On 20 April 2009, the Australian Government's Export Finance
and Insurance Corporation ("EFIC") (see www.efic.gov.au/) released it second Global
Readiness Index Report ("Index") (see www.efic.gov.au/gri/report).
The Index was released at a function convened by EFIC in
Melbourne with a keynote speech by the Australian Trade Minister, a
presentation on behalf of EFIC summarising the results of the Index
and a panel question and answer session involving the Trade
Minister and representatives of EFIC, the AIEX and the AiG.
The release of the Index was timely given the extensive evidence
that trade finance has become increasingly hard to secure. In their
recent communiqués, both the G20 and the WCO noted the
reduction in availability of trade finance and part of the measures
adopted by the G20 included the provision of trade finance to the
value of $US 250 Billion by G20 countries over 2 years. At the
release of the Index, the Australian Trade Minister also referred
to the G20 measures as a much needed resource for those involved in
EFIC provides a suite of financial services and products to
exporters at all levels, from SME's through to larger
companies, Banks and other financial institutions. These products
are separate to the EMDG scheme administered by Austrade which is
more of a reimbursement for certain permitted expenditure on export
activities subject to certain strict criteria. There has been a
significant level of concern that the EMDG scheme is underfunded
and unduly restrictive as well as having comprehensive compliance
obligations. Many of the questions during the panel discussion were
aimed at seeking reassurance that additional EMDG funding would be
made available. The Trade Minister declined to provide that
assurance and maintained that the current difficulties with the
EMDG scheme were the responsibility of the former Howard
The Index was the result of extensive investigations and
enquiries of 726 companies involved in export at all levels of
trade. Accordingly, EFIC expressed some confidence that the Index
provides an accurate representation of the state of readiness of
Some of the findings of the Index can be summarised as
Companies still seemed optimistic about overseas
84% of companies with offshore operations are planning to
expand them, 52% in the next year.
Of respondents without offshore operations, 44% are planning to
expand offshore, 32% in the next 2 years.
The 4 top destinations for offshore expansion by Australian
companies are currently North America, SE Asia, Europe and China.
Investment in South Asia is expected to show the greatest increase
from 15% to 20% thanks to the perception of increased opportunities
in India (this is the focus of the Austrade Utsav program).
Most companies heading overseas are seeking to increase revenue
rather than saving costs or seeking economies of scale.
Access to finance is a key barrier. Those stating access to
finance as a barrier increased from 29% in the last Index to 58% in
this Index. 34% nominated it as the most significant barrier they
SME's face especially high finance barriers.
Finding external funds for offshore expansion has become even
harder with most using retained earnings to fund expansion.
The commitment to globalization remains strong but is being
EFIC concludes by stating that the Index results
"challenge financial institutions and government to find
innovative solutions to ensure that "bankable" exports
and offshore investments receive the financial backing they
The impression (and it is only that) was that the Trade Minister
favoured the expansion of EFIC's suite of products to include
such additional financial solutions. The release of the Federal
Government's Budget on 12 May 2009 may well unveil such new
products – which would be quite a result in the light of
the public comments by the Federal Government that the Budget will
be exceedingly tight with little additional funding for projects
other than those already announced.
It is important that all should be aware of the results of the
Index and that clients will be needing to be advised on what
finance is available for exports – both now and in the
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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