Chapter 3
Issues
3.1
This chapter examines the main issues and concerns raised during the
committee's inquiry into the Textile, Clothing and Footwear Strategic
Investment Program Amendment (Building Innovative Capability) Bill 2009. The
principal matters raised in the evidence provided to the committee concerned difficulties
with examining the detail of the scheme, and the eligibility criteria under the
scheme.
The bill
3.2
Some submitters stated that more needed to be done to support the
industry as a whole, with the Australian Council of Wool Exporters and
Processors commenting that they regard 'this as a disappointing opportunity to
embrace a “whole of industry” approach.'[1]
3.3
While Bruck Textiles noted their disappointment with the Textile,
Clothing and Footwear (TCF) Innovation Package as a whole, they recognised the
purpose of this bill, stating:
...it is vital that this Bill be passed as it will accord the
continuation of the assistance that was always scheduled for this sector
industry under the former TCF (post 2005) Strategic Investment Program.[2]
3.4
Professor Roy Green who led the Review of the Australian TCF Industries
provided further support for the bill, noting that although:
...a broader whole of government approach will ultimately be
needed. In the meantime, this Bill is an important step in the right direction
for the TCF industries...I wish to reaffirm the argument of my report and commend
this Bill to the Committee.[3]
Details of the scheme
3.5
The Australian Industry Group suggest that the detail of the Clothing
and Household Textile (BIC) scheme should provide for streamlined application
and decision making processes. This would allow for faster decisions, increased
transparency, reduced red-tape and administration costs, and improved scheme
effectiveness.[4]
3.6
Bruck Textiles observe that the bill itself simply provides the
framework to establish the Clothing and Household Textile (BIC) scheme, and
does not provide the detail of the scheme. This makes it difficult for industry
bodies to determine whether they will be eligible for funding under the scheme:
Bruck, by virtue of its window furnishings manufacture, will
still be eligible to claim for funding under the BIC Scheme for certain
activities – or certainly, that is the company’s expectation. But this is not
entirely clear, as what is missing from the Bill, is the actual Scheme detail
outlining how the Program will be implemented and delivered.[5]
3.7
As the detail of the scheme is not available, several submitters note
that it is difficult to comment comprehensively on the bill and the scheme.[6]
3.8
Bruck Textiles note that a Consultation Paper was released in September 2009,
outlining the draft guidelines for the Clothing and Household Textile (BIC)
scheme, and inviting public comment. However, they state that 'nowhere, not
even in the earlier Consultation Paper, does the Government specify exactly
what products are to be covered'.[7]
3.9
The committee notes that the Consultation Paper does outline the
proposed guidelines for the Clothing and Household Textile (BIC) scheme, making
the two following proposals which give industry some guidance:
1. In
the interests of minimising administrative and compliance costs of BIC, the
provisions of BIC are to be based as much as possible on those of the TCF
Post-2005 (SIP) Scheme and participation in BIC is to be as seamless as
possible for eligible entities between the TCF Post-2005 (SIP) Scheme and BIC.
2. BIC
is to provide assistance to clothing and household textile entities in the same
way, and subject to the same conditions, as Type 2 grants assist the entities
under the TCF Post-2005 (SIP) Scheme, except that innovation grants would be
capped at 50 per cent of eligible expenditure rather than the 80 per cent under
the TCF Post‑2005 (SIP) Scheme.[8]
3.10
In addition, the Consultation Paper states that the Government will
consult with the clothing and household textile industry on implementation
issues, including the headline subsidy rate.[9]
3.11
In its submission the Australian Industry Group encourages the
Government to continue consulting with industry as the detail of the Clothing
and Household Textile (BIC) scheme is finalised and implementation commences.[10]
3.12
The Consultation Paper released by the Department of Innovation,
Industry, Science and Research notes that while only one Consultation Paper is
envisaged, there will be a second opportunity for public comment once the draft
guidelines have been developed. These are expected to be available in February
2010.[11]
Eligibility criteria
3.13
In section 37ZM the bill gives a broad outline of the types of products
which will be eligible for grants under the scheme, providing for:
....the making of grants in connection with, or incidental to
the following:
(i) products
that, under the scheme, are taken to be eligible clothing and household textile
products;
(ii) products, some or all
of which are intended to be sold in Australia.
3.14
However, the bill does not define which products are taken to be
'eligible clothing and household textile products'. Further, while the bill
provides a definition of clothing/finished textile expenditure under section 4,
it leaves the definition of clothing products and finished textile products to
be made in the legislative instrument:
clothing/finished textile expenditure means
expenditure in connection with, or incidental to, the manufacture in Australia,
or the design in Australia, of products that, under a TCF scheme, are taken to
be:
(a) clothing
products; or
(b) finished textile
products.
3.15
The committee notes that under the TCF Post‑2005 (SIP) scheme, the
definition of eligible products was provided in the legislative instrument, and
it is expected that definitions will be provided for in the Clothing and
Household Textile (BIC) scheme in the same way.
3.16
In light of the information available, various organisations have
commented on which entities, activities and products should be eligible for
funding under the Clothing and Household Textile (BIC) scheme.
3.17
Bruck Textiles made substantial comment on the entities they considered
should be eligible under the scheme, arguing that only companies which can
demonstrate significant manufacturing activity in Australia should be eligible
under the Clothing and Household Textile (BIC) scheme:
...eligible household textile companies must be required to
undertake a certain degree of fabric conversion (ie dying, printing, laminating
and coated) together with the final production of the household textile
product, rather than just cutting and hemming an externally sourced finished
fabric.[12]
Further, Bruck Textiles contend that:
...where firms have announced that they are shifting the bulk
of their manufacture offshore, they should automatically be excluded from
receiving any further funding under the TCF Schemes, or indeed any government
scheme designed to encourage and support local manufacturing activity.[13]
3.18
The Technical Textiles and Nonwoven Association (TTNA) take a similar
point of view, stating that eligibility for the scheme:
...should be confined to those companies that can demonstrate
manufacturing activity in Australia. Members of the TTNA believe that
supporting design-related activities would have little or no flow through to
manufacturing jobs in Australia and will only serve to place more production
off-shore and therefore is of negative value.[14]
3.19
Empire Rose also suggest that the funding provided under the bill should
be used to 'maintain some quality domestic manufacture'.[15]
The Carpet Institute of Australia Limited go even further, stating that 'the
new arrangements must include claw-back provisions for grants made to firms
that cease local manufacturing within a specified period of receiving
assistance.'[16]
3.20
The committee notes that section 37ZM(c) places very specific provisions
on the eligibility of products which are manufactured outside of Australia.
3.21
Bruck Textiles also suggest that entities which are eligible under the Clothing
and Household Textile (BIC) scheme and 'source locally produced fabrics in
their innovative developments be allowed an uplift factor (of say 50%) to the
rebate they receive on those projects.'[17]
3.22
The Australian Council of Wool Exporters and Processors state that the
'early stage' wool processing industry has been omitted from the scheme, and call
for a 'whole of industry' approach.[18]
3.23
The TTNA note their objection to the limitation of the scheme to
clothing and household textiles, and contend that:
...the BIC Scheme should also include technical and nonwoven
textiles for applications other than for household usage...the BIC Scheme should
not be restrictive and should support and fortify the union of innovation,
technology and capital investment across a number of textile manufacturing
processes. To that end, and in light of the governments quest for innovation,
we advise that the definition should include value added processes that provide
functionality to a product such as (but not limited to) coating and lamination...and
others including nonwovens. With profound usage in Australian homes, machine
made carpet...could also not intelligently be excluded from the purposes of the
BIC Scheme.[19]
3.24
The Carpet Institute of Australia Limited (CIAL) also commented on the
fact that it does not appear that carpet will be included under the scheme:
An important omission, however, is that the Scheme does not
include a list of the industrial activities that are classified as ‘household
textiles.’... CIAL strongly believes that machine made carpet should be
recognised as a household textile for the purposes of the Scheme.[20]
3.25
Bruck Textiles further argue that the Clothing and Household Textile
(BIC) scheme should encompass:
...companies involved in the production of “Specialised
Textiles” that involve further value adding than the basic textile
manufacturing processes of weaving, dyeing and finishing. There has been
significant change in the textile manufacturing in Australia since the
introduction of initial TCF (SIP) Scheme in 2000. The textile manufacturing has
moved from the manufacturing of basic commodity fabrics to high value added
products.
Therefore the definition of eligible entities needs to be
expanded to include the entities producing STRUCTURED and 3 – Dimensional
Textiles, multi layered textiles i.e. Coated Fabrics and Laminated Fabrics.
These special functional fabrics offer the ability to build innovation
capability in Australia that can be marketed internationally. The eligible
entities must include entities conducting these activities e.g. Specialised
Coating and Lamination, as these processes transform basic textiles into a
functional and high performance textiles.[21]
3.26
While the eligibility of such entities will be determined by the
definition of eligible products in the legislative instrument, the committee
notes that the bill is part of a larger TCF Innovation Package and such
entities may be eligible for grants under the Textile, Clothing and Footwear
Strategic Capability Program which is open to the wider TCF industries, as well
as assistance under schemes which are not specific to the TCF industries.
3.27
Several submitters commented that capital expenditure should be included
under the Clothing and Household Textile (BIC) scheme.[22]
Bruck Textiles contend that capital expenditure relating to the purchase of new
plant and equipment should definitely be included, as '...much innovative
development requires investment in the purchase and development of new
equipment, and this can often underscore the very success of the innovation in
question.'[23]
3.28
However, Empire Rose noted that the bill should establish 'tighter
controls on how funding is used to prevent it from being used for the wrong
purposes', as under the previous scheme, funding was 'used to purchase property
instead of using it to improve businesses'.[24]
3.29
The committee observes the statement in the Consultation Paper that 'Grants
equivalent to the TCF Post-2005 (SIP) Scheme’s Type 1 grants (in relation to
capital investment expenditure) would not be available under BIC.'[25]
3.30
However, the Consultation Paper also states that:
It is open to have different eligible activities under BIC
than those of the TCF Post-2005 (SIP) Scheme by...adding eligible activities
drawn from the TCF Post-2005 (SIP) Scheme’s Type 1 grants in relation to
capital investment expenditure (for example, including upgrading existing TCF
plant or equipment in relation to environmental requirements as eligible activity
for an innovation grant)...[26]
3.31
Bruck Textiles argue that if capital expenditure is excluded from the Clothing
and Household Textile (BIC) scheme, the maximum headline subsidy rate should
not reduce to 50 per cent from the 80 per cent that was
available under the TCF Post‑2005 (SIP) scheme.[27]
3.32
The Australian Industry Group notes that in order to ensure the Clothing
and Household Textile (BIC) scheme achieves its objective of fostering of 'a
sustainable and internationally competitive manufacturing industry and design
industry for clothing and household textiles in Australia', the eligibility
criteria for the scheme will have to be 'carefully developed.'[28]
Committee comment
3.33
The committee considers that Government should continue to consult with
industry on the details of the Clothing and Household Textile (BIC) scheme,
taking industry comment on the draft guidelines into account when formulating
the final guidelines for the scheme.
3.34
Given the matters raised in the evidence received, the committee
considers that the eligibility criteria established in the Clothing and
Household Textile (BIC) scheme must be clear, must facilitate the achievement
of the scheme's objective, and must be carefully formulated in consultation
with industry.
3.35
The committee notes that the bill will facilitate the continuation of
assistance provided for under the TCF Post‑2005 (SIP) scheme, and will
operate in much the same way as the previous scheme.
Recommendation 1
3.36
The committee recommends that the Senate pass the bill.
Senator Annette Hurley
Chair
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