Bills Digest No. 164 2002-03
Export Market Development Grants Amendment Bill
2003
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Export
Market Development Grants Amendment Bill 2003
Date Introduced:
29 May 2003
House:
Representatives
Portfolio:
Trade
Commencement:
On the day on which the Act receives the Royal Assent. The
Amendments are scheduled to apply from 1 July 2003.
The purpose of the Bill is to amend
the Export Market Development Grants Act 1997 to refocus the eligibility
selection criteria and thus enable more small and medium businesses to
qualify for export assistance.
The Export Market Development Grants scheme (EMDG) is
a financial assistance program for exporters. It is designed to encourage
small and medium businesses in Australia
to seek and develop export markets. Qualifying exporters are reimbursed
for a proportion of their expenditure on promotional activities.
To be eligible under the EMDG scheme, the Australian
exporter must, at present, satisfy specified criteria, including:
- income
of less than $50 million in the grant year
- export earnings of less than $25 million, and
- have
incurred at least $15 000 of eligible export expenses.
Once an exporter has received eight grants, any additional
grants can only be claimed for expenses in new markets. An export product
must be substantially of Australian origin to be eligible for an export
grant. Services (including tourism, conferences and events) delivered
to non-residents in Australia,
as well as services delivered outside Australia
may satisfy eligibility criteria under the EMDG scheme.(1)
In the Portfolio Budget Statements 2003-04,
the Australian Trade Commission (Austrade) states that Austrade is the
lead agency in Australia's
efforts to double the number of exporters by 2006.(2) In
its Portfolio Budget Statement 2003-04, Austrade's performance
information for Output 1.4 (administering the EMDG scheme), the following
statistics are stated:
- total number of EMDG applicants
(4580)
- total number of EMDG recipients (4120)
- number of new EMDG applicants
(1840), and
- the number of new EMDG recipients
(1480).(3)
The administered appropriation and administered expenses
figure in Budget 2003-04 for the EMDG scheme is listed at $150.4 million.(4)
One month before Budget 2003-04, on 16 April 2003, the Trade Minister, the Hon Mark
Vaile MP, announced that proposed refinements to the EMDG scheme would
enhance its efficiency by focussing on small business.(5)
The announcement foreshadowed the following changes to the scheme:
- a reduction of the annual turnover ceiling from $50 million to $30
million
- a
reduction of the maximum number of grants from eight to seven
- removal
of additional grants for entering new markets, and
- the
reduction of the maximum grant amount from $200 000 to $150 000.
On 14 May 2003,
Mr Craig Emerson MP, the Shadow Minister for Innovation, Industry and
Trade stated in a media release:
The Budget…maintains the 1997 cap on the Export Market Development
(EMDG), causing its real value to fall 11 per cent.(6)
Senator Aden Ridgeway, the spokesperson for the Australian
Democrats on Industry, Small Business and Tourism, issued a media release
on 14 May 2003 which included the following
statement:
By leaving the $150 million cap on the Export Market Development
Grants Scheme (EMDG), the [G]overnment is making it more difficult for
small businesses that have begun exporting with the assistance of the
EMDG to continue doing so.
Given the Government's stated target to double the number
of exporters by 2006, they should be doing more to facilitate export activity.(7)
The Australian Financial Review provided a report
on the EMDG scheme on 24 April 2003. The report noted that
the EMDG payments are paid under a split-payment system. The first-round
amount has a ceiling of $60 000 as an initial up-front payment to
an exporter. The second instalment is paid at the end of the financial
year. The amount of the second payment will depend on the amount of funds
remaining in the EMDG budget after all first payment instalments are made,
less Austrade's administration expenses (estimated at 5% or about $8 million).
The report noted that the more successful applicants there are for the
scheme, the less they will receive because the overall cap means that
the grants in individual total amounts will decrease.(8) The
reduction of the maximum grant amount from $200 000 to $150 000
will also see a further reduction for those applicants who can claim the
maximum reimbursement of promotional expenses under the EMDG scheme.
A media report also indicates that a rationing of grants
will be 'disastrous for an IT industry already fighting for diminishing
government funding' and that the industry will lobby against the proposed
changes in this Bill.(9)
The Government's reported response is that it wants to
target funds better towards new, smaller exporters to assist them to enter
export markets.(10)
The amendments proposed by this Bill are a refinement
of the existing EMDG scheme. Failure to pass the legislation would not
prevent the continued operation of the EMDG scheme under the existing
legislative criteria.
Items 1–4 reduce the income ceiling for applicants
during the grant year from $50 million to $30 million. This tighter income
ceiling will apply to claims by applicants from the 2003–04 financial
year onwards.
Due to the fact that the income ceiling, above, has been
significantly reduced and must now not exceed $30 million in the grant
years (financial year) 2003–04 onwards, the existing export earnings limit
of $25 million is essentially redundant. Items 5–12 remove reference
to the export earnings limit.
Item 13 is a key amendment. For other than an
approved trading house(11) (which may claim $500 000),
the maximum provisional grant to an ordinary applicant is reduced from
$200 000 to $150 000 for the grant years (financial year) 2003–04
and onwards.
Under the existing rules, applicants are limited to a
maximum of eight grants under the EMDG scheme (unless the applicant then
enters a new market and is considered for additional grants). The number
of multiple grants will be limited to seven by Items 14-17. Additional
grants for new markets(12) will also be removed (see Part 5,
below).
Additional grants above the maximum number of repeat
grants available will no longer be available for entering new markets.
Items 18-22 remove this exception.
Item 23 provides a summary diagram to assist applicants
ascertain their likely eligibility for a grant.
Planning for overseas promotional activities is
likely to involve lead-time. Existing exporters, currently in the promotional
planning stage, may have benefited by a longer transitional approach in
the refinements to the EMDG scheme to enable them to continue on the basis
of the existing more generous grant provisions. The proposed refinements
may target smaller businesses more effectively but some applicants already
in the 'stream' may feel that they have seen a reduction of the grant
amounts that they will be able to claim.
- The criteria that apply under the EMDG scheme are
found on the Australian Trade Commission web site (www.austrade.gov.au).
- Portfolio Budget Statements 2003-2004, Australian
Trade Commission, p. 91.
- ibid., p. 106.
- ibid., p. 99.
- 'Export Grant Scheme Provides Greater Focus on Small
Business', Media release, No. A034/2003, the Hon
Mark Vaile MP, Trade Minister, 16 April 2003.
- 'Budget fails to invest in Australia's
future', Media release, Mr Craig Emerson MP, Shadow Minister
for Innovation, Industry and Trade, 14 May 2003.
- 'Small Business in the Budget Shadow of Big Business',
Media release, No. 03/330, Senator Aden Ridgeway, Australian
Democrats Spokesperson for Industry, Small Business and Tourism, 14 May 2003.
- Robin Robertson,
'Support scheme is too successful for its own good', Australian Financial
Review, 24 April 2003.
- Selina Mitchell,
'Industry says grant rations will endanger exports', Australian,
22 April 2003.
- Mark Davis, 'Funding
cap proves turn-off for firms', Australian Financial Review,
23 April 2003.
- The Minister must determine guidelines for use by
Austrade for the approval of a 'trading house'. These determinations
are a disallowable instrument (see section 101 of the Export Market
Development Grants Act 1997).
- The meaning of a 'new market' is set out at section
113 of the Export Market Development Grants Act 1997. Section
113 will be repealed by this Bill.
Brendan Bailey
2 June 2003
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
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