Part Two
Performance reporting
Outcome 1
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Advance Australia’s trade, investment and education promotion interests through information, advice and services to business, the education sector and governments.
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Programme 1.2: Trade development schemes—Export Market Development Grants
Objective
Provide an incentive for businesses to enter into export and grow to become sustainable exporters.
Deliverables and key performace indicators
Tables 4 and 5 summarise the results for programme 1.2 against the deliverable and key performance indicators set out in Austrade’s 2013–14 Portfolio Budget Statements.
| Key performance indicator | Achieved |
Outcome |
|---|---|---|
Number of grant applications. |
|
The number of grant applications received in 2013–14 was 2,715. This is fewer than the 3,045 received in 2012–13, and lower than the budgeted target of 3,000–3,500— see page 87. |
Number of grant recipients. |
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The number of grant recipients in 2013–14 was 2,445.(a) This is fewer than the 2,757 received in 2012–13, and lower than the budgeted target of 2,800–3,300— see page 88. |
(a) Includes mainly 2012–13 grant year recipients, but also some recipients carried over from previous grant years.
Administering the Export Market Development Grants scheme
The Export Market Development Grants (EMDG) scheme encourages small and medium-sized Australian businesses to enter into and develop export markets. To be eligible for a grant in 2013–14, applicants must have incurred more than $20,000 in eligible expenses, which businesses accessing the scheme for the first time may incur over two years. Almost all grants are paid the year after applicants’ export expenditure has been incurred (and therefore the term ‘grant year’ refers to the year in which the expenditure is incurred).
Export Market Development Grants Amendment Bill 2014
The Export Market Development Grants Amendment Bill 2014 was passed by both Houses of Parliament in March 2014. The Bill aligned the EMDG scheme’s rules with the revised level of scheme funding and also contained technical and simplification measures. The Bill provided for the following changes to the Export Market Development Grants Act 1997:
- an increase in funding for the EMDG scheme by $50 million over four years, commencing in 2014–15
- an increase in the maximum number of grants able to be received by an applicant from seven to eight
- a reduction in the minimum expenses threshold required to be incurred by an applicant from $20,000 to $15,000
- a reduction in the $5,000 deduction from the applicant’s provisional grant amount to $2,500
- prevention of the payment of grants to applicants engaging an EMDG consultant assessed to be not a fit and proper person
- introduction of a mechanism that enables a grant to be paid more quickly if the grant is determined before 1 July following the balance distribution date
- introduction of a provision allowing, for the 2013–14 financial year only, the payment of additional expenses above the cap on administration costs from Austrade’s departmental appropriation.
Consultant Quality Incentive Programme
The Export Market Development Grants (Extended Lodgement and Consultant Quality Incentive) Determination 2012 provides the framework for a voluntary system aimed at improving the quality of applications prepared by EMDG consultants. EMDG consultants who have a demonstrated record of lodging at least five accurate applications over the whole preceding lodgement period, and apply to participate in the programme, are granted an extended period of an additional three months for lodging applications for grants.
The determination first applied to EMDG applications lodged in 2013–14 and extends to EMDG applications in future years. In 2013–14, 55 of the 76 eligible EMDG consultants were approved as participants in the programme. The consultants approved under the programme in 2013–14 have been listed on the Austrade website.
Chunguang Liu | Senior Grants Auditor, EMDG scheme, Sydney
Chunguang is qualified in law and international business and his work involves assessing claims under the Export Market Development Grants scheme. Having studied and worked in China prior to coming to Australia in 2000, Chunguang also advises his colleagues on the Chinese market and related legal issues. ‘I have experience and knowledge in both public and private sectors in China and Australia, and I have a good understanding of public policies and the needs of small to medium-sized enterprises in both markets’, he said.
One of his biggest achievements at Austrade was assisting a business-matching opportunity for Sanitarium Health Foods with Shanghai Hualian Group in 2004, resulting in an immediate export impact. ‘At the last minute, I acted as a translator and facilitator all the way through a demonstration breakfast, bridging both business cultures. At the conclusion, a container-load order was placed by the Shanghai customers on the spot’, he said.
Chunguang also provides risk management services associated with exports to Chinese-speaking markets. He has worked in other areas of Austrade, including Austrade Direct, investment and on past new exporter development programmes. ‘Since I started at Austrade, I’ve provided tailored services in a one-on-one capacity to more than 800 exporters, many of which have grown from tiny companies to sustainable exporters, like the Aussie Bums clothing brand’, he said.
Scheme performance
As a result of a combination of factors, including global trading conditions, the number of EMDG applications received in 2013–14 decreased by 10.8 per cent, with 2,715 grant applicants compared to 3,045 applicants in 2012–13. In the previous year, grant applications had declined by 7.1 per cent.
The scheme’s initial appropriation for 2013–14 was $125.4 million, which was increased to $137.9 million following the release of the Government’s 2013–14 Mid-Year Economic and Fiscal Outlook. This increase delivered on the Government’s 2013 election commitment to progressively restore funding to the EMDG scheme starting with an initial boost of $50 million over four years.
All grants up to the value of $60,000 were paid immediately after assessment and approval. Applicants who qualified for grants in excess of that amount were paid the remainder of their grants at the end of the financial year. The average value of grant payments for the 2012–13 grant year was $45,708, which was an increase of 6 per cent on average grant payments for the 2011–12 grant year. The total assessed eligible grant demand for the 2012–13 grant year amounted to $106.6 million.
Table 6 shows a total of 2,445 grants, worth $113.6 million, were paid to EMDG recipients in 2013–14, a reduction of 11.3 per cent in grant numbers and 5.6 per cent in the total value of grant payments compared to 2012–13. The 11.3 per cent reduction in the number of grant recipients follows the reduced demand of 7.9 per cent in grant numbers and 4.1 per cent in grant payments in 2012–13.
A total of 47 grants, worth $3.4 million, were made under the special ‘approved body’ category to businesses such as industry associations and regional tourism bodies, and to firms cooperating in joint venture–style marketing arrangements.
(a) Includes 2,332 recipients for the 2012–13 grant year and 113 recipients carried over from previous grant years.
(b) Includes the value of grants for the 2012–13 grant year of $106.6 million plus the value of 113 grants from previous years and supplementary payments to grant recipients from previous years. A total of $113.6 million was paid from the 2013–14 budget.
Although almost all grants are paid the year after applicants’ export promotion expenditure has been incurred (the grant year), in any financial year there will be some additional grants relating to previous grant years. To allow a comparison between the number of recipients and applicants relating to the same grant year, Table 7 provides a profile of grants that were paid in 2013–14 to the 2012–13 grant year applicants only. A comparison with previous years is also provided.
The average grant paid in 2013–14 to 2012–13 grant year recipients was $45,708 (up 6 per cent) and the median grant was $30,862 (up 10 per cent). The scheme continued to provide strong support to regional and rural Australia, with 478 grants (20 per cent) paid in the 2012–13 grant year to businesses in those areas. While the EMDG scheme supports a range of business types, companies are the dominant category. In the 2012–13 grant year, 91.5 per cent of EMDG recipients were in that category (Table 8).
Small exporters continue to be the largest category of EMDG recipients, with 74 per cent of 2012–13 grant year recipients reporting annual income of $5 million or less (Figure 15), 74 per cent of recipients reporting fewer than 20 employees (Figure 16) and 76 per cent reporting export earnings of $1 million or less (Figure 17). A breakdown of EMDG recipients by state and territory in the 2012–13 grant year is shown in Figure 18 and Table 9.
Figure 15: EMDG recipients by annual income, 2012–13 grant year
Figure 16: EMDG recipients by number of employees, 2012–13 grant year
Figure 17: EMDG recipients by annual export earnings, 2012–13 grant year
Figure 18: EMDG recipients by state and territory, 2012–13 grant year
Note: Figures do not total 100 per cent due to rounding.
Note: Some figures have been rounded.
By broad industry classification, the majority of EMDG recipients (65 per cent) in the 2012–13 grant year were in service industries, with a further 30 per cent in manufacturing and 5 per cent in the primary sector (Figure 19). Education and culture, ICT services, and professional, scientific and technical services dominated among services recipients.
Figure 19: EMDG recipients by industry, 2012–13 grant year
The principal market targeted by EMDG recipients continued to be the United States, with 58.6 per cent of all recipients paid grants for promotion activities which included the United States, followed by the United Kingdom, China, Singapore, Hong Kong and Germany (Figure 20).
The advertising expenditure category was the largest expenditure category as a proportion of total assessed expenditure, followed by marketing visits and overseas representation costs (Figure 21).
Figure 20: Top six countries targeted by EMDG recipients, 2012–13 grant year
Note: Recipients may promote to more than one country.
Figure 21: EMDG recipients by expenditure category, 2012–13 grant year
Scheme funding
The EMDG scheme’s initial appropriation for 2013–14 was $125.4 million, and a further $6.4 million was carried over from previous appropriations for grants carried over from 2012–13. The Government allocated an additional $50 million to the scheme over four years. This allocation provided an additional $12.5 million to the EMDG scheme’s budget for 2013–14, increasing the scheme’s appropriation for 2013–14 to $137.9 million.
For the 2012–13 grant year, 2,332 businesses (100 per cent of all recipients) received their full grant entitlements, and 592 businesses received more than the initial payment ceiling amount of $60,000. Eligible demand for grants was lower than available funds, resulting in an underspend of $23.8 million.
Total cash funding used by the scheme in 2013–14 was $120.9 million, including $6.4 million of funding carried over for grants from 2012–13. Of the funds appropriated in 2013–14, $6.9 million, or 5 per cent of the original appropriation, was spent on administration, as well as an additional $0.4 million paid from departmental appropriations.
Communication and promotional activity
During 2013–14, Austrade’s EMDG communication activities focused on alerting EMDG clients, including grant applicants, consultants and industry bodies, to the legislated changes to the scheme attached to the Export Market Development Grants Amendment Bill 2014. Publicity was also given to the implementation of the EMDG Consultant Quality Incentive Programme, which commenced on 1 July 2013.
EMDG success stories, featured in EMDG newsletters and on Austrade’s website, www.austrade.gov.au, highlight the export successes of applicants and the role the scheme plays in helping Australian businesses become sustainable exporters.
Mail-outs informed EMDG clients about new developments, and workshops were conducted to improve applicants’ understanding of the scheme.
Administrative performance, risk and fraud control
Austrade processed 2,479 (91.3 per cent) of 2012–13 grant year applications within the 2013–14 financial year.
While striving for faster turnaround and better client service, Austrade maintained its strong focus on risk management and fraud control, which included the following measures:
- All applications were subject to appropriate levels of assessment scrutiny, on a risk-managed basis.
- Claimed grant amounts processed in 2013–14 were adjusted down by a total of $18.2 million (14 per cent) as a result of Austrade’s assessment activities during the year.
- No persons were convicted of fraud against the EMDG scheme during the year. At 30 June 2014, one person was before the court for alleged fraud, and no cases were with the Commonwealth Director of Public Prosecutions for consideration as to whether to commence court proceedings.
During 2013–14, 69 of the applications processed resulted in a request for an internal Austrade review of the initial grant assessment, down from 133 in the previous year. The appeal rate was 2.7 per cent of applications processed.
Details of appeals made by EMDG applicants to the Administrative Appeals Tribunal are shown in Table 10. Seven appeals by EMDG applicants were finalised during 2013–14, comprising three appeals that were successful in part, two appeals that were withdrawn or settled prior to the hearing and two that were decided in Austrade’s favour. Three appeals were in progress at 30 June 2014.
Table 10: Appeals to the Administrative Appeals Tribunal under the EMDG Act in 2013–14
| Number of appeals in progress at 1 July 2013 | 5 |
| Number of appeals received from 1 July 2012 to 30 June 2014 | 5 |
| Total | 10 |
| Appeals withdrawn, finalised or settled prior to hearing | 2 |
| Decisions handed down by the Administrative Appeals Tribunal | 5 |
| Decisions handed down by the Federal Court | 0 |
| Total | 7 |
| Number of appeals in progress at 30 June 2014 | 3 |
Two applicants were denied a grant under the ‘not fit and proper’ provisions in section 87AA of the Export Market Development Grants Act 1997. No appeals against a not fit and proper determination were lodged, and one applicant had section 73 of the Act applied for failing to respond to Austrade’s request for information. At 30 June 2014, seven companies were under review under section 87AA.
Austrade’s support enables Opengear to build its international presence
Since 2004, Opengear has been designing, manufacturing and delivering feature-rich, cost-effective, flexible solutions for secure remote infrastructure management. Opengear enables companies to access and manage virtually any electronic device on their network remotely and securely from anywhere, even if the network is down, to improve efficiencies and maximise business continuity.
Opengear has graduated from receiving support from the Export Market Development Grants scheme to a business with $10 million in revenues, branches in the United States and Europe, and 90 per cent export sales. The company, which maintains its executive management and research and development teams in Brisbane, has received seven grants under the scheme.
Company Director Robert Waldie said the grants had enabled Opengear to build an aggressive international trade show presence. ‘We’ve found trade shows to be a key success factor in growing our export business’, he said. ‘In October 2013 alone, Opengear was exhibiting at Interop in New York City, IT Expo in London and the Data Centre Dynamics show in Melbourne. In November 2013, we had stands at Usenix LISA ’13 in Washington DC, at Cisco Live in Mexico and at Norway’s largest IT fair, ATEA Community.’
Opengear’s Chief Executive Officer, Rick Stevenson, said the scheme’s support had played a key part in funding Opengear’s growth. ‘We are grateful to Austrade for those contributions’, he said. ‘Although the grants have ended, we are at the point now where we are growing profitably with strong positive earnings before interest and tax. More than half our employees are now employed in our overseas offices.’
Opengear’s IM7200—a state-of-the-art infrastructure management solution that streamlines the remote management of networks, servers and power infrastructure in data centres and remote environments. The company received assistance from Austrade through the EMDG scheme. Image used with permission of Opengear.
Austrade assists Mukti Botanicals to enter overseas markets
Mukti Botanicals is a manufacturer of luxury skincare products. Established in 2000, the company is now one of Australia’s premier organic brands. Certified with the Organic Food Chain in Australia, Mukti products are formulated on the principles of cosmetic chemistry, aromatherapy, herbalism and organics.
Mukti, the company’s founder, has a background in natural therapies, beauty therapy and holistic medicine. As a therapist with a passion for natural products, Mukti was unable to find a brand that she felt comfortable using on her clients. She furthered her research and study of cosmetic chemistry and went on to create her unique botanicals range.
The company now has distribution networks throughout the Pacific islands, Asia and the United States. Mukti Botanicals has been a client of the Export Market Development Grants scheme since 2005–06, and the payments have assisted with reimbursement for travel to trade fairs and the provision of free samples to potential overseas customers. The payments have also covered part of the cost of advertising in international magazines such as New Woman, Blitz and Professional Beauty. This promotion has been highly successful, as overseas sales have primarily resulted from marketing via Mukti’s website and through magazine exposure.
‘The scheme has assisted us in offsetting the expenses of entering overseas markets that may have otherwise been prohibitive for a small business. The reimbursement of capital, especially in the early years of funding, has allowed us to attend trade shows, analyse the market, visit our distributors, conduct market visits for training, educational and promotional purposes, and heighten brand awareness’, Mukti said.
Mutki Botanicals produces a broad range of certified organic beauty products, including its age-defence serums. The company received assistance from Austrade through the EMDG scheme. Image used with permission of Mukti Botanicals.