Corporate advisory firm BSI has called for Australian exporters to put pressure on the Federal Government to overturn its decision to reduce funding of the Export Market Development Grants (EMDG) Scheme.
The Federal Budget is slashing the allocation of support for SME exporters by $50 million and halving the Tradestart support program.
BSI CEO Ivan Kaye said that the cuts will serve only to undermine the effectiveness, motivation and desire of Australian exporters, especially smaller exporters, to pursue overseas markets.
"If anything, support for this vital part of the economy should be increased," Mr Kaye said. "We have had several calls from EMDG recipients all over Australia, who would be happy to share their opinions of the latest cuts."
Mr Kaye added that the cost-cutting is contrary to the scheme's objectives.
"Reduced funding to this program is clearly a false economy, where the broader economic returns from increased exports far outweigh public financial ‘savings’ from paring back the scheme."
Mr Kaye points out that at the beginning of the decade, the Government made a commitment to "doubling the number of exporters by 2006".
"This KPI has been achieved, yet, ironically, the pool of funding to support these exporters has significantly been reduced."
The Export Market Development Grants Scheme (EMDG) is an integral part of the export promotion strategy of many Australian exporters, especially smaller to medium sized exporters.
"For many exporters, the EMDG Scheme plays a significant role in the decision of whether or not to export, which markets to tackle, their export orientation (what proportion of production to export) and how much they are prepared to invest in marketing," Mr Kaye explains.
"These businesses are typically cash flow poor, and determine the amount of marketing spend, factoring in potential rebates from the EMDG.
"Reducing their potential entitlement places a huge strain on their resources, and will limit their marketing activity in the following year, hence starting the cycle of reduced export activities in following years."
The EMDG Program – A Successful Program
The EMDG Scheme is regarded as one of the most successful programs delivered by Government. Its objective is to bring benefits to Australia by encouraging the creation, development and expansion of foreign markets for Australian goods, services, intellectual property and know-how.
The scheme achieves this by encouraging small and medium Australian businesses to develop overseas markets through a 50% reimbursement of expenditure incurred on export promotional activities.
The Scheme is open to Australian companies that meet an overseas promotional expenditure threshold of $A10,000 over a two-year period, have a turnover of less than $A50 million.
"The businesses that received grants during this same period generated in excess of $A5 billion in exports," Mr Kaye said.
"Claimants in the 2008/2009 financial year, due to be paid out in 2010, are expected to only receive 60% of their full entitlements. This is as a result of increased numbers of exporters.
"Due to a reduction of support for claimants in the 2009/2010 financial year from $200m to $150m, this shortfall is expected to increase significantly."
This shortfall is of great concern to ordinary businesses that look to the scheme to contribute to their export performance.
"While recognising the need for fiscal discipline within public financial management, one needs to take into account the substantial economic multipliers and benefits arising from expanded export outcomes resulting from support from the EMDG Scheme," Mr Kaye said.
"Exporters, do whatever you can to convince government to continue to support this worthwhile support for the SME Exporter."
To read more about BSI's Exporter Call to Action, visit:
Business Strategies International (BSI)
Business Strategies International assists small and medium sized companies realise their growth potential through insightful analysis and corporate advisory activities. BSI is uniquely positioned to work with high potential companies. To find out how BSI can make your business grow, visit http://www.bsi.com.au
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