The export subsidy regime still in turmoil

The Popular Export Market Subsidy Program is doomed unless there is a ‘severe overhaul’ following the federal government’s controversial reforms that have significantly reduced the value of the scheme for Australian businesses, the Export chairman says Consultants Association, Rod Campbell.

Government reforms to the Export Market Development Grants (EMDG) at the end of 2020 transformed the program from a reimbursement program to an entitlement program, with funding to be pledged in advance but not disbursed until that certain milestones are not achieved.

These reforms have also seen the removal of the export test, making many more businesses eligible for the popular scheme, which has operated for almost 50 years.

The number of applicants to the scheme has nearly doubled over the past year, and in the absence of any new government funding, this will see the value of individual grants that businesses receive rise to 80%.

The EMDG now has three tiers for applicants and a dedicated stream for representative bodies. The first level is for new exporters, while the other two levels are for more established businesses.

Although the government justifies the reforms as providing certainty for Australian exporters and unlocking cash sooner, no money under the scheme has yet been provided for the first two tiers for this financial year, according to Mr Campbell.

It’s been nearly 10 months since applications opened, and with the previous scheme requiring companies to wait 12 months after carrying out activities to receive reimbursement, there’s been virtually no change other than the size of the grants being smaller, he said.

“There’s total frustration – no one knows what’s going on,” Campbell told InnovationAus.com.

“I get at least five or six emails every week from clients saying they haven’t heard anything and there is complete radio silence from Austrade and the minister. It’s a scheme that aims to instill confidence – it’s laughable.

The government also recently revealed that $26 million had been taken from the applicants’ budget allocation from the previous year to pay for the increased interest in the program this year.

The EMDG program will fail unless there is a major overhaul, Mr Campbell said.

“[Former Trade Minister Simon] Birmingham said the EMDG is the most successful economic stimulus the government has ever introduced, and it is. Now they are wasting 46 years of proven success for a mystery program, and now the EMDG is going to sit alongside most of these other failed programs,” he said.

“It’s going to fail – they jammed it. They took it completely away from commercial reality. There must be a severe revision.

Austrade is still assessing applications for the 2020-21 financial year, with companies waiting to see how much funding they will receive. Mr Campbell said there was now also a lack of expertise within Austrade.

“Whether deliberately or not, people at Austrade who would have had the knowledge and experience of what was about to happen, they left Austrade or they were made redundant. Austrade is now run by people who have been there for less than two years,” Mr Campbell said.

There is also confusion among applying companies that the money will be provided before export activities begin, Mr Campbell said, but that is not the case. Under the new regime, a company must first provide a marketing plan and then a progress report showing that this plan has been carried out.

If these documents do not match, funding will not be awarded.

“Somehow someone worked that notion into the narrative of the new program. There would never have been a cash advance, but someone worked it into the narrative. But how can you plan in a world that is now disrupted by a pandemic and disruption in Europe?” says Mr Campbell.

Despite these concerns raised by opposition and government senators, no additional funding for the EMDG program was provided in the recent budget, with the exception of a $100 million top-up over two years as part of of the regional accelerator program.

This funding will only be for regional businesses and will not be administered by Austrade, but no further details have been released on this.

Do you know more? Contact James Riley by email.

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