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Are SMEs missing out on the export market?

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Are SMEs missing out on the export market? article image

It’s great that Australia is reaping the benefits of the mining boom with our previous deficits on our current account being reduced as a result of substantial trade surpluses. There are of course concerns that we are developing a two speed economy and that the relative strength of the Australian dollar is hurting Australia’s manufacturing and non-mining export base, but these concerns appear to be ignored by government and the community at large. The question that needs to be asked is, is there a problem for Australia’s long term economic growth if the mining industry cannot continue to dominate our exports? It is acknowledged that mining is a relatively capital intensive activity that uses large numbers of skilled labour during the construction phase, but far fewer during the subsequent mining phase. This has been highlighted in recent weeks by the announcements by some of the large mining companies of their increased use of trucks that are operated remotely without the need for drivers. What happens to all the skilled labour force once the construction phase is over? This might be 10 years or more away but when it happens, what work will be available for these people? The sectors of the economy that employ most staff such as tourism, education and manufacturing, are the industries suffering the most from the impact of the mining boom, with the Australian dollar in particular creating great difficulty. The situation in their export markets is exacerbated by the weaknesses in European and USA economies. There appears to be a substantial disincentive for Australian businesses, particularly small to medium companies in the service and manufacturing sectors, to look at exporting with the strong Australian dollar, weaknesses in many overseas markets and minimal support from government. The concern is that if these businesses are not looking to become exporters where will employment opportunities be developed? The concern I have that SMEs are not focusing on exporting is exemplified by the dramatic drop in the number of applicants for Export Market Development Grants (EMDG). The EMDG program, which is the government’s main financial assistance program for SMEs looking to develop export markets, is currently looking at the number of applicants dropping by at least a third over the previous year. While this drop can be attributable to a number of factors relating to the funding of the program (the program was severely underfunded in the past two years and there is no certainty of receiving full payment) and some changes to eligibility, the drop in applications is a sign that SMEs have not been looking at export as a potential market opportunity. The fact that EMDG applications are a lag indicator (as applications are for expenses incurred in the year ended 30 June 2011), is a greater concern as to what might be happening currently. The possible loss of SMEs to exporting is a blow to Australia’s long term export performance and employment levels. While many SMEs may not succeed in exporting their goods and services, most will. Of those that do succeed there will be a number that will extremely successful - a look through the finalists at the 49th Australian Export Awards will show more than three quarters were SMEs that accessed Export Market Development Grants in their start up phase. SMEs need encouragement to enter export markets. This does not necessarily mean greater financial support, although a program such as EMDG should provide certainty to exporters and a real incentive to develop new markets.  However, it does mean focused support from government with an understanding that the high dollar is a barrier to new exporters and that it takes time to develop export markets. The support of Austrade is crucial and it is important that Austrade’s new role does not focus too much on emerging markets or investment but looks to ensure SMEs become successful exporters.

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