Bills Digest no. 170 2009–10
Export Market Development Grants Amendment Bill
2010
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
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Export Market
Development Grants Amendment Bill 2010
Date introduced: 26
May 2010
House: House of
Representatives
Portfolio: Trade
Commencement: On
the day after Royal Assent
Links: The
links to the Bill, its Explanatory Memorandum and second
reading speech can be found on the Bills page, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Bill extends the Export Market
Development Grants (EMDG) scheme by five years from 2011–12
to 2015–16 and makes amendments to the Export Market
Development Grants Act 1997 (the Act) to generally reduce
access to grants and grant money under the Act in line with a
reduction in funding announced in the 2010–11 Budget.
The EMDG scheme was first established in 1974 by the Export Market Development
Grants Act 1974. The scheme was substantially simplified
in 1997 by the Export Market Development Grants Act 1997
which repealed the previous legislation and capped total annual
grants paid under the scheme at approximately $150 million per
year.[1] Partly in
fulfilment of an election commitment to improve Australia’s
trade performance and partly in anticipation of a review of the
EMDG scheme, the Rudd Government increased funding in 2008–09
and 2009–10 to $200 million per year.[2] Consequent amendments to the scheme by
the Export Market Development Grants Amendment Act 2008
widened the eligibility criteria as well as increasing the number
and quantum of grant payments.[3]
In his second reading speech introducing the Bill, the Minister
referred to the timing of the extra funding and the focus of
assistance:
In the government’s first term we have
modernised the scheme through legislation in 2008 and we have
increased its funding in 2008-09 by $50 million and again in
2009-10 by $50 million. This increased funding of $100 million over
two years was made at exactly the right time to support our
important SME [small and medium enterprise] exporters during the
global financial crisis.
The modernisation of the scheme and increased
funding has received a very positive response from business; over
the last two years the number of applications has increased 21 per
cent.
As international markets continue to improve
and as the government brings the budget back into surplus it is now
appropriate to review the provisions of the scheme to focus its
assistance on those SME exporters who can benefit most.[4]
The Explanatory Memorandum for the Bill states that expenditure
under the Act ‘is set through annual Appropriation Acts. A
capping mechanism ensures that expenditure under the scheme is
limited to the amount appropriated’.[5]
According to the 2010–11 budget papers, the amount
appropriated for 2010–11 is
$150.4 million:
Table 1: Trade development schemes – Export Market
Development Grants (EMDG)
|
2009‑10
Revised budget
$'000
|
2010-11
Budget
$'000
|
2011-12
Forward
year 1
$'000
|
2012-13
Forward
year 2
$'000
|
2013-14 Forward
year 3
$'000
|
|
Annual
administered expenses: Administered item
Total program expenses
|
200,400
200,400
|
150,400
150,400
|
150,400
150,400
|
155,400
150,400
|
154,000
150,400
|
Source: Portfolio budget statements
2010–11: budget related paper no.1.10: Foreign Affairs and
Trade Portfolio, p. 78
The proposed changes outlined in the Bill include:
- an extension of the EMDG scheme so that it applies to all grant
years from 2011–12 to 2015–16 inclusive. A further
extension beyond 2015–16 will be subject to a review which
must be carried out and provided to the Minister not later than 30
June 2015
- a reduction in the maximum grant payable per grant year from
$200 000 to $150 000
- a reduction in the maximum number of grants available for an
individual recipient (other than an approved body or joint venture)
from eight to seven
- an increase in the minimum eligible expenses threshold from $10
000 to $20 000
- a cap on intellectual property (IP) registration expenses at
$50 000 per application
- an increase in the income limit for members of approved joint
ventures/consortia from $30 million to $50 million. (This change
will rectify a previous drafting error and aligns the income limit
applying to joint venture members with the income limit applying to
general EMDG applicants.)
- the removal of as an eligible special approval applicant
category, as recommended by the Mortimer review. The current
provision allows the Australian Trade Commission (Austrade) to
grant special approval to large organisations that would normally
be ineligible to access the scheme when representing smaller, rival
competitors. This provision has been unused for a number of
years
- the reinstatement of disqualifying conviction provisions in the
Act that were unintentionally removed when the Criminal Code
Amendment (Theft, Fraud, Bribery and Related Offences) Act
2000 replaced earlier disqualifying conviction provisions
- enabling the Chief Executive Officer (CEO) of Austrade to
impose conditions on the accreditation of EMDG consultants,
and
- amending the ‘form and manner’ requirements and
lodgement deadlines for grant applications submitted by accredited
EMDG consultants.
It should be noted that the establishment of a statutory
accreditation scheme for EMDG consultants, as already provided for
by section 100 of the Act, will only have practical application
should Austrade decide to implement such a scheme in the future. At
this stage, Austrade has not made a decision to proceed with a
consultant accreditation scheme but the proposed changes enabling
Austrade to specify, among other things, accreditation conditions
and lodgement deadlines form part of the accreditation
framework.
There have been 15 reviews of the EMDG scheme since it started
in 1974.[6] The most
recent review was conducted in 2008 by Mr David Mortimer AO,
Chairman of Leighton Holdings Ltd and Australia Post. The immediate
issues faced by the Mortimer review were a shortfall in capped
funding in 2007–08 (approximately $28 million and a greater
shortfall in the subsequent year), stakeholder uncertainty due to
changes introduced in 2008, and an unexpected fall in export
marketing expenditure.[7] The shortfall in funding, which effectively reduced the
maximum grant from $150 000 to $80 000, was met by $50 million in
extra funding provided by the Government in 2008–09 and
2009–10.
The Mortimer review was concerned that current demand for the
EMDG scheme exceeded available funding. Grant recipients were
guaranteed up to a designated initial payment, but the balance or
remaining amount which was paid at the end of the financial year
depended on residual funding. This meant that a large number of
recipients received a substantially reduced EMDG entitlement. While
continuing to support a capped funding scheme, the Mortimer review
identified two options to better align the cost of the scheme to
its budget:
- allocate significant additional funding to meet current and
future demand estimates of demand, and
- set ongoing expenditure at the 2009–10 budgeted level
($200 million) through significant changes to grant
provisions.
The review favoured the latter option but stopped short of
recommending either option. Instead it recommended that the funding
cap should be indexed annually to preserve the real value of the
funding and a tightening of provisions to reduce access to the
scheme. Among the changes recommended by the review were a
reduction in the number of grants a business is eligible to receive
from eight to five and an increase in the minimum eligible expenses
threshold to $30 000.
Successive reviews of the EMDG scheme have pointed to the grant
multiplier effect of the scheme and its positive trade
impact.[8] Similarly,
the economic modelling commissioned by the Mortimer review, as part
of a broader review of export policies and programs, found that the
scheme generated additional exports and compared favourably with
other government programs and benchmarks.[9] However, the Productivity Commission
made cautionary observations regarding the survey responses used in
the modelling.[10]
Schedule 1—Amendments to the
Export Market Development Grants Act 1997
Items 1 and 2 remove
the approved trading house applicant category from the Act.
Item 3 provides for
applicants (other than approved bodies and approved joint ventures)
to receive up to seven grants under the EMDG scheme (previously the
maximum was eight).
Items 4–9 make
consequential amendments to the Act in respect of the removal of
the approved trading house applicant category and the reduction in
the maximum number of grants available to individual
recipients.
Item 10 increases
the eligible expenses threshold incurred
for a grant from $10 000 to
$20 000 within the grant year (if the applicant is not a grantee in
respect of any previous grant year, then eligible
expenses includes those incurred during the grant
year or the immediately preceding year).
Item 11 limits the
expenses claimable under item 8 of the table in section 33 of the
Act to $50 000 per grant year. Item 8 in the table was added to the
list of eligible promotional activities by the Export Market
Development Grants Amendment Act 2008 and relates to expenses
incurred in granting, registering or extending eligible IP rights
under foreign laws.
Item 17 increases
the income limit for EMDG eligibility of joint venture members from
$30 million to $50 million in the grant year. The income limit
rules in subsections 7(1)(d) and 7(4)(c) of the Act, which apply to
individual applicants and trustees respectively, was increased from
$30 million to $50 million by the Export Market Development
Grants Amendment Act 2008. The income limit rule applying to
joint venture members remained unchanged. This item aligns the
income limit rule applying to joint venture members with the income
limit rule applying to individuals and trustees.
Item 22 reduces the
maximum grant payable per grant year from $200 000 to $150 000. The
current $250 000 ceiling for the combined grants payable for
members of related companies groups is unchanged.
Item 32 amends
section 106A to require an independent review of the EMDG scheme to
be carried out and provided to the Minister no later than 30 June
2015. The last section 106A review was the 2008 Mortimer review
mentioned earlier in this Digest.
Item 34 amends the
definition of grant year in section 107 of the Act so that
all grant years from 1996–97 until 2015–16 inclusive
are years for which grants can be paid.
Item 36 reinstates
the disqualifying conviction provisions in the Act that were
unintentionally removed when the Criminal Code Amendment
(Theft, Fraud, Bribery and Related Offences) Act 2000 replaced
earlier disqualifying conviction provisions.
Item 37 amends the
‘form and manner’ requirements at paragraph 70(2)(b) of
the Act to permit an extension of time for submitting grant
applications in the circumstances specified in a legislative
instrument to be made by the CEO of Austrade.
Item 38 inserts
new section 70(4) into the Act to permit the CEO
of Austrade to specify, by legislative instrument, the
circumstances and timeframe for submitting applications. The
instrument would be subject to parliamentary scrutiny and
disallowance under the Legislative Instruments Act
2003.
Item 39 provides
that the same disqualifying conviction provisions referred to at
item 36 also apply to EMDG consultants preparing applications on
behalf of their clients.
Item 40 inserts
new paragraph 97(1)(k) to provide that any
decision of the CEO of Austrade under an EMDG consultant
accreditation scheme to impose conditions on the accreditation of a
consultant or to vary those conditions is a ‘reviewable
decision’.[11]
Item 41 inserts
new paragraph 100(2)(aa) to permit the CEO of
Austrade to make decisions imposing conditions on the accreditation
of EMDG consultants or varying or removing those conditions.
Items 42 makes
consequential amendments to the Act as a result of the
reinstatement of disqualifying conviction provisions referred to at
item 36.
Item 43 provides
that the updated disqualifying conviction provisions described at
items 36 and 39 apply to grant applications made in respect of
grant years commencing on or after 1 July 2010. The updated item 42
conviction provisions will only apply in relation to grants or
advances paid by Austrade on or after the day after Royal
Assent.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2465.
Michael Priestley
11 June 2010
Bills Digest Service
Parliamentary Library
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