Japan stirs controversy with huge COVID-19 aid contract for ad giant Dentsu

Jul 28, 2020 | News On Japan

Jul 28, 2020 (channelnewsasia.com) - Off a narrow corridor above a store selling Persian rugs in central Tokyo, a small office houses a private operation that won a tender in April to distribute more than US$20 billion in government aid to businesses hit by the coronavirus.

The agency, the Service Design Engineering Council, actually carried out only a fraction of that work, local media reported last month. Service Design was co-founded by Dentsu Group, one of Japan's most influential companies.

It passed hundreds of millions of dollars to administer the project back to Dentsu, an advertising and PR company with close ties to Prime Minister Shinzo Abe's ruling Liberal Democratic Party (LDP), government documents show.

Under the arrangement, Service Design won the contract to distribute the US$20 billion, but actually took less than 1 per cent of the total US$718 million for managing the project and passed on most of the rest to Dentsu, which set up vetting procedures, websites and call centres, the companies and the Ministry of Economy, Trade and Industry (METI) said.

Dentsu, in turn, subcontracted the work again through its subsidiaries. The ministry has said that there were five tiers of subcontractors and at least 63 companies involved. Officials have disclosed the names of only 14 of those; the government has not fully accounted for contracts worth at least US$247 million, about one-third of the total.

The arrangement led to confusion and delays for small business owners. Members of parliament have questioned how taxpayers' money was spent during a national emergency.

Controversy over the contract - one of the largest that Japan has outsourced from its pandemic budget - is widening for Abe's government, already facing a fall in public support over its handling of the pandemic.

Questions are mounting from opposition politicians about the government's links to Dentsu, a publicly listed company. At issue is whether Service Design helped shield Dentsu's leading role from scrutiny. The government and Dentsu have come under fire in the past for their close ties.

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