Despite big changes in the world economic environment in the past 12 months, the Export Finance and Insurance Corporation’s 2009 Global Readiness index has found Australian companies continue to actively explore offshore expansion opportunities for their businesses.

Angus Armour, EFIC Managing Director & CEO says access to larger markets around the world and the opportunity to participate in global supply chains were the major drivers for the 726 globally active Australian businesses which took part in this year’s survey.

"Our 2009 survey reveals that despite the headwinds of the global economic downturn, offshore expansion remains a strategic imperative for Australian businesses,” he said.

Summary of the EFIC 2009 GRi:

'No’ is the clear answer from a survey conducted by the Export Finance & Insurance Corporation (EFIC) in February. EFIC’s 2009 Global Readiness index (GRi) spanned 726 Australian businesses. It found that 84 percent of companies with offshore operations are planning to expand them, 52 percent within the next year. Of respondents without offshore operations, 44 percent are planning to go offshore, 32 percent within the next two years. So companies aren't tearing up their expansion plans, or even putting them aside temporarily, but rather are setting out for new markets, despite stiff headwinds, to position themselves for when growth resumes.

What is motivating companies to globalise? The GRi shows that they are overwhelmingly in pursuit of increased revenues and market share: 71 percent rate this as their chief reason. Pursuit of economies of scale or lower costs are rated as a reason for offshore expansion by only 38 percent of businesses, with a mere 3 percent seeing this as the main driver.

In terms of the obstacles to going global, access to finance is by far the most significant. Fifty-eight percent see it as a barrier; 34 percent nominate it as the biggest one. In 2008, only 29 percent of companies rated access to finance a major obstacle, with the change reflecting the intensification of the credit crunch. In addition, the smaller a business’s revenue, the more likely that finance will be a barrier. SMEs seem to be suffering disproportionately from the decline in banks’ lending appetite.

Last year’s GRi survey showed a high percentage of respondents – 73 percent– used retained earnings to finance exports or offshore expansion. This year that reliance is even greater for those financing offshore expansion – 82 percent (and 64 percent say it is their top method). External funding comes a long way behind: only 30 percent of respondents use a debt facility from an Australian financial institution, and only 4 percent rate this as their primary funding source.

The global economic crisis has clearly raised the finance barrier for Australian companies with export and offshore operations. However, it is encouraging to see that they remain optimistic about globalisation and are preparing their businesses for when economic conditions do improve.

* To read the full EFIC 2009 Global Readiness index survey visit: www.efic.gov.au/gri/report