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Editorial: Doubts deepen over murkiness in Japan's subcontracting of coronavirus subsidy

Criticism over the murky manner in which the work necessary to distribute the Japanese government's cash benefit program for small- and medium-sized companies hit by the novel coronavirus was commissioned to the private sector is growing louder.

The Tokyo-based Service Design Engineering Council won the bid for the Ministry of Economy, Trade and Industry (METI)'s benefit program at approximately 76.9 billion yen (approx. $704.48 million). But the organization then almost wholly commissioned advertising giant Dentsu Inc. to handle the applications for the benefit program for approximately 74.9 billion yen (approx. $686.23 million).

In addition, through a group company, some of the work was consigned to the temporary staffing service Pasona Group Inc.

Why was this done? METI cites Dentsu being bombarded with inquiries when it was listed as the depositor in a past benefit program as the reason. But that problem could be solved simply by changing the name of the depositor.

The contract between METI and the Service Design Engineering Council forbids the complete subcontracting of the work to another entity, the reason being that if a business operator that merely takes a cut without doing any work intervenes, costs would balloon.

The amount of Dentsu's subcontract is 97% of the amount of the Service Design Engineering Council's original contract. This is unusually high, and could even be in violation of the contract.

To begin with, the Service Design Engineering Council was established with Dentsu and other companies dispatching their executives. It only has 21 employees in all. It's questionable whether it would have been able to manage the workload.

When work is subcontracted, it becomes difficult to monitor how money is being used.

Under METI's rules, contractors are required to check on subcontractors' expense processing. The more subcontractors there are, the more difficult it becomes for METI to directly check up on how and what subcontractors are doing with their money.

How work on the government's "Go To" campaign -- which entails distributing coupons to the public to encourage them to travel and eat out after the novel coronavirus outbreak has calmed down -- has been commissioned has also raised questions. That's because it has been estimated that the contractor would be paid a maximum of nearly 20% of the project cost, or 309.5 billion yen (approx. $2.84 billion).

The number of companies and organizations that have the know-how to be commissioned to do government work is limited. It is problematic if they develop cozy relationships with the government and allow sloppy accounting to take place.

As for the government's Subsidy Program for Sustaining Businesses, small- and medium-sized companies have been troubled over the time it has taken between applying for the benefits and actually receiving them.

Work is commissioned to the private sector in order to make progress quickly and efficiently. An investigation is essential to determine whether the structure in which work was managed was appropriate.

What has taken place looks like a system in which large corporations benefited massively from a crisis that small- and medium-sized companies faced. The government bears the responsibility to respond to these doubts.

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