This week, in the fifth instalment in a six-part series on export strategies, Gary Kleyn considers the incentives and help provided by the Federal Government.
MOTIVATED by a desire to double the number of exporters, the Federal Government is keen to provide and market its incentives that help businesses wishing to market themselves overseas.
At the Federal level, the Export Finance and Insurance Commission and the Australian Trade Commission (Austrade) offer guarantee facilities or grants for exporters.
The Export Working Capital Guarantee facility offered by EFIC has been in operation since 1992. Since that time 167 exporters have used the facility with a total value of $141 million and supporting export contracts with a total value of $635 million.
The facility is available to an Australian exporter with annual revenue of more than $2 million. To be eligible the con-tract, purchase order or letter of intent must have a value of at least $300,000. Also, it is available if the exporter’s bank has rejected the exporter’s app-roach for cash and/or bond facilities to complete the export transaction.
Western Australian drilling company Maxidrill Pty Ltd is one company that has made use of the facility.
A $1.3 million contract was awarded to its 95 per cent-owned subsidiary, P.T Maxidrill Indonesia, for drilling services to P.T. Newmont Nusa Tenggara. EFIC issued a $377,000 EWCG to guarantee a working capital advance made to Maxidrill by its bank. In addition, EFIC issued a $76,900 performance bond.
Besides the EWCG facility and performance bond, EFIC also offers finance to exporters including Documentary Credit Finance, where EFIC takes on the payment risk of the bank issuing the documentary credit, or bonding facility. EFIC also provides insurance against non-payment arising from defined political and commercial risks.
Austrade administers the Export Market Development Grant scheme to provide financial assistance for new and existing exporters. The grant has been so successful, the Federal Government recently announced changes that place restriction on the eligibility of exporters to receive the grant.
EMDG reimburses up to 50 per cent of the expenses incur-red on eligible export promotional activities after the business has spent more than $15,000. Each year, $150 mill-ion has been allocated to the program.
This year demand is outstripping the monies available, however in the 2001-02 financial year, $143 million was paid to around 3,100 businesses with an average grant of $45,000.
Trade Minister Mark Vaile recently announced that the annual turnover ceiling for applicants would be reduced from $50 million to $30 million while the maximum grant amount would be reduced from $200,000 to $150,000.
The proposed changes take effect for claims received and paid from July 1 2004.
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