Exporters upbeat, but finance remains a problem

Australian exporters remain optimistic about the future of the offshore operations of their businesses but are being held back by financing issues, a new Government report has revealed.

The Federal Government’s Export Finance and Insurance Corporation yesterday released the results of its annual Global Readiness Index, which shows that out of 726 Australian companies, 80% of those with offshore operations expect to expand them.

Of those businesses without overseas operations, 40% have plans to expand offshore, with 71% of companies citing “increasing market share” as the main reason for expansion.

Nicholas Giurietto, head of marketing at the Export Finance and Insurance Corporation, says Australian businesses are not waiting for conditions to improve and are instead planning major overseas growth.

“The figure that was surprising was the continued commitment to offshore growth. We know just talking to people that businesses see it as a requirement, but in the face of the global financial crisis they’re looking at expanding. It was actually stronger than we thought,” he says.

“What we anticipate is that Australian companies will grow overseas as they need to integrate into global sales chains and have offices and such closer to supply lines outside our own borders.”

But despite the eagerness of Australian exports to expand, 58% of respondents stated that “access to finance” is a problem, up from 29% last year, while 34% ranked the problem as a “key obstacle”.

The index also reveals that smaller firms are in desperate need of finance, with 63% of businesses with turnover between $1 million and $10 million saying access to finance is a problem. That number drops to 33% for companies earning over $50 million.

But Giurietto says increases to Government aid programs such as the Export Grant Development Scheme can only go so far in helping exporters of a certain size, and that there are no grants of aid schemes for larger companies.

“It’s really a different place in their lifecycle, the EGDS is an Austrade program and it’s  designed to be functional earlier [in a company’s life]. But after that is a point where they’ve got a foot-hold and they’re not getting support from Australian banks because assets are overseas. And of course the bank overseas says, ‘who are you?’.

“So this is a commercial finance problem. Grants help people get going, but it’s not enough on its own,” he says.

Giurietto says programs such as those offered by EFIC will be crucial to help exporters grow and maintain competitiveness as the economy worsens.

“There are no grant programs but the key thing is, what EFIC does is guarantee loans at interest rates so they’re commercial rather than a grant. So we charge for them for the risk involved, but we will take a risk that perhaps a commercial bank won’t. We have a more expansive view.”

“But with 40% of companies planning to expand offshore in the next few years, programs like this are going to be very important for the health of the industry.”