The war over the future of the Export Finance and Insurance Corporation (EFIC) continues to rage at the Productivity Commission’s public hearings this week, following a draft report that criticised the government-owned body for doling out credit to big corporates at the expense of small business.

EFIC, whose slogan is “overcoming financial barriers for exporters”, provides loans and insurance to some of the nation’s biggest firms on the proviso they are unable to source cash in the commercial market.

It operates two funds — a “commercial account” with a liability of about $2.7 billion and a smaller $0.7 billion “national interest” account that requires the direct approval of trade minister Craig Emerson.

But if the PC’s draft report — published last month — is any indication, the body could soon be gutted at the behest of the Gillard government. The PC assessment slammed EFIC’s arm’s-length agreement with the minister, accusing it of straying from its raison d’être, and indulging in unjustifiable corporate welfare.

NGOs have also arced up about the dubious activities exporters get up to in developing countries after they receive the EFIC green light.

The PC said EFIC should limit its role to providing support to SMEs with a turnover of under $25 million and “found no convincing evidence to indicate there are failures in financial markets that impede access to finance for large firms, or for domestic resource projects”.

EFIC’s commercial account should be limited to “guarantees” and basic reinsurance, the PC wrote. In effect, the organisation — established in 1991 — would become a shadow of its former self.

High-profile EFIC clients include listed infrastructure and resource industry heavyweights Santos, Worley Parsons, Leighton, Oil Search Tenix and — according to a list of glowing testimonials on its website — the Big Four banks.

Economist and Q&A favourite Judith Sloan had a crack in The Australian, calling on the body to be shut down and its commercial loans transferred to the private sector.

EFIC’s response has been robust. On Tuesday, this curious story appeared in The Sydney Morning Herald offering up a staunch defence of EFIC on behalf of its powerful clients. Many claim that EFIC only provides finance in a project’s initial stages and that the global financial crisis has made it difficult for wannabe exporters to source funds.

Public hearings on the future of the body have proven fiery. In comments that have gone unreported in other media, Jubilee Australia deputy director Carmelan Polce highlighted EFIC’s “secretive” national account operation and alleged corruption undertaken by EFIC-backed firms.

One example was Exxon Mobil’s LNG activities in the Southern Highlands of Papua New Guinea. In December 2009, former trade minister Simon Crean revealed the project would be funded by an EFIC loan of $US500 million, $US400 million of which was written to the National Interest Account. Jubilee will publish a report next month investigating the LNG project’s devastating impact on the local community and is expected to argue the benefits of the investment have not been properly shared.

One beneficiary of EFIC’s recent largesse is infrastructure giant Tenix — currently being investigated by the Australian Federal Police over allegations it bribed Asian officials to win contracts. In one allegedly dodgy 2001-02 EFIC-backed Tenix deal with the Philippines Coast Guard — that was not approved by the Philippines Senate — EFIC is still owed money but according to Jubilee the debt collection processes remain opaque. Tenix is accused of hatching shady deals across the south-east Asian region between 2001 and 2008.

And the alleged involvement of a Leighton subsidiary in a $US1.3 billion bribe to Iraqi officials could also attract scrutiny. The ailing ASX performer secured $200 million funds injection from EFIC in 2008-09 for mining equipment, however this seems unrelated to the Iraqi allegations.

Polce said that the information used to justify decisions was protected by “cabinet-in-confidence” provisions.

“The validity of the decision is not open for debate even by elected members of the federal parliament. There are no checks and balances in this system and in an environment of minimal transparency, intended or unintended abuses of the policy can occur and go undetected,” Polce said.

Polce also took aim at EFIC’s exemption from the Freedom of Information Act, which prohibits the release of documents based partly on the fear that a company’s private financial data could fall into the wrong hands. While company accounts should remain hidden, she said other information arguably in the public interest, including the social and environmental risk of the deals, should be disclosed.

An EFIC spokesperson told Crikey that as the investigations were still in train it was difficult to comment: “While the allegations are of great concern, they are still only allegations. Until the investigations are complete we do not see a reason to discriminate against these organisations on the basis of what may be the activity of a handful of people.”

In a section helpfully titled “anti-corruption initiatives” on its website, EFIC notes that its OECD affiliation welds it to an “OECD Council Recommendation on Bribery and Officially Supported Export Credit”. It is also a member of the Transparency International.

On the shadowy process for inclusion in the “national interest” account, the spokesperson explained that it forwards the Minister the initial company application along with its own assessment of the issues and risks: “EFIC do not recommend a course of action in relation to the transaction. The decision rests with the Minister.”

The firm, perhaps realising it is fighting for its life, unloaded on the PC draft report. In a strongly-worded response to the regulator’s draft findings, EFIC says that the suggestion its board is operating on insufficient levels of information “has not been substantiated” and is “inaccurate”.

A further recommendation — that EFIC’s compliance with the Minister’s expectations and its governing Act has not been sufficiently audited — was “inaccurate and impractical”.

Of particular concern were “statements or findings which imply that EFIC’s board may not, even in some limited circumstances, be properly discharging its duties or may have not been making decisions on a fully informed basis or that management is not disclosing sufficient information to properly advise the Board.”

The public airing of the allegations was regrettable, EFIC said: “This finding therefore requires strong public rebuttal, to protect not only the integrity of EFIC’s own governance structures, but also the reputation of the board.”

The EFIC board contains a who’s who of the blue-chip Australian business community, including Commonwealth Bank director Andrew Mohl, Billabong Australia director Sally Pitkin and Essendon Football Club chairman David Evans. There are no board members specifically versed in corporate social responsibility.