THE DISTILLERY: Leighton laundry

A second case of alleged wrongdoing by Leighton subsidiaries arises in the Middle East, while a jotter looks at Westpac's reshuffle.

The more we hear about the Iraqi bribery allegations levelled at Leighton Holdings, the more it looks like the scale and complexity of the company Wal King built have become liabilities. The Age’s Adele Ferguson has found out that Leighton watched as an Abu Dhabi joint venture quietly fell apart in 2009 under the veil of the global financial crisis, when the real reasons was a scandal unearthed by an internal investigation. Meanwhile, the big changes at Westpac, Australia’s undersold services sector and the ‘solution’ in Greece are all up for discussion this morning.

Firstly, The Age’s Adele Ferguson reveals that Leighton Holdings hit trouble in the Middle East before it signed up for the Iraq project that’s got it into all this trouble.

"Leighton signed a $1.4 billion joint venture with Abu Dhabi-based Tourism Development & Investment Company in December 2007 to undertake contracting for various projects commissioned by TDIC, the tourism asset development arm of the Abu Dhabi Tourism Authority. Eighteen months later, the joint venture company was abandoned and both companies blamed the decision on the global financial crisis. Neither company mentioned a scandal that had resulted in an internal investigation being carried out after TDIC received a series of documents that alleged fraudulent activity by a Leighton manager, who for the purposes of this article is called NX.”

The Age’s Eric Johnston looks at the changing faces at the top of Westpac and the positioning to succeed chief executive Gail Kelly.

"Westpac chief Gail Kelly has reshuffled her top executive ranks for the second time in four months after long-term confidant Rob Chapman has opted to quit running St George. After running Westpac's St George business for the past 15 months Mr Chapman will return to his home city of Adelaide. While he will no longer work with the bank, he will act in an advisory role to BankSA, another Westpac unit. Critically, the reshuffle comes just months out from former ANZ banker Brian Hartzer taking charge of Westpac's entire Australian operations, a role that oversees the St George and flagship Westpac retail business.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd says the narrative that Australia’s mining sector is hollowing out the manufacturing sectors simply bypasses the pertinent fact that Australia’s services sector is our largest.

"The current political obsession with negativity avoids any productive discussion about the importance of the services sector and how critical it will be to the country’s future. Services account for about 80 per cent of Australia’s gross domestic product and 85 per cent of employment. It is an engine of growth, as can be seen from the fact that about 2.3 million jobs were added in services in the past decade. It is a major contributor to the balance of payments. Services exports now exceed $50 billion, which is about 25 per cent greater than the $40 billion in exports of manufactured goods. However, the official trade numbers from the Department of Foreign Affairs and Trade substantially understate the level of Australia’s services exports in such professions as accounting, engineering and architecture.

And fourthly in this morning’s Distillery, The Sydney Morning Herald’s Malcolm Maiden offers a typically astute analysis of the Greek debt bailout, starting off by explaining that it doesn’t significantly improve the country’s debt-to-GDP ratio.

"What the deal does do, however, is eliminate debt rollovers from the equation, by greatly extending the maturity profile on Greece's debt portfolio. The yields that are produced when the new debt is traded are academic: Greece won't need to pay them for new long-term funds any time soon. It also sets in train the second bailout that is needed to fund the Greek government's running expenses. That's an advance, and I don't expect the triggering or non-triggering of credit default-swap insurance taken out on the old Greek bonds to make much difference. Credit default payouts are triggered if Greece's decision to boost the takeup from 85.8 per cent to 95.7 per cent by force is treated as a default event. But the market's netted-out exposure to the swaps is not large – about €3 billion. The Greek saga will continue, however, focused now on internal politics.”

Sticking with international affairs for the moment, The Australian’s Robin Bromby is confused by the Indonesian push towards resource nationalism.

Closer to home, The Sydney Morning Herald’s Ross Gittins says it’s becoming harder and harder to believe the Australian economy is growing at trend. The Herald Sun’s Terry McCrann makes the simple point that the mining boom can’t work for every state. The Australian’s David Uren says there’s a real potential for a large fall in the price of commodities than anyone’s currently expecting thanks to the slowdown in China. The Sydney Morning Herald’s Jessica Irvine says her newspaper’s wellbeing index is showing signs that Australia’s luck might be running out.

The Sydney Morning Herald’s Ian Verrender continues to reflect on Treasurer Wayne Swan’s allegation that mining billionaires are becoming increasingly influential. Verrender is uneasy about the influence compared to colleague Ian McIlwraith, who comes out in their defence.

In a separate piece, The SMH’s Ross Gittins rubbishes Tony Abbott's strategy to pay for all his spending promises while leaving alone all of Labor’s promised tax cuts. His colleague Michael Pascoe hits the ratings agencies hard.

The Age’s Michael West smells a fishy relationship between Deloitte and the big drug companies for a study promoting huge potential cost savings for the Australian economy with the use of fish oil tablets, specifically for people with heart disease.

And finally, The Australian’s Paul Garvey suggests that the Sino Iron project by Citic Pacific may just be the worst project brought on by the Australian mining boom.

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