Ian Murray, executive director of the Australian Institute of Export, provides an overview of the Export Market Development Grant (EMDG) scheme and how changes may improve its effectiveness.
In May, we conducted a study on the effectiveness of the EMDG scheme and the results proved once again that the program really works for exporters. From a sample of over 200, 64 percent of respondents said the EMDG scheme was a significant help when they first started out in export and only 15 percent said it was no help at all. When asked ‘if the scheme had not been available, would you have started exporting?’, 23 percent said ‘no’—substantial when you consider the thousands of companies that have entered the program since it started in 1974. Equally interesting was the number of respondents that, despite answering ‘yes’ to the second question, went on to say that without the scheme they could have pulled out, or that progress would have been slower.
Like all government programs, the EMDG scheme has had its fair share of reviews. Despite that, it lives on and we trust it will live on for many years. Right now it’s subject to the government review of export policies and programs to which a wide range of people submit; the majority will no doubt support the program, and many will promote change.
Change is necessary. First and foremost, the government has to remove the uncertainty that has crept in with a likely shortfall this year of $28 million, and even more predicted for 2008/09. If uncertainly is allowed to continue, exporters will either stop spending or reduce their marketing budgets. This can only result in a negative impact on our trade balance, which the rising dollar and credit crunch are doing their best to reduce now. The easy answer of course is more money, which I obviously support, but not beyond $250 or $300 million. The difficult question is how and to whom the assistance should be given.
There is no doubt that the program should continue to have a cap and that both the annual turnover of $50 million and the maximum annual claim of $150,000 should be retained. This will ensure that the scheme continues to focus on the SME sector and support new exporters. Change can be made by providing more flexibility and allowing more experienced exporters greater access. One way of doing this is replace the current time-based criteria with a dollar-based program. Instead of allowing exporters to claim for eight years, provide a maximum grant of say $1 million within a period of 15 to 20 years. This will have the effect of allowing a company who has accessed the scheme for seven years and not spent up to the maximum, back into the scheme when launching a new product or entering a new market.
Three other things that should be considered in this review are: taking steps to reduce the dropout rate, the need to measure the scheme’s performance, and a way to improve the productivity from an Austrade and applicant perspective.
One way of addressing the dropout rate, which is up to 30 percent in the first one or two years, is through education and training, for example, by making export education eligible under the scheme and by encouraging small companies entering the scheme to do a new exporter training course.
When one considers the amount of money spent on this program alone, the issue of effectiveness has to be the next question. Clearly the government has to make sure that funds are available to measure the program not just every few years, but on a regular basis. The government will then be in a position to measure effectiveness and make changes, without having to do expensive reviews every few years.
Finally, there is a strong argument for staggering the application process the way the ATO does with taxation returns. While Austrade encourages companies to lodge returns early, human nature takes over, resulting in a huge number being lodged late in November. Spreading them out over the year must be better for productivity.
With a rising dollar and the world knocked around by the credit crunch, the need has never been greater for supporting our exporters. We trust the government will take this opportunity to make what is a sound program even better.
—Ian Murray is executive director of the Australian Institute of Export