Industry experts have warned that a significant shortfall in funding for the Government’s Export Market Development Grant program could force SME exporters to pull back from overseas markets at a time when other nations are investing heavily in support programs for exporters.
Ian Murray, executive director of the Australian Institute of Export, and Ivan Kaye of grant advisory firm BSI, says exporters were dismayed to learn that the recent Federal Budget did not include extra funding for the EMDG program.
While the Government boosted funding for the program in 2009-10 by $50 million to $200 million, funding will fall back to $150 million in the 2010-11 year.
Murray says that could lead to a serious shortfall in the size of grants paid to exporters.
The EMDG scheme is open to Australian companies that spent at least $10,000 on export-related marketing expenses, and have a turnover of less than $50 million.
Kaye says that claimants in the 2008-09 year, which are paid in 2010 under the scheme’s structure, will only receive 60% of their full entitlements due to a sharp increase in the number of applicants.
Murray puts the shortfall for the 2008-09 year at $30 million and says the shortfall for claimants in the 2009-10 year, which will receive funds in 2011, could face a shortfall of up to $80 million if the total funding pool is slashed by $50 million.
“The whole issue is uncertainty. People who are looking towards their expenditure for this year and next, if they are not confident they are going to get the level of support they expect, we simply believe they will pull back,” Murray says.
“The dollar is tough, the economic environment tough, all you need now is this uncertainty and people will pull back. I would have thought it was one sector where you would you would say, let’s put in some dough and let’s try and drive this.”
Kaye says his clients who have applied for EMDGs are concerned about paying for export-related marketing expenses they thought would be covered under the scheme.
“They have actually budgeted on getting an Export Market Development Grant and if they don’t get the amount they expect, their cashflow is in serious trouble.”
“But the reality is that they can’t do anything about it. The reality is that will just spend less.”
Murray is also unimpressed with the Government’s decision to slash its funding to the Tradestart program, which is specifically focused on export advisers to work out of 54 offices around the country.
While the Government announced in the Budget that the program would be extended for a further four years, the level of funding has been cut from $22.3 million over the previous four years to $14.4 million over the next four.
“That’s not a lot of money, but every piece of research that has been done has been supportive in terms of return on investment.”