Thoughts on Round 4 of the Export Market Development Grant

As Round 4 of the Export Market Development Grant (EMDG) closes today, I thought I would share my views on where the program did not work this round, and some ideas to improve it for next time.

Firstly, some history

The EMDG has undergone some charges.  Originally it was a program that a business applied in arrears after it had spent the money.  Once all applications assessed the available budget was allocated across all applicants in what I considered was a reasonably fair basis considering how much you spent.  A business spending $300,000 would get more back than a business spending $60,000.

The main criticism here was that no one knew how much they would get back so it was very hard to plan.

To be fair the government listened and the EMDG application process was then changed to a process where you applied in advance for a particular tier.  Each tier had a maximum annual grant.  Once all applicants were accessed, the available funds were then allocated by tier, which pretty much each applicant getting the same amount.  In this case a business spending $300,000 got the same as a business spending $60,000.  And if they were in Tier 1 this was $15,000.

The criticism of this was that it was not worth the effort.  I personally know of one business that spend over $300,000 marketing in the UK to launch their product.  They sat down and worked out that the advantages of running their UK and European business through a UK subsidiary far outweighed their EMDG moneys.  End result income was removed from Australia which may someday come back as a dividend.

Now let’s look at Round 4 changes

To be fair they realized that amounts like $15,000 for Tier 1 and $24,600 for Tier 2 did not really work.

So, they decided in round 4 to try and increase the amounts that would be paid out.  They did this by working on a first come first served basis.  Allowing those successful applicants to get paid more.  In theory not a problem as many grant programs work like this.

But here is where they made a fatal flow in the process in my view.

Tier 1 was for new exporters.  But, if you had just 1 export sale to anywhere in the world in the past 18 months you were not eligible for Tier 1.

Tier 3 was for current exporters expanding to selected new markets.  But if you had 1 export sale in the past 18 months to the selected new market you were not eligible for Tier 3 for that market.

For example, I know of one business with over $1.4m in exports from the US (their main market), but had managed to snag 1 invoice of $11k from Singapore and 1 of $32k to the UK.  This made them ineligible for Tier 3 in respect of the UK or Singapore, the next markets they were planning to expand to.  They had to apply under Tier 2, but they were too late.

This meant, anything else was left to Tier 2.

Guess what – most businesses (like the example above) fell into Tier 2.  And the demand for this tier was so high that applications for Tier 2 were closed within 3.5 hours of opening on 12 November 2024.  That’s right $62m in grants gone in 3.5 hours.

But in respect of the other Tiers, these are only closing today and it looks like some of these will be undersubscribed (i.e. not all the budget for that tier has been applied for).

And they are now talking about putting some of the moneys from the undersubscribed tiers back to Tier 2 applicants (but not to new Tier 2 applicants who missed out)

Recommendations

Firstly, the definitions of Tier 1 and Tier 3 need to allow for the examples of where a business has had some, but limited success in their export markets.  One export sale should not disqualify you from a Tier.

Secondly, Austrade should take a leaf out of the Qld Governments Business Basics Grants Program.  This had the same issue of closing within hours of opening and many businesses missing out simply because for whatever reason they could not apply that quickly.  So now they have a ballot process.  All accessed applications within a time frame of a week or 2, enter into a ballot to pick the successful applicant.

Let’s see if they make any changes for the next round of the Export Market Development Grant .

Contact Wayne on wayne@arealcfo.com.au or 0412 227 052.

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