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Editorial: Japan industry ministry bears responsibility for confusion over COVID subsidy

  • June 12, 2020
  • , The Mainichi
  • English Press

There is continuing confusion over a Japanese government program aimed at providing financial assistance to small- and medium-sized companies that have been significantly affected by the novel coronavirus pandemic.


There have been over 10,000 cases in which companies have not received subsidies from the Subsidy Program for Sustaining Businesses 1 1/2 months after applying for them. Many companies have had trouble getting in touch with the call center by phone to inquire about their cases.


How did this situation come to be?


To begin with, there are doubts about the capabilities of the Service Design Engineering Council to carry out the work it was commissioned to do by the Ministry of Economy, Trade and Industry (METI). This organization had not even released its financial statements, which comprise the foundations of confidence. In other words, METI had signed a contract with the council without confirming the latter’s financial statements.


Furthermore, the council subcontracted the work it was commissioned to do to advertising giant Dentsu Inc., which then subcontracted the work repeatedly, making the situation complicated and unclear. Until just recently, METI was not aware of the big picture.


The council served simply as a go-between, while Dentsu is the true contractor. It could effectively be said that the work was handed over wholly from METI to Dentsu.


By repeatedly subcontracting the work, it becomes difficult to see what’s going on in the project’s entirety. It becomes unclear where the locus of responsibility lies, and governance does not function as it should. Concerns that margins are siphoned off and costs balloon arise.


The problem of the subsidy taking long to reach those in need had been pointed out in the early stages. It was METI’s responsibility to make the contractor report on its progress and challenges on a daily basis, and to make improvements. But yet, METI left everything to Dentsu.


What was supposed to be a project commissioned to the private sector to increase efficiency has backfired. It’s clear that METI had not taken management responsibility for the project seriously enough.


It’s also questionable how much competition there actually was when METI chose the operator for the project.


METI had made contact with the council and Dentsu at an early point in time before an invitation to make bids was announced, conducting hearings on the project’s structure and other information. Perhaps METI, placing priority on going forward with the project as quickly as possible, was counting on Dentsu, which has abundant know-how in this area.


But such a process lacks fairness, and could even result in choosing an inefficient operator.


The number of public servants is decreasing, and the outsourcing of administrative services to the private sector has become well established. Dentsu has grabbed this business opportunity to take on a broad range of projects from the national government and local municipal governments.


METI says that it intends to investigate the situation with outside experts, but there are a lot of problems involved, from budget use to management structure. There is a need for a review, including of how the commissioning of public work to the private sector should be carried out.

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