From building and shipping to global supply chains

EFIC can assist Australian-based manufacturers to win and finance export opportunities when the private market can't. Robert Dravers, the organisation's director of SME and mid-market was on hand at the Leaders' Summit to outline EFIC's operations.

The way Australian businesses have changed has in turn changed EFIC, which helps many of them expand into Asia.  

Under a couple of different guises, the Export Finance and Insurance Corporation has been aiming to help Australian businesses do business abroad (and at home).  

Like the businesses under its jurisdiction, EFIC has changed with the times, and the times are dominated by SMEs looking to be part of the Asian Century.

"Integrating into Asia as Futuris is doing is surely the way to go," explained Robert Dravers, the organisation's director of SME and mid-market. "And EFIC, I'm pleased to say, is moving in that direction as well."

"About two years ago, we started to support SMEs onshore, so not just exporters, which is what you'd expect us to do, because we are the EFIC. But we're supporting people onshore who are supplying an exporter or an export project."

With SMEs involved in international supply chains – especially in the case of some of Australia's successful "micro-multinational" firms – EFIC changed what it does to be of service to these SMEs.

"And we moved into this onshore space because these massive resource projects we've seen of late in the oil and gas sector and the coal and iron ore and the like, they create very large supply opportunities for SMEs."

Now in its sixth decade, EFIC (formerly EPIC – Export Payments Insurance Corporation) had its remit broadened in 2011 under the Federal Government's Trade Policy Statement to recognise the global supply chains that Australian manufacturers and other businesses are a part of.  

Australian businesses have moved from a strictly build and ship model, said Dravers.  

"Very recently with the government's allowance we have been able to support companies who are internationalising, that is to say offshoring or setting up business operations overseas," explained Dravers.

"So it's in recognition that this is the way of the world now, this is happening, Futuris has made it happen and we want to support the Futurises of the future," said Dravers.

"An SME company looking to set up in somewhere, usually in Asia – it may be China, it may be in Thailand – they are often going to be challenged to get the funding they need from their bank. Because the assets that they have are going to be building and the bank is asked to fund are overseas, there are jurisdictional issues around for the bank around taking security, registering security in those markets and or taking control of those secured assets.

"Often the supply is going to be constrained, and that's why there is a role for EFIC to play to support SMEs in internationalising their operations, whether they be for supplying into a regional or a global supply chain in the way that Futuris is or building a factory or a distribution centre in order to supply their finished product, it doesn't matter."

This shift follows stories in recent years of successful Australian manufacturers often being of a "micro-multinational" orientation, for example in the case of ANCA, the Manufacturers' Monthly Endeavour Awards winner for Exporter and Overall Manufacturer of The Year.

ANCA is an Australian company that supplies its high-end cutting tool technology to a number of international companies, and has been able to expand into Thailand and Taiwan. Its headquarters and innovation muscle are in Australia, but from Thailand they are able to take advantage of a free trade agreement between that Thailand and China, from where the company has seen increasing demand in the last year (see Endeavour Awards profiles, Manufacturers' Monthly June).

As Swee Mak from the CSIRO's Future Manufacturing Flagship and others have noted, Australia's manufacturing environment is a unique one, with a preponderance of specialised, nimble, internationalised companies, and no really huge industrial firms. There is no Australian manufacturing company that comes anywhere near Bosch or Siemens, for example, in terms of scale.

"We have our own unique manufacturing DNA, made up of tens of thousands of SMEs," noted Mak last year.  

"This is very different to some other industrialised countries, where there are many more large scale manufacturing enterprises. Australian SMEs often find it difficult to embrace industrial automation because of cost and the risk of disruption to their production."  

Credit is often constrained to SMEs, with banks sometimes reluctant to fork out a loan that a promising Australian business looking to deal overseas might deserve.  

"Because either the SMEs trading with a company overseas and there's assets  going overseas and uncertainty with payments from foreign companies and the like or it's more simply a case of an SME not having physical assets to secure more loan funds from the bank," said Dravers.

There are conditions to what EFIC will support, of course. Companies considering expanding their operations overseas must be SMEs, defined as having less than $100 million turnover or under 100 employees. Also, EFIC must be convinced of an economic benefit being returned to Australia when overseas investment is being supported.

"We will be looking at issues around what income is coming into Australia in terms of payment from anything from IP to management fees, future dividends and so forth," said Dravers.  

He added that EFIC would not assist Australian companies looking to set up facilities overseas so they can fire their Australian workers.

For Australian micro-multinationals, sometimes a little assistance is needed to get into a global supply chain that they would potentially serve well. And for both EFIC and the manufacturers it assists financially, things are changing, and the Asian Century has a lot to do with it.

"Clearly the way the world is moving, away from the traditional definition of manufacturing – of changing raw materials into a finished product – into manufacturers who are part of a supply chain," said Dravers.

"And as we've heard from Dexter Clarke [Futuris's representative at the Leaders' Summit], very often you need to be close to your buyers in order to service them best and also lower your cost of getting your goods to them and ensuring that they get there on time.  

"EFIC is now able to support companies that are setting up in Asia and elsewhere, and that we think is a very positive new direction for us to take."
 

(Originally published in Manufacturers' Monthly's Leaders' Summit supplement, and based on the magazine's annual Leaders' Summit, held in May.)