Bills Digest No. 164 2002-03
Development Grants Amendment Bill 2003
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
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Market Development Grants Amendment Bill
29 May 2003
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
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
To be eligible under the EMDG scheme, the
Australian exporter must, at present, satisfy specified criteria,
- 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
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
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
- a reduction of the maximum number of grants from eight to
- removal of additional grants for entering new markets, and
- the reduction of the maximum grant amount from $200 000 to
On 14 May 2003, Mr Craig Emerson MP, the
Shadow Minister for Innovation, Industry and Trade stated in a
The Budget maintains the 1997 cap on the Export
Market Development (EMDG), causing its real value to fall 11 per
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
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,
Additional grants above the maximum number of
repeat grants available will no longer be available for entering
new markets. Items 18-22 remove this
Item 23 provides a summary
diagram to assist applicants ascertain their likely eligibility for
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
- 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.
2 June 2003
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