Photo/Illutration A guideline on “hanko” posted on the Justice Ministry’s website (From Justice Ministry’s website)

When Japanese government officials decided to shift to electronic processing of public contracts, the idea looked good, at least on paper.

However, more than five years later, the expensive investment has not paid off, mainly due to the reluctance of none other than the government itself, which remains mired in the "hanko" stamp seal culture.

The “electronic contract” GEPS system was used in only 1 percent of the public works contracts that could be handled by it in fiscal 2019, according to the internal affairs ministry, which operates the system.

Of 21 government offices, 16 did not even use GEPS, which manages all central government offices’ orders for goods and services and the awarding of contracts to private companies, even once. 

The government in 2014 spent about 1.6 billion yen ($14.9 million) to establish the electronic GEPS system.

Before that, each government office handled such processes on its own.

With GEPS, every step of the process of signing a public works contract with private companies is conducted online, from bidding to signing.

It costs about 300 million yen to maintain the GEPS system annually, according to government officials.

During the novel coronavirus pandemic, the government has urged private companies to rely less on the hanko culture and more on electronic contracts.

However, the government officials haven’t walked the talk.

According to the ministry, there were 31,438 cases among 21 offices that could be handled through the electronic bidding system in fiscal 2019.

But in only 20,762 cases, or 66 percent, was the bidding conducted electronically. And only 319 contracts were made electronically.

The agriculture ministry, education ministry and the National Police Agency said they “had not made any electronic contracts through fiscal 2019,” in an interview with The Asahi Shimbun.

Electronic contracts are considered beneficial for companies and organizations awarded public works contracts because they can reduce paperwork and are exempt from the stamp tax.

In principle, any company that so desires can conduct the contract process online.

But in reality, many government employees are so accustomed to doing so on paper that they are reluctant to use the modern technology.

In many cases, a company submitted a bid online and was awarded a contract. But the government side did not have any employee with experience of signing a contract electronically. It ended up conducting the rest of the process through paperwork and stamping hanko on the documents.

A government employee admitted, “I have strongly believed that a contract has to be paper-based and hanko has to be used.”

The Abe administration has promoted the electronification of governments and administrative processes as part of its national information technology strategy. GEPS was one of the major projects.

“Bureaucratic organizations are turf-minded," said Atsuko Nomura, a chief researcher at the Japan Research Institute. "It is important to break such a mindset and check the government’s efforts on digitization thoroughly.”

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