where the walls meet the beams or columns.
Hope this helps!