Access an issue with government assistance

Most industry programs have survived the Abbott government’s proverbial axe; however gaining access to them has never been harder. Alan Johnson reports.

A quick search on the Internet for government grants for the manufacturing sector will reveal a far more streamlined approach than with the Labor Government, with all grants and assistance programs now lumped together under business.gov.au. While some have received questionable name changes, their contents are much the same.

Despite the Abbott government looking to cut some programs, and reduce expenditure, it has been forced to keep some programs open for longer than they would like. Instead of being able to cut programs, feedback suggests the government is now attempting to limit its outgoings by making it much harder for manufacturers to access them.

Mark Philips, Australia’s Head of Manufacturing with Grant Thornton one of the world’s leading organisations of independent assurance, tax and advisory firms, says the biggest frustration he has with the government’s grant programs is accessibility.

“The government opens up these programs for an available period so you can make submissions, but then closes them very quickly. They then go through a lengthy process of consideration.

“Programmes, which only open for three to four weeks, are not open for long enough to put together a well thought out, plausible case,” Philips told Manufacturers’ Monthly.

Hit and miss hurts industry

Like a lot of large organisations, he says there’s a bit of hit and miss.

“The government likes to manage the programs through their bureaucracy (AusIndustry), who receive the applications, consider them, but don’t give any set time limits to deliver the outcomes of the application.

“Most times the process is outside the commercial speed of business.

“A company only has an opportunity when a government program happens to be open, and only if they can respond quickly enough, normally a short three to four week period in which they can apply.

Philips pointed to the Automotive Diversification Program (ADP) which opened and closed within three to four weeks.

“The applications had to be in by the end of April, a fairly complex process, but we won’t see an outcome until July or August.”

He says the present government is far slower than when Labor was holding the purse strings.

“And you never know how many rounds there will be. They will tell you the budget of the program, and then depending on the number of successful applicants determines whether there is another round of that program or not.”

According to Philips, there needs to be a consistent program in place that allows businesses to be able to look at opportunities in a commercial timeframe.

He also pointed to problems with the Automotive Transformation Scheme (ATS) with the government recently conceding that it would not take $500m out of the fund the program, which would proceed until 2020.

“Officially they have said that fund is in place but is only open until 2017, when the last vehicle is produced in Australia.

“But this is factually incorrect; the scheme does not rely on the vehicle producers and is open for other companies to participate.

“Unofficially, the administrators of the program, AusIndustry, are putting applicants through the wringer in an attempt to minimise the amount they can claim,” Philips said.

Manufacturing schemes

As well as the ADP, there is also an Automotive Industry Structural Adjustment Programme providing redundant workers from eligible auto companies (including component suppliers) with immediate access to intensive employment support.

These programs are part of the $155m Growth Fund.

Closely linked is the Next Generation Manufacturing Investment Programme, a $60m competitive grants programme, which supports businesses that are investing in capital projects to establish or expand high value manufacturing operations in SA and Victoria. At the time of writing the program was closed.

Other programs include the Certain Inputs to Manufacture (CIM) Program which provides import duty concessions on certain imported raw materials, intermediate goods as well as prescribed metal materials and goods.

While for the TCF industry there is the Clothing and Household Textile Building Innovative Capability scheme (BIC scheme), which provides grants for innovation activities for registered Australian clothing and household textile firms carrying out eligible activities in Australia.

Assistance schemes

One of the industry’s most successful assistance programs, Enterprise Connect, is still available, but now known rather clumsily as the Entrepreneurs Infrastructure Program.

The key components of the program remain, with up to $20,000 available to engage a skilled business adviser who will work one-on-one for up to 40 hours to identify areas of opportunity, at no cost.

Business advisers work with people throughout various operational levels of the business to develop a thorough view of, for example, the strengths and weaknesses of a business, strategic business issues and potential areas for business improvement and growth.

The Business Review is a collaborative process, with the business adviser and key people in the business working together to identify changes that could be made to increase the business’s competitiveness.

Each business receives a report outlining findings and recommended actions.

Once the company has the report, it can apply for a Tailored Advisory Service (TAS) government grant, which gives the company the chance to engage a consultant/s to make the improvements the Business Adviser recommended in the Business Review.  They will reimburse your business half the cost, up to a maximum of $20,000 (excluding GST), of engaging the consultant/s.

The types of improvements eligible for funding may include, but are not limited to: supply chain management, business and quality management systems, Lean manufacturing, strategic and business planning, resource management, people and change management, new product/service development, diversification/economies of scope, and export strategy.

“This is a great scheme, where the grants help manufacturers to take on professional support is quite beneficial,” Philips said.

“Often companies can’t find that seed money to do any research or have the resources needed.

“Another type of grant that is important to manufacturers is capital contribution to plant and equipment costs, where companies can’t compete in achieving the desired rate of return on investment when they are going up against an alternative global location.”

He says the biggest issue is global players who have money that can be placed anywhere around the world, with Australia one of the most expensive locations to set up.

“That’s where the ADP comes in, and some of the regional infrastructure programs largely aimed at the funding of capital for plant and equipment.

“If the government is able to assist in funding plant and equipment, then following the acquisition comes jobs,” he said.

Stop and start approach

While not critical of the government funding R&D, Philips points out the funding only produces the R&D. “You don’t get the multiplier of the R&D being converted into a product in the Australian marketplace.”

He advises government to take a close look at the Patent Box, a UK program where manufacturers receive tax deductions on income that is generated from R&D.

“They only forgo the revenue by actually producing the product in the UK.

“If you look at the amount of IP we generate here, then you look at the level of product from that IP which is manufactured here, then I think we are missing out on a huge opportunity.”

Philips believes the government’s stop and start approach to grants makes it difficult to get involved.

Perfect Partnership

One government program that all manufacturers should register with is ICN’s (Industry Capability Network) Gateway, a comprehensive online system with around $400bn worth of projects and more than 70,000 suppliers listed.

Free to manufacturers and suppliers, the system offers companies an opportunity to build the perfect partnership. It allows suppliers to browse and send their expressions of interest in new business and it helps project managers manage the supply chain process.

A connection recently facilitated by ICN Victoria has created nearly a million dollars’ worth of work for a local company and could lead to further work for items that would have been imported.

The project required by electronic contract manufacturing company SRX will be delivered by Hofmann Engineering, and is an example of how ICN can work as a business connector.

Late in 2014, SRX was looking for a company that could provide an aluminium extruded part that had to be machined to very high tolerance. One of ICN’s business consultants, Peter Moore, met with SRX representatives and established what was needed.

Moore and ICN was able to develop a list of Australian companies with the capability and capacity required for the work, through which SRX found the best company.

In addition to this, SRX is now talking with Hofmann Engineering about two other products that are currently imported but, for quality reasons, SRX would prefer to have made locally.

Moore said to win the first part of the work Hofmann Engineering had tooling built specifically to handle the job and was looking at dedicating a machine to do the task.

“Now with a local company providing the product, SRX has much better control and better service.”

SRX General Manager Jeff Malone said the knowledge base and work of ICN Victoria had provided a win-win situation for SRX and Hofmann Engineering.

“We now have a quality local provider for this project, and we are talking to them about other possibilities. It gives us greater confidence in the products we will require and it also means we are spending our money in Australia and thus supporting local jobs,” Malone said.

Industry Growth Centres

A new policy direction of interest is the $188.5 million Industry Growth Centres Initiative, designed to lift competitiveness by focusing on five identified areas of competitive strength: Advanced Manufacturing; Food and Agribusiness; Medical Technologies and Pharmaceuticals; Mining Equipment, Technology and Services; and Oil, Gas and Energy Resources.

The Centres will also facilitate engagements between enabling services and technologies, such as Information and Communications Technology, where they provide essential and direct support to the growth sectors.

For more information on government grants and industry assistance schemes go to www.business.gov.au.