Fear uncertainty and doubt of exporters
The objective of the EMDG programme
The objective of the Export Market Development Grant Scheme (EMDG) (in its 44th year) is to support SMEs with their export endeavours by helping mitigate the risks through partial funding of their marketing costs.
The purpose of this scheme is to give emerging Australian SME exporters the confidence to take chances, to explore and to build a global focus into their business philosophy knowing that the Govt offered partial underwriting of their marketing costs.
Exporting is not for the faint hearted - and is fraught with risk and uncertainty. The export grant mitigates some of this risk by providing a safety net for exporters.
The results
A key goal of the programme was to increase the number of exporters - which is positive for Australia in every way.
This has been successful - and there have been around 4000 SME exporters accessing the scheme generating significant revenue, jobs and international exposure, with thousands of success stories.
Treasury performed a comprehensive study - whereby the EMdG programme was comprehensively endorsed - here is the report https://static.treasury.gov.au/uploads/sites/1/2019/02/360985-Export-Consultants-Associating-Inc-supporting-document.pdf
The programme is revered by the rest of the world and in my view and that of others, has been the most successful economic stimulus initiative ever introduced in this country.
Stats have shown that
- every $1 of grant generates $7 of export revenue.
- 1 in 5 jobs are a result of companies that export
A key kpi of the EMDG, AUSTRADE and the Government is naturally to increase the number of exporters - which is positive for Australia in every way.
The Pain
Up until 2010, the Government ensured that exporters received their full allocation - providing up to $200m per annum in funding.
As the number of exporters increased - and the total entitlements increased - the amount required would be anywhere between $175m and $300m.
As a result of Budget cuts - the scheme allocation was reduced from $200m to 137.5m - meaning that exporters are uncertain of what their entitlement will be.
The budget has allocated a further $20m per annum for the next 3 years to the EMDG programme- which is great and appreciated - but is still leaving the programme underfunded
By underfunding the program, the Govt has effectively withdrawing the safety net and leaving exporters uncertain of what grant they will be getting creating uncertainty, fear and doubt - which is not helpful!
How the scheme works
An eligible Australian exporter, can get a retrospective grant on their marketing spend of up to 50c in the dollar after the first 10,000 up to a maximum of $150,000 per year - for 8 years.
The value of the grant is performance based and is dependent of the export revenue that is earned by the company after the second year.
This is a taxable grant.
The Cap
As a result of a limit to support exporters imposed in 2015 of 137.5m, per year, Exporters who were expecting their grant entitlement - have not received what was expected and Austrade is forecasting a shortfall of $60m in 2019, and by 2021/22 a shortfall of $112M.
The government’s additional contribution of $20m per annum over the next 3 years- while welcome by exporters, is still forecasted to keep exporters short of their full entitlement and uncertain of their entitlement.
To fully fund the EMDG programme , based on the current and forecasted activity, the funding would need to be between 175m and $250m
A question that keeps coming back at me and I have no answer...
If there is indeed a demonstrable return on the Countries investment of 7-1, why is there in fact any cap on supporting exporters in their marketing endeavours?
A solution
Currently much of the surplus has come from the serendipitous increase in exports of High Grade Coal and Iron Ore to China.
A great investment of the Government (which should have bipartisan support ) would be to allocate the required funds necessary to fund the programme which builds export capability through Export Marketing Support.