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. www.exportsolutions.com.au
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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B2B Article: Strong Australian Dollar an Extra Challenge for Exporters
October 2010
The Australian dollar is nearing its strongest level in two years, with September likely to reflect the biggest monthly gain since May 2009. While many Australians are celebrating this strength by enjoying international holidays and stronger purchasing power, for exporters the strong Australian dollar presents new challenges.
While exporters may already have strategies in place to deal with uncertainty of regular currency fluctuations, the continued strengthening of the Australian dollar is more likely to mean that profits are reduced over the longer-term and that exported goods and services become less competitive as prices, in foreign currency terms, increase.
But all is not lost – while ACT exporters may be tempted to become despondent as they face yet another challenge, there are strategies that can assist exporters to cope with the current situation and even turn an apparent-negative into a positive, making the ride just that little bit smoother.
Banks and other financial institutions offer a range of products and risk management strategies that assist exporters to cope with dealing with foreign exchange, including hedging and offshore trade accounts. However, as exporters we need to be looking for other options as well.
For instance, while hedging foreign exchange needs has been a practice that has traditionally helped exporters cope with currency fluctuations, as the current situation is more about the near-parity of the Australian dollar with the US dollar, using forward exchange contracts as a strategy might not be as effective as in times when there is greater fluctuation and uncertainty.
Similarly, running offshore trade accounts is a strategy that allows businesses to avoid exchanging money into Australian dollars by receiving income and paying expenses in US Dollar, or other denominated foreign currency. However, the currency will eventually need to be converted, so trade accounts might in effect only be delaying the impact of the strong Australian dollar.
As exporters, we may need to look a bit harder than the holiday-makers to find the benefits of a strong Australian dollar – but they are there. For example, if you are an exporter that imports some of your materials, you’ll be benefitting from those transactions, which will hopefully offset the losses you may have made when selling your goods and services overseas.
Exporters might also look to other markets where the strong Australian dollar does not negatively impact on their competitiveness or erode export profits. Exporters that diversify their customer base at this time might not only be able to lessen the negative impacts of the strong Australian dollar, but enjoy longer term benefits arising from expanding into new markets.
We should also not ignore existing resources available to exporters, such as the Export Market Development Grant scheme. Despite the recent reduction in funding for this scheme, it is still a valuable resource that assists ACT exporters to develop export markets by reimbursing a percentage of promotional expenses. And this may be one area where the strong Australian dollar works to the advantage of exporters as advertising in international markets can be more affordable at this time.
And like the holiday-makers taking advantage of current exchange rates, exporters travelling internationally to maintain business and build new relationships should also notice the benefits from the strong Australian dollar while they are overseas.
So while it is true that the Australian dollar nearing its strongest level in two years presents a number of difficulties for ACT exporters, it is a challenge that we can overcome.