A review of the $200 million export market development grant (EMDG) scheme has found that uncertainty around the amount of grant money available was damaging the effectiveness of the scheme.
Earlier this year Federal Trade Minister Simon Crean announced that the initial maximum payment under the program for 2007-08 would be $40,000, around $30,000 less than 2006-07.
Crean said at the time that the decrease was due to changes made to the eligibility rules around the grant by the Howard government in 2006, which led to a 28.6% increase in grant claims in 2007-08. But no additional funding was provided to cover the increase in interest.
The EMDG review, conducted by company director David Mortimer, found the confusion around funding was unhelpful.
“The current funding arrangements for the EMDG scheme, and the significant uncertainty about the actual grant to be paid, substantially negate the objective of encouraging exporters to commit their own additional resources to export promotion. A well-designed program should not create uncertainty about the level of benefit,” the report says.
The review found the EMDG scheme is effective and provides a net positive benefit to the Australian economy. The review supported the current cap of $200 million on the scheme, but said funding must be indexed to preserve its real value.
The review also suggests tightening the scheme by restricting the number of years a company can receive grants from eight to five, and increasing the amount that must be spent on export promotion to be eligible from $10,000 to $30,000.
Mortimer told The Australian Financial Review that the funding shortfall must be addressed by the Government.
“There a lot of evidence to suggest [the scheme] is effective but it’s broken, and you can’t just leave something blowing wildly in the wind without putting some guideposts around it.”
Warren Cross, lawyer and chief executive of Export Incentives on the New South Wales central coast, has been working on the EMDG scheme since 1982 and endorses the review’s recommendations.
“Mortimer has hit the nail on the head,” Cross says. “The two things lacking in this scheme are certainty and simplicity. It’s not working, but if they fund it correctly, it will work really well.”
Cross says the oversubscription to the scheme and subsequent funding shortfalls have made companies hesitant about their export programs.
“That’s a fundamental problem. Some companies are going to suffer a substantial financial loss this year and next year as people are going to get a lot less than they expected.”
Cross also says the constant rule changes and the introduction by the Howard government of a two-tiered payment system have made the scheme “unbelievable complicated”.
“The Government has really got a bite the bullet. They’ve got a commit to the scheme and fully fund it and then stop changing the rules,” Cross says.
Related stories:
- Federal Government export assistance falls
- Export grant scheme reviewed for SMEs
- Free money for growth
