by Gemma Hansen
Australian exporters have faced many obstacles over the past two years – a buoyant dollar making our products less affordable on the world stage, the global financial crisis, and now the reduction in funding of the Export Market Development Grant (EMDG) scheme.
EMDG is a scheme that has been supporting Australian exporters for many years to launch their products internationally by funding a portion of overseas marketing costs. However, in recent years the scheme has been underfunded and this is causing a great deal of uncertainty in the export community. Austrade are currently receiving applications for 2009/10 expenses, but the prospect of a boost to business cash flow has been cut short due to the government announcing that funding of EMDG has been cut by $50M down to $150M. A 25% reduction in funding from 2008/09.
A further announcement received in early July advised businesses that due to this underfunding of the scheme, first tranche payments for 2009/10 grants would be set at just $27,500. This is a drastic cut from the $40,000 first tranche for 2008/09 and will see the number of businesses impacted by this underfunding increase from approximately 20% of all applicants to 50%. A disastrous result for all businesses who have invested money in developing international markets with the understanding that the government would assist with up 50% of these costs.
Small to medium businesses rely on this scheme to take that first step onto the export stage. Canberra business Seeing Machines have accessed EMDG funding over many years to grow their business to the point where the majority of their income now comes from international clients. Belinda Burgess, COO of Seeing Machines says “Due to the nature of our business we were always going to get most of our revenue from overseas. EMDG has been very beneficial to us in helping fund some of our international marketing expenditure and in the early years of the business we would have really struggled without it. It’s disappointing that the government is not adequately funding the scheme going forward for the next group of companies trying to get a foothold in international markets. We continue to see cutbacks in grant programs
that can only have a negative impact on the growth of Australian businesses and their ability to contribute to the growth of our economy.”
Grant applicants for 2009/10 can be approved for a maximum rebate of $200,000 but their first payment will only be $27,500 and then they will have to wait until June 2011 to see whether they will receive further funding. This level of uncertainty makes it very difficult for businesses to sustain international growth. Businesses new to EMDG such as iCognition Pty Ltd will go into a scheme that has been so beneficial for companies in the past, but provides no assurances for moving forward.
Joe Mammoliti, Director of iCognition says “iCognition is gaining a presence on the world stage for its innovative Diem Enterprise solutions and expertise in information management. The window of opportunity for our knowledge and products is rapidly evolving and it is important that we are represented internationally to maximize these opportunities. There are many conferences and trade shows that we see as beneficial to our export growth, but we may have to reconsider how much international travel we can consider to do with the cuts to the EMDG scheme”.
The export community is campaigning for the government to provide an additional $50M to the EMDG scheme for 2009/10 grants. We also need assurance that the scheme will maintain funding of at least $200M per year for future grant applicants. The scheme can only be of benefit to businesses if they are certain that by spending their money under EMDG rules they will receive what they are entitled to.
In a media release by The Minister for Trade, The Hon Stephen Smith, he cites one of the reasons for the EMDG budget being cut by $50M is the Government strategy of returning the federal budget to surplus within three years. Budget surplus will be achieved sooner by supporting exporters in their overseas activities rather than curtail their spending. Greater promotion of Australian goods and services will drive increased export earnings which will only add to the budget surplus objective.
Gemma Hansen works for Export Solutions assisting Australian businesses access the Export Market Development Grant scheme.
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