Meetings Industry Association of Australia EXPORT MARKET DEVELOPMENT GRANT SCHEME ACCESS BY PROFESSIONAL CONFERENCE ORGANISERS

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1 Meetings Industry Association of Australia EXPORT MARKET DEVELOPMENT GRANT SCHEME ACCESS BY PROFESSIONAL CONFERENCE ORGANISERS Summary of Proposal That internationally marketed conferences, exhibitions and events be able to access the Export Market Development Grant Scheme via an application made by the Professional Conference Organiser (PCO) on behalf of a joint venture arrangement between the PCO and their Clients. Background As a result of submissions made to the Review of the EMDG Scheme, the EMDG Scheme Review Board recommended that the application criteria be amended sufficiently to allow Professional Conference Organisers to apply for grants, either on behalf of their clients or in their own right. In discussions with the Trade Minister held late in 2000, it was indicated that the Government is clearly supporting the right of access, and encouraged MIAA to work through the options available. One option canvassed positively was that the conference organiser and client apply jointly, but not under the existing very strict EMDG joint venture arrangements Current EMDG Scheme and Review The legislative objective of the EMDG Scheme is to "bring benefit to Australia by encouraging the creation, development and expansion of foreign markets for Australian good, services, intellectual property and know-how". Importantly, the review (dated 30 June 2000) recommended and the Government has accepted that the scheme will continue for at least the next five years. There is a current cap on the scheme of $150 million, and out of that comes the grants plus the administration of the scheme. This cap means that there is no certainty at the time of application that grant recipients will receive their full entitlement. If the scheme is oversubscribed then some of the entitlements are reduced. The review recommended that it would be better for everyone to keep their full entitlements, but acknowledged that if the Government wanted to limit the cost of the scheme, then the cap is the best method. Currently, there is a $15,000 non-reimbursable threshold for each applicant, and monies spent after then are matched dollar for dollar. For example, a spend of $20,000 on international marketing only allows for a grant claim of $2,500 (half of $5,000 spent above the threshold). At this level, the grant may not even cover

2 compliance (application) costs. The current $20,000 minimum expense requirement is recommended by the board to be reduced to $15,000. This $20,000 minimum is one of the two main preclusions to individual clients accessing the scheme for their conferences. It is only a limited number of conferences that have an international marketing budget of $20,000 plus. The benefits of the scheme increase proportionate to the amount spent on international marketing. The report provides a useful summary on relative returns: $ spent Grant Claimed Return $20K $2, % $40K $12, % $60K $22, % $75K $30,000 40% $115K $50, % etc. The other main preclusion which currently exists is that the PCO rarely "owns" the event (which under the Scheme would be the product). This renders them ineligible. Clients who do "own" the product may be able to apply, but another barrier may be that the event is not an ongoing marketing activity, in other words, the event may not be "exported" again for some years by the Client. There is a time lag between incurring the expense and receiving the grant, as it works in a grant year. For example, marketing dollars spent between 1 July 1999 and 30 June 2000 are then claimed for sometime between 1 July and 30 Nov 2000, and grants received anything from 8 weeks to 1 year or more after lodgement. Importantly, you need to register as a first time applicant before the end of June. This timeframe is an important issue to resolve in view of the special arrangements that exist in running a conference or event. The Board recommended no change to the limit of 8 grants (8 years) unless the company is marketing to new markets. The grant is taxable. EMDG currently supports six categories of promotional activities including: (1) overseas representative - min of 12 months rep. (2) marketing visits (3) communications to promote product (4) free samples (5) trade fairs, literature and advertising (6) short-term consultants. In order to claim the monies spent on these activities:

3 (1) must have been spent to seek out, create demand for, or develop an export market for the product (2) you must have been the principal in the export transaction (3) the expense must have been paid by you (4) the item paid for must have been provided to you and used (5) must have evidence of expense. It is items (2), (3) and (4) that have caused the meetings industry the most difficulties in PCO's accessing the scheme. Bringing overseas buyers to Australia is currently ineligible. The board has recommended that this be eligible expenditure. This recommendation is strongly supported by the meetings industry. The current legislation allows applicants to claim Internet costs under the Trade Fairs, Literature and Advertising category which the site is for export promotional purposes. Eligible Internet costs may include, design costs, website set-up charges, annual fees etc. EMDG does not support any capital or development costs of e-commerce and the Board has recommended no change to this. In taking the above summary of how the scheme operates, we again note the Review's words that "The board also found merit in the proposal to redesign the rules so that professional conference organisers have better access to the Scheme." Options canvassed by the industry include: (1) that the PCO applies on behalf of a range of clients they have served in a grant year. (2) that the PCO applies to seek reimbursement for marketing dollars spent by the PCO on a range of events marketed throughout the grant year. (3) That a joint venture arrangement be set up that allows both the client and the PCO to access the grants joint. This joint venture option would not be using the current joint venture provisions in the EMDG legislation, as these are not appropriate for the meetings industry. Instead, special provision would need to be made to accommodate the way the meetings and conference industry operates. In preliminary discussions with Austrade, they feel that the rules relating to the EMDG would make the first option administratively too difficult - too many rules to change, and also there would be a difficulty in ensuring that the PCO returns the grant monies to the clients. The second option entails our industry looking at how PCO s currently represent clients where the most common model is one where the monies are spent from the "conference budget". There would need to be a major shift to a model where the PCO was expending the marketing dollars out of their own funds, with some adjustment needed in the conference agreement to reflect this.

4 The third option may represent the most appropriate course, and the proposal outlined below expands on how it would work in more detail. The Proposal It is recommended that access to the Export Market Development Grant Scheme for the purposes of international conference and event marketing be via an application made by the PCO on behalf of a joint venture arrangement between the PCO and their Clients. The proposal will accommodate the range of client relationships that a PCO has at any one time. It also recognises that a PCO/Client arrangement can last a number of years, with international marketing dollars expended over the entire period of the relationship. It is proposed that a PCO wishing to access the EMDG scheme on behalf of a joint venture with their clients would need to set up an international marketing fund (either as a separate bank account or accounted for in clearly identified part of their accounting system). Monies allocated by the client in their conference budget for international marketing would be paid into this fund and matched dollar for dollar by the PCO themselves. This fund in any one year could contain the funds for a number of clients. Eligibility in any one year for an EMDG Grant would be assessed in accordance with the total dollars spent from the fund. Grant monies, once received, would be distributed on a pro rata basis depending on the amounts expended in the grant year for each conference. The PCO would be eligible for half the grant monies (as they have contributed half) and the client s share of the grant would be put back into the conference budget or in the event that the conference has been held (completed) during the grant year, sent back to the client by the PCO. In applying for a grant on behalf of its joint venture arrangements, the PCO would have to set out all clients that have contributed to the fund in the grant period. This proposal has a number of advantages: (1) it brings the owners of the conference, being the clients, to the party as joint applicants. (2) It ensures that although the PCO does not have to carry 100% of the marketing costs, and associated risk, they are taking some of the marketing responsibility. (3) It aggregates the international marketing spend of a range of conferences and clients which are being serviced by PCO s in any one grant period, which not only maximises the benefit of the grant refund, but also encourages the PCO to deal with its international marketing in a holistic way.

5 (1) The ongoing activity is the continued marketing activities done by the PCO with and on behalf of its clients (2) It appears to be in line with one of the principles established in the recent AAT decision in relation to Far North Queensland Destination Management Co case, where the tribunal held that it was enough for FNQ to supply the service it does not have to own the service or be the provider of the service. On the other hand, the proposal assumes that adjustments will be needed from both the Government/Austrade and the industry: (1) For Austrade, the criteria of the scheme would need to be altered to allow this special type of joint venture arrangement (as the current EMDG joint venture situation is not appropriate to this industry), and an acceptance that one of the parties of the joint venture would not technically own the product ; and, (2) For the industry, the PCO s and clients would need to be educated not only on the positive possibility of making their international marketing dollars go further, but also on the adjustment that would be needed to the Conference agreements to reflect the different marketing contributions. Throughout this document the term PCO is used for consistency with the Review recommendations. However, it is strongly recommended that this proposal be extended to exhibitions and events, which may be organised by PCO companies, but also by specialists in these areas. 5 March 2001