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PRIVATISING POST

The World Bank,Postal Services and

the Asia Pacific Region -

A Trade Union Response

A INTERIM REPORT TO THE UNI (APRO)

POST AND ALLIED SERVICES SECTOR CONFERENCE

HIROSHIMA, JAPAN

OCTOBER 2000

Privatising Post - A Trade Union Response Hiroshima, Japan, October 2000

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EXECUTIVE SUMMARY

· Postal Services - A Vital Public Communications Service. Postal services are a fundamental right and are vital to the social and economic development of all countries. They continue to provide the most affordable and accessible communications service available to the vast majority of the world’s population. While the penetration of alternative communications technologies is anticipated to continue, any program of postal sector reform must be based on a recognition of the need to ensure the continuance of these services on an affordable and accessible basis. To do otherwise will be to widen further the existing widening gap between the world’s information rich and information poor.

· Challenges Facing the Future of Postal Services. Postal Services throughout the world, and particularly in the Asia Pacific region, are facing a number of major challenges to the way they do their business and the nature of their industry. These range over technological challenges (including the need for modernisation and the increased threat of product substitution), the need to attain profitability, the need for investment and improved service performance, the need to embrace new services and products (such as the Internet) and the direct threat of private or foreign-public sector competition.

· The Role of the World Bank. Many of the challenges and “reform” strategies identified by the World Bank as the basis for its postal “reform” program merit support. The need to improve financial and service performance, meet new market needs with new service and products and associated organisational reforms (such as commercialisation and corporatisation) are therefore supported. However the World Bank has used its financial position to actively promote the privatisation model over other less radical approaches to reform. The trade union movement considers this advocacy un-balanced, un-necessary and based on an ideological commitment to neo-liberal economic theory. This is clear from its actual program of “assistance”, such as in Sri Lanka, Argentina, the Philippines and Trinidad and Tobago.

· The Real Challenge - Creating a Profitable Public Sector Postal Service for the 21st Century. This study is informed by the belief that there is an alternative to the radical approach taken by the World Bank. For in the developed world - beyond the reach of the financial influence of the World Bank - more innovative approaches to postal sector reform have been undertaken. These alternatives meet both the commercial and organisational challenges facing postal services while retaining a central public ownership provision as a guarantor of affordable and accessible community service obligations. These alternatives are based on a gradual and controlled approach to change. They encompass commercialisation and corporatisation, within the framework of a publicly owned postal service. They have been achieved with both community and employee input to the reform process. The examples cited of Australia and Japan have resulted in profitable outcomes for both services. This study recommends the incorporation of key principles drawn from the examples of these community supported postal reform programs as minimum standards for postal sector reform throughout the region.


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CONTENTS

EXECUTIVE SUMMARY

1. PURPOSE AND BACKGROUND TO THE STUDY

2. POSTAL SERVICES IN THE 21ST CENTURY

2.1 Postal Services - Vital Public Communications Services2.2 Challenges Facing Postal Services2.3 Global Competition2.4 Employment and Unionisation Impacts of Global Competition2.5 The International Agenda for Postal Reform 2.6 The Implementation of Postal Reform2.7 Conclusion

3. POSTAL SERVICES IN THE ASIA-PACIFIC REGION

3.1 Key Statistics3.2 Revenue, Profitability, Regulation and Monopoly Service3.3 Structure and Ownership3.4 The Implementation of Postal Reform in the Asia Pacific Region3.5 Global Competition in the Asia Pacific Region

4. THE WORLD BANK AND THE POSTAL SECTOR

4.1 The World Bank - A Neo-Liberal Study in Failure4.2 The World Bank and Privatisation4.3 The World Bank’s Postal Sector “Reform” Program4.4 Concerns with the World Bank’s Postal Program

4.4.1 Regulatory Reform and the Reserved Service4.4.2 Privatisation and the World Bank’s Postal Program4.4.3 Public Sector Employment Reductions

4.5 The World Bank in Action - Sri Lanka

4.5.1 The Sri Lankan Postal Service - Background4.5.2 The Sri Lankan Government and Postal Reform4.5.3 The World Bank Project4.5.4 Worker Consultation4.5.5 The Sri Lankan Government Postal Reform Bill4.5.6 Conclusion

5. AN ALTERNATIVE APPROACH TO POSTAL REFORM - AUSTRALIA AND JAPAN


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5.1 Australia Post - Introduction

5.1.1 Australia Post - Background5.1.2 The Australian Postal Reform Process

5.1.2(a) First Phase - Corporatisation, Commercialisation and Limited Deregulation

5.1.2(b) The Impact of the First Phase Reforms - Successful Corporatisation

5.1.2(c) Second Phase - The Conservative Government’s Deregulation Plan

5.1.2(d) The CEPU Response - Concerns, Alternatives and the Hands Off Aussie Post Campaign

5.1.2(e) The CEPU’s Concerns with Postal Deregulation5.1.2(f) The CEPU’s Alternative Reform Program5.1.2(g) The CEPU’s Hands Off Aussie Post Campaign

5.1.3 A Trade Union Assessment of the Australian Postal Sector Reform Experience

5.1.3(a) Campaign Successes5.1.3(b) Policy Successes5.1.3(c) Conclusion - The Challenge of Supporting Positive

Change

5.2 Japan Post

5.2.1 Introduction5.2.2 The Postal Service5.2.3 The Postal Savings Service5.2.4 The Postal Life Insurance Service5.2.5 Postal Service Reform Proposals in Japan5.2.6 Current Status of Reform - Competitive and Political Edge5.2.7 Conclusion

6. CONCLUSION AND RECOMMENDATIONS - A POSITIVE FUTURE FOR POSTAL SERVICES, THEIR EMPLOYEES AND CUSTOMERS

6.1 Postal Services - Unprecedented Change6.2 Postal Services - Vital Community Services6.3 The Asia-Pacific Region and the Pressure for Change6.4 The World Bank - An Agent of Change6.5 The Real Challenge - Creating a Profitable Public Sector Postal Service6.6 Principles of Change


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TABLES

1. Stamp Prices for Domestic Letter (First Class)2. Performance of Selected Postal Operators3. OECD Countries: Domestic Standard Letter Price and Monopoly Protection4. Comparisons of Selected Multinational Postal Companies (Public and

Private Sector5. Public and Private Postmen6. Deutsche Post Deals

REFERENCES


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1. PURPOSE AND BACKGROUND TO THE STUDY

Along with many of its affiliates, the international trade secretariat representing the world’s postal workers, the Union Network International (UNI) - and its predecessor body the Communications International - have been concerned at the impact of international financial and trade agreements and bodies in promoting the deregulation and privatisation of postal services, with potential negative effects on working conditions and unionisation. This concern has been reflected in a number of recent initiatives and major policy statements by UNI.1

Specific concern in the Asia Pacific region has focused on the operations of the World Bank, a financial arm of the United Nations. While this body is chartered as a financial lending body to provide financial assistance to the developing world directed at stimulating economic development and alleviating poverty, it has more recently been an active promoter of postal sector deregulation and privatisation.

The World Bank’s promotion of postal deregulation and privatisation was made explicit in its 1996 study entitled - “Redirecting Mail: Postal Sector Reforms”. The major concern of UNI has been raised in the context of the increasing globalisation of postal services provision, with moves towards deregulation and privatisation and the recent establishment of a number of multinationals and joint ventures or strategic alliances in the postal sector. Increasingly, the deregulaiton and privatisation of postal services can also be seen to have become part of an intenrational ideological psuh.

Consequently in February 1999 the Communications International’s Asia Pacific Regional Postal Committee resolved that a special research project be conducted on this area. The aims of the proposed study were:

· to respond to the World Bank’s study - “Redirecting Mail” - and its postal strategy;· to provide a systematic critique of this strategy and to promote an alternative industrial

strategy for the postal sector; and· to outline the role of the public sector and the social role of postal services, as well as our

concerns regarding the real impacts of deregulation and privatisation in the postal sector throughout the region.

An initial working party for the study was established in November 1999 and discussions were held at an international regional seminar held in Bangkok, Thailand in December 1999. This involved representatives from UNI-Asia Pacific Regional Office (APRO) (Eichii Ito), the Australian CEPU (Jim Claven), the Thai Postal and Telecommunications Union (Narubol Issarapruk), the Philippines Postal Workers Union (Noel Dacasin and Marina Lejos) and the Zenyusei-Japan (Hiroshi Tabata). This meeting discussed the project and proposed a range of matters concerning the development of the study, such as the range of matters to be covered,

1 Union Network International (UNI), “The Universal Postal Service: A Basic Human Right Threatened by Deregulation and Liberalisation”, 1st Meeting of the UNI World Executive Board, 19-20 July 2000, Edinburgh, UK; and, CI-APRO, “Preparation for the Regional Postal Industrial Policy”, Communications International (CI) - APRO, Post Asia Pacific Committee Meeting, February 5-6, 1999, Tokyo, Japan, p. 21.


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suggested contributions from affiliates, an initial timetable and an allocation of responsibilities.

This paper constitutes an initial interim report of this research project. This report is structured as follows:

· It first seeks to outline the nature of the postal services sector throughout the world and in the Asia Pacific region;

· It identifies some of the major challenges facing the sector and the push for reform of the sector;

· The role of the World Bank in this process is identified, with particular emphasis on the central role that privatisation and private sector participation plays in the World Bank’s postal “reform” program;

· The study analyses the role of the World Bank in a case study of Sri Lanka, identifying the key lessons of this example;

· It then sets out an alternative approach to postal sector reform by reference to the experience of Australia and Japan. This approach balances the need for commercialisation, corporatisation and profitability, within the context of maintaining public ownership and community service obligations and a commitment to workforce consultation; and,

· In conclusion, the study outlines some key principles for inclusion in a balanced approach to postal reform.

It is intended that further research will be undertaken to broaden the base of research of the study.

This paper has been prepared by Jim Claven of the Australian Communications Electrical and Plumbing Union (CEPU). He acknowledges the assistance of Basil de Silva (UNI-APRO Deputy Secretary), Eichii Ito (UNI-APRO Tokyo Office) and Hiroshi Tabata (Zenyusei-Japan).


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· 2. POSTAL SERVICES IN THE 21ST CENTURY

2.1 Postal Services - Vital Public Communications Services

Since there inception, postal services have been a vital and important communications link for all. As the World Bank acknowledges, for the overwhelming majority of countries, the postal service is the most basic and most common means of communication. It is also often the only link serving the entire community and forms the most important medium of communication for business and commerce. Approximately 189 postal administrations across the globe provide postal services to the world’s nearly 6 billion population.2

The sheer size and impact of the postal sector is significant in terms of the employment the sector supports and the proportion of GDP that it generates. Due to the labour intensive nature of physical mail delivery, between 60 and 85% of the total cost is labour.

Key statistics provided by the Universal Postal Union3 for 1997 demonstrate the continuing importance of postal services.

· Network Scope. As an indication of the spread and accessibility of the world’s postal network, there are over 770,000 permanent post offices throughout the world (an increase of 40,000 since 1993), representing approximately one office per 7,500 inhabitants). As a result most postal administrations posses unparalleled distribution and retail networks, providing substantial opportunities to expand the range of services offered;

· Employment. Postal services worldwide employ 5.89 million employees (a reduction of 200,000 since 1993), representing approximately one postal employee for every 1000 inhabitants;

· Existing Domestic Mail Volumes. In 1997, more than 404 billion letter post items were handled by postal administrations throughout the world i.e. close to 1100 million items posted each day in post offices and letter boxes for delivery within national borders. Worldwide, an average of 69 letter-post items per capita per year are posted destined for the domestic service. Between 1993 and 1997, the number of letter posted items posted in the domestic service in industrialised countries increased by an average of 1.95% each year, Developing countries, on the other hand, saw an annual drop of 2.13% over the same period. This fall in traffic was attributed to developing countries in the European and the former Soviet Union region, as well as a decrease in the number of newspapers transported by China Post;

· Existing International Mail Volumes. While representing only 2.1% of overall mail traffic, international letter mail volumes saw close to 24 million letter post items cross national frontiers every day. In 1997, nearly 9 billion such items were posted in the international service, over a third by developing countries. On average, 1.5 items are posted per capita

2 Universal Postal Union, (UPU) Postal Statistics, (Berne, UPU, 1998), pp. XII.3 Ibid., pp. XII-XV.


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per year in the international service. Between 1993 and 1997, international letter post traffic rose on average by 0.6% throughout the world. However only the industrialised countries and the Arab region of developing countries witnessed an increase; and,

· Domestic and International Mail Volumes Predicted to Increase. In 1997 the UPU estimates that worldwide domestic mail volumes are forecast to increase by an annual growth rate of 2.5% over the coming decade. The European and the former Soviet Union region is expected to increase by 2.5%, with low and middle income countries increasing traffic volumes by between 2 and 5.8% respectively. Similarly, international mail volumes are predicted to grow by 3.8% per year up to 2005, with industrialised countries realising 3.4% average growth and low and middle income countries achieving annual traffic volume increases of between 5.1% and 4.4% respectively.

2.2 Challenges Facing Postal Services

While the provision of traditional physical mail services remain the mainstay of postal administrations, the range of products and services provided by postal services have always been subject to change. For example, the emergence of telegraphic services resulted in a major change to the operations of post offices.

However as the postal service throughout the world enters the 21st century, there are a number of major challenges to the postal services industry which are altering the nature, structure and organisation of postal services throughout the world. These include increasing globalisation and competition, the push for postal reform and changes to the structure and operations of postal administrations. These will be discussed in detail later in this report.

However there are also a number of other changes to the nature of the postal market itself. These are issues associated with new technology, increasing pressures to attain profitability, meeting universal service standards and commercialisation.

New Technology

The postal sector in all countries faces a threat of product substitution as a result of the on-going revolution in communications. This is witnessed in the expanded use - even in developing countries - of electronic communications for business transactions as accessibility and affordability increases. As the World Bank states, in developing countries due to the high hardware and link-up costs electronic communications systems tend to be owned by large businesses. However “intermediary” service providers (for example small outlets providing fax, e-mail and other electronic communications services) are also emerging rapidly in both developed and developing countries (primarily in urban centres).4 Importantly, new e-commerce services provide threats and opportunities of significant new markets for the accessing and delivery of products.

4 Ranganatham, K., Redirecting Mail: Postal Sector Reform, (The World Bank, 1996), p. 20-21.


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Postal sector forecasting studies have stressed that the range of new electronic communications media that will be available will transform customer needs and the nature of the postal market. With increasing accessibility to interactive forms of communication (such as the Internet), new and direct mediums will open between business and customers. Customer information will have to be targeted and services modified.5

A 1995 UPU study estimates, for example, that electronic mail will double to 10% of the total messaging market in 2005. However other analysts regard these growth rates as being conservative. In both the US and the UK, predictions are for a massive expansion of electronic mail within the business sector.6 It is predicted that the Internet will have an estimated 550 million people connected by the early 21st century and consumer spending via the Internet increasing to $US186 billion by 2005 (up from between $US500 million and $US1 billion currently.7

In Australia, predictions are that while the physical communications market will continue to expand,8 this projected increase is in the context of the diminishing of the standard letter market in comparison to the total massaging market. It is estimated by Australia Post that it’s hard-copy mail communications account for approximately a fifth of the total of this communications messaging market or 4.4 billion items out of 22 billion messages carried throughout Australia in 1998. Telephone, faxes, e-mail, electronic data exchange (or EDI) and the Internet are estimated to account for two-thirds of this total market. Australia Post have estimated that over the period 1960 through 1996 to 2001, Australia Post’s portion of the total messaging market has declined from 50% (1960) to 19% (1996), with a prediction of its decline to 17% in 2001.9

Clearly, this all makes the profitability and viability of postal administrations vulnerable to a range of commercial competitive pressures from the expansion of electronic communications and commerce. However they also provide opportunities to enter a range of new product and service markets based on these new electronic technologies. These new electronic services will include hybrid mail (such as converting electronic mail to physical mail for delivery and vice versa), Internet services and e-commerce. A wide range of postal operators are currently actively engaged in providing these services (from Australia post, Dutch TPG, UK Post Office, Deutsche Post, La Poste (France), Canada Post, New Zealand Post and many others including Sri Lanka Post).10

5 Institute for the Future, Posts: Inside the New Web of Communications, Future of Global Mail Project, 1999.6 CI, Developments, Trends and Issues in Postal Services, April 1999.7 The Weekend Australian, June 21-22, 1997. 8 Australia Post, Opening Submission to the National Competition Council Inquiry into the Australian Postal Corporation Act 1989 and Associated Regulatory and Institutional Arrangements, August 1997, p.23 (subsequently referred to as Australia Post Submission); Australia Post, Annual Report 1996-97; and, Australia Post, Annual Report 1997-98, p. 9.9 Australia Post, Annual Report 1995-96.10 CI, Developments, Trends and Issues in Postal Services, April 1999, Communications, Electrical and Plumbing (CEPU), E-commerce and Postal Services - CEPU Response to UNI APRO Questionnaire , March 2000; Canada Post, “Canada Postal Corporation and Cebra Inc. from strategic alliance with SAP to deliver electronic post office to Mysap.Com community”, News Release, 14 September 1999; Ameresekere, P., “Thirty-eight new post offices with e-mail facilities”, Daily News (Sri Lanka), 5 October 1999.


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This technological threat and opportunity is further enhanced by the fact that these services provide a range of advantages to the business sector of the postal market. This sector is the largest sector of the mail market, where even in developing countries it is estimated that up to 85% of all mail is provided by the business sector. It is this business sector component of the postal market which is most likley to face competitive pressures from elecotronic media as the latter provide opportunities for higher service standards and improved reliability. The World Bank argues that this is the most severe competitive attack facing postal administrations, coming as it does from services beyond the usual defined monopoly protections of post offices.11 Increasingly, this is forcing postal administrations to realise that they are competing in an overall communications market, where electronic and physical communications are increasingly in competition.

Profitability

Overall financial performance of the world’s postal sector is problematic. However while postal operations in high income countries tend to break even (-1.5% return on sales), middle income countries are running at huge losses (about -15% on sales) or 10 times worse than high income countries. Low income countries are worse performers in this regard, with on average double the losses of middle income countries (about -30% on sales) or 20 times worse than high income countries. This poor financial performance results in a significant cash drain on public revenues and chronic under-investment. 12

In addition, it can be expected that profit margins are expected to be squeezed in the future as the level of competition increases. This will increasingly place competitive pressure on postal services to reduce the wide discrepancy in charges (such as for the standard letter) that exists between postal services (such as 0.62 Euros in Italy, 0.56 Euros in Germany and 0.46 Euros in the UK for example) thereby reducing revenue and profit margins.13 This is based on evidence from the parcel delivery and express mail market which is subject to extensive competition. For example, UPS’s total revenue has fallen from core non-express deliveries outside Europe despite the actual number of packages being constant. The direct competition from these private multi-national operators against national postal administrations in a liberalised market is already the subject of industry speculation, with Deutsche Post anticipating UPS’s entry into traditional mail services on liberalisation.14 These revenue constraints will be added to by the requirement of most traditional postal operators to maintain universal service obligations, regardless of the real cost of maintaining these service.15

11 Ranganatham, K., Redirecting Mail: Postal Sector Reform, (The World Bank, 1996), p. 21.12 Ranganathan, K., “Providing Comprehensive Assistance”, in UPU, Universal Postal Union - 125th Anniversary Yearbook, (Berne, UPU, 1999), p. 70.13 For a comparison of standard letter charges see Tables 1, 2 and 3 attached. Table 1 compares standard letter charges throughout Europe in terms of Euros. Tables 2 and 3 compare these rates for OECD countries in US and Australian currency comparisons.14 Watts, C., “The yellows and take on the browns”, Forbes Global, 21 August 2000, p. 58.15 CI, Developments, Trends and Issues in Postal Services, April 1999.


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Universal Service

While industrialised countries on average have achieved universal service for their populations, this is not the case with developing countries in which large sections of the population have no access to the postal service. The World Bank states that low income countries, on average, are able to provide the postal service to only 66% of their population. This implies that, given the very low telephony penetration in these countries, that approximately 34% of the population may have access to no communications medium. In this regard, many developing countries face the challenge to realise universal postal service in their communities.16

Commercialisation and its Implications - Corporatisation

The world-wide trend towards economic deregulation and the push for an increasingly role of the private sector in the provision of public services has added a new commercial dimension to the conventional service concept of the postal service. Postal users are increasingly being seen by management (and governments) as valuable customers, demanding service improvements to meet their evolving needs. Increasingly, public postal administrations have been faced by aggressive private sector operators (such as in the express courier market). This need for customer focus to retain market share has implications not only for products and services but for the nature of the organisation. Commercialisation is seen as requiring a less bureaucratic and more market-driven approach by management and service provision.

Corporatisation is increasingly considered the model to create sufficient postal management and financial flexibility required to combine commercialisation, competitiveness and profitability with the provision of a universal public service. The OECD reported in a recent study that most countries have either transformed postal operators from government departments into public corporations or are proposing such changes in the future. The OECD cites improvements in profitability, service quality, productivity and efficiency as the chief benefits of such a change.17

2.3 Global Competition

Changes in the structure of postal services and the increasing deregulation of the postal services market throughout the world has resulted in a transformation in the nature of postal services competition. Legislative and regulatory changes have increased the scope for global competition in the postal sector.

Traditionally, global competition in the postal sector has been limited to the multinational courier and parcel delivery companies, such as TNT, DHL and United Parcel Service (UPS) and Federal Express (FedEx). These had established huge customer bases, dominating the

16 Ranganathan, K., “Providing Comprehensive Assistance”, in UPU, Universal Postal Union - 125th Anniversary Yearbook, (Berne, UPU, 1999), p. 70.17 OECD, Promoting Competition in Postal Services, Directorate for Financial, Fiscal and Enterprise Affairs, Committee on Competition Law and Policy, (Paris, OECD, 1999), p. 7.


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express delivery and parcel distribution market, with fleets of aircraft, massive sorting hubs and large international delivery workforces. The prospect of postal deregulation led many to consider these private multinational operators as a major threat to national postal services.

Yet the trend that has emerged in recent years has been for these operators to face takeovers by national postal services, utilising new found commercial freedoms to borrow and retain profits. Where TNT is owned by the Dutch postal service, the German post office holds a significant share interest in DHL. While both UPS and FedEx operate outside of these alliances, they are nevertheless facing increasing competition for revenue and profits as a number of national postal services compete vigorously.

This has been a consequence in recent years of national public postal services having been increasingly pushed to operate commercially, as if they were business enterprises, and pre-existing commercial restraints on their operations being relaxed by government. The postal administrations of Australia, Canada, New Zealand, the UK, the Netherlands and Germany have been in the forefront of these developments.

This has had the effect of creating a number of multi-national postal corporations, most of which are publicly owned. For the first time, many of these operators are competing beyond their national domestic markets. Where Deutsche Post, Dutch TPG and the UK Royal Mail are doing this primarily by purchasing parcel delivery, courier, express and direct mail companies, New Zealand and Canada Post have concentrated on providing their expertise and services to other postal administrations. While these alliances are subject to frequent change, the following is a brief discussion of these developments in global competition to date.18

UK Post Office

With respect to global operations, the UK Post Office has entered the global postal market with various significant acquisitions. This has accelerated significantly since 1998 when the government increased Post’s ability to borrow and retain profits, effectively releasing an extra £1 billion over 5 years and unleashing a £600 million acquisition program over the last 18 months.

UK Post are now reported to be second largest courier, parcels and express operator in Europe, with a projected total turnover of £2.28 billion. To date, UK Post have purchased a 50% stake in General Parcel (which incorporates operations in Germany, Austria and Hungary), Nedloyds’ parcel delivery subsidiary (Selektvracht) the acquisition of parcels transporters Pakket Dienst (Netherlands) and Pakke Trans (Denmark), the Irish parcels and logistics provider the Williames Group, German express courier Der Kurier, the French express delivery firms Extand (£71 million) and Crie (£16 million), a 15% share of Sweden’s CityMail and other joint venture operations in the Netherlands. Royal Mail (UK) has also formed an alliance with the French postal service (La Poste).

Beyond Europe, UK Post has acquired the New York-based Citipost (£25 million) and formed the ground-breaking global alliance with Singapore Post and the Dutch TPG. This

18 See Tables 4 and 5 for a comparison of selected multinational postal companies (public and private sector) and Tables 2 and 3 for a further comparison of the performance of an expanded list of postal operators.


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alliance will create a Brussels-based global business consisting of 110 international sorting facilities located in 60 countries (with links to 140 others through contracts with private suppliers) to provide services in 200 countries. This operation alone will have an estimated annual turnover of £750 million. UK Post is also providing advisory services as part of the consortium that purchased the Argentine postal service in 1997. UK Post is gaining experience in the operation of innovative services such as direct mail, retail and direct marketing services.19

Deutsche Post

Deutsche Post has been aggressive in utilising its new commercial freedoms, purchasing a range of acquisitions and establishing joint ventures throughout the world.20 Deutsche Post has consequently become a truly multi-national company. Since 1997, Deutsche Post has spend more than $5 billion (US) to purchase stakes in around 25 postal and logistics companies in Europe and the US.

In Europe, Deutsche Post these purchases include a parcels delivery company in each major European country. Their major acquisitions include freight forwarders Swiss’ Danzas, a13% share in the independent Postbank and other parcel businesses throughout Europe (such as Poland’s Servisco, Sweden’s ASG, France’s Ducros Services Rapid, Belgium’s BPD parcel distributors, Austria’s IPP Packets and a 50% share of the UK Securicor distribution division and others in Czechoslovakia). Deutsche Post and its Euro Express brand is now Europe’s largest courier parcels and express operator, with 13% of the market and a turnover of £2.39 billion.

In the US, their purchases include a 25% share in DHL International, the international express company (a company with operations in 227 countries, 60,000 employees and a fleet of over 200 aircraft) and Global Mail, a major US exporter of international re-mail. With respect to international mail, Deutsche Post’s takeover of Air Express International, a new alliance with Lufthansa Cargo and the proposed merger of these operations with its DHL International arm, will lead to Deutsche Post overtaking the US company FedEx as the largest airfreight forwarder in the world. There is industry speculation that Deutsche Post could further expand its operations by in fact entering an alliance with FedEx itself, the latter being the main rival of UPS.

Deutsche Post have also expanded the scope of its operations beyond parcel delivery and distribution through its purchase of a 50.1% share of an Irish marketing company (Fortress Europa Marketing), a 17.2% share of a Danish international data post operation, a 100% share of the Us direct mail company (Global Mail) and the German Postbank (for $2.6 billion US). The latter offers factoring and accounting services as well as real estate financing.

19 CI, Multinationals in Postal Services, April 2000; Hounsfield, C., “Foreword - Emerging Partners”, Postal Technology International, 2000; Suffling, D., “Don’t Panic Mr. Roberts - Now we’re players in a global game, Communications Workers Union (CWU), Voice, June 2000, p. 8-9; Royal Mail, “Global Post Office Joint Venture”, Media Release, 9 March 2000; TPG, “TPG, British Post Office and Singapore Post in ground breaking One Billion NLG business mail joint venture”, Media Release, 9 March 2000; and, TPG, Press Conference 9 March 2000, 9 March 2000.20 Table 6 identifies some of the key Deutsche Post acquisitions in recent years.


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Deutsche Post has therefore become a major player in the increasing globalisation of postal services across the broad spectrum of the new and burgeoning postal industry. Beyond Europe, Deutsche Post’s purchase of Danzas in March 1999, Deutsche Post is now the world’s no. 1 freight forwarding company. It has been transformed in recent years from a post office into a large and diverse global supply change company operating throughout the world but with a firm base in Europe.21

Dutch TNT Post Group (TPG)

As a truly international postal company, based around the former Dutch postal service (KPN) and the international courier and parcel distribution company, TNT Express Worldwide, TPG operates in nearly 200 countries, employs 100,000 staff, carrying more than 80 million kg of mail and 100 million express items.

The extent of its international operations is demonstrated by the fact that TPG has 9% of the UK parcel delivery market compared to UK Post’s 24% and local parcel delivery company Securicor’s 16%. It has recently extend its European operations by purchasing the French express delivery company Jet Services (for $US361 million) and Tranjato, a Portuguese parcel delivery company. TPG has formed an alliance with the Irish postal service (An Post), as well as its recent joint venture with the UK Post Office and Singapore Post (see above).22

Through TNT, TPG has strong direct mail operations, for example printing and mailing all of Citibank’s European customer account statements and opened a range of outlets to prepare, print and deliver corporate unaddressed mail.

These express services and logistics play a large part in TPG’s financial performance, with mail accounting for 47 of revenue, express delivery 40% and logistics 13%. The vast bulk of TPG’s express services operating revenues is sourced from its European operations (77% or $US2.375 billion). It is reported that TPG is planning a major expansion of global operation, including acquisitions.23

New Zealand Post

While New Zealand Post lacks the financial leverage of the other multinational postal operators, it has been able to use its favourable reputation with bodies such as the World Bank to gain an international profile as a provider of postal consultancy services.

Through its subsidiary arm - New Zealand Post International, they have gained a five year contract to manage and operate Trinidad and Tobago’s postal service (a World Bank assisted project), completed a 3.5 year contract to establish and run Namibia’s postal service and the re-engineering of postal services in both South Africa and Malaysia. They have also completed projects in Thailand, Hong Kong, South Korea, China, Philippines, Indonesia,

21 Campbell, J.I., “The Overview of the International Postal Reform Movement”, 4 December 1998, p. 10-11; CI, Multinationals in Postal Services, April 2000; Watts, C., “The yellows take on the browns”, Forbes Global, 21 August 2000, pp. 57-58; and, Suffling, D., “Don’t Panic Mr. Roberts - Now we’re players in a global game, CWU, Voice, June 2000, p. 8-922 TNT, “TPG, British Post Office and Singapore Post in ground breaking business mail joint venture”, Press Release, 9 March 2000.23 Ci, Multinationals in Postal Services, April 2000


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Portugal, Turkey, Czech Republic, Botswana, Tanzania, Fiji and Australia. New Zealand Post also recently won a contract (as part of a consortium with the UK Post Office) to restructure the South African Post Office.

With its totally deregulated domestic lettermail market, New Zealand Post also operates courier companies in direct competition with local and multi-national courier and parcel delivery companies. It has invested in heavily in direct mail, data mail and electronic delivery services, acquiring shares in Datanet (an electronic mail company) and a joint venture with corporate direct mailer, Gallagher Mailing Service Ltd. New Zealand Post is now the largest courier and parcel delivery company in New Zealand, having purchased a number of competitors. It is also operates the third largest airline in the country.24

Canada Post

The approach of Canada Post has been to conduct its international operations as an advisor to other national postal administrations through a specific subsidiary arm, called Canada Post Systems Management (CPSML). Established in 1991, this company has completed 80 projects in 38 different countries.

Many of these contracts have been part of World Bank postal reform projects, including a $C4.3 million contract from Guatemala to provide postal advisory services, an unsuccessful bid for the contracts to operate the Trinidad and Tobago postal service and to restructure the South African postal service. Other global initiatives of Canada Post have included a 75% share in the parcel and courier company Purolator (which had an annual turnover of $C849 million in 1997-98) and a joint venture with Deutsche Post, France’s La Poste, the Swedish Post Office and TNT forming GD Express Worldwide, an international courier service (subsequently purchased wholly by the Dutch TPG).

While Canada Post has entered the global marketplace by working through other national providers, this relationship could in the future be developed into contracting to operate or outright purchasing of local postal services.

Conclusion

It can be anticipated that this dual process of increasing global competition and concentration of multi-national operations will continue and even accelerate. Increasingly national postal administrations will be drawn into this global market and at the same time face increasing competition for their domestic postal markets. In this respect, the Managing Director of New Zealand Post International recently is reported as referred to this situation as follows:

“Post’s will fail, disappear, fall by the wayside, be bought out, split up and sold. Ten years from now, maybe even sooner, the world will be dominated by perhaps 10 or 12 super postal companies.”25

24 CI, Multinationals in Postal Services, April 2000.25 Hounsfield, C., Op. Cit.


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These are only a few examples of the global transformation in ownership and operations in the postal sector. Clearly they will provide domestic postal administrations in this region - and others - with a serious threat to domestic and international mail markets and pose questions for national sovereignty in the postal market. They also threaten to blur the nature of public ownership in the postal sector.

2.4 Employment and Unionisation Impacts of Global Competition

The globalisation of postal services through competition has a number of implications for employment and unionisation.

UPU statistics confirm an overall reduction from 5.89 million of 200,000 postal workers between 1993 and 1997. Much of this reduction will have come from the responses of postal services management’s in developed countries to new technology, commercialisation and increasing competition. For example, Deutsche Post alone has reduced its workforce from 390,000 in 1994 to 250,000 in 1999. This has been achieved through the replacement of 1,000 postal depots with 83 high-tech package sorting centres at a cost of DM4.1 billion. In addition, 16,000 out of a total of 30,000 Deutsche Post retail outlets have been closed.26

Dutch TPG has adopted a similar strategy since 1989. Where a 1996 study by the London-based National Economic Research Associates (NERA) estimated that deregulating only cross-border and direct mail throughout Europe would cost more than 5,000 French postal jobs, UNI has estimated that throughout Europe postal deregulation could cost up to 500,000 postal jobs.27

Employment levels will also be affected by increasing contracting or franchising of retail operations. Across the developed world, many postal services are well advanced with such programs. The Netherlands, New Zealand and Australia provide examples of how this program is proceeding. Dutch TPG has franchised out most of its small post offices to a retail news stand chain. New Zealand Post is undertaking a similar arrangement by establishing a joint venture (called Books and More) with the multinational company, Blue Star International. The aims for Books and More to effectively replace corporate post offices with these franchise retail outlets, with negative impacts on both New Zealand Post employment and unionisation within the industry. In 1998, after an on-going program of converting corporate post offices to licensed operations, over 66% or almost 3,000 of Australia Post’s retail outlets are operated under license as private businesses.28

It is true that many of the key players at the moment are national postal administrations with significant union membership rates amongst their domestic workforces. However many of their private sector acquisitions do not have significant union presence’s. Many of the new

26 Watts, C., Op. Cit., p. 57.27 CI, Developments, Trends and Issues in Postal Services, April 2000; and, UNI, “Postal Deregulation could cost up to 500,000 jobs in Europe”, Press Release, 31 May 2000.28 Ci, Developments, Trends and Issues in Postal Services, April 2000; NZ Engineering, Plumbing and Manufacturing Union (EPMU), Books and More profits for NZ Post, April 1999; EPMU, United workers rally over NZ Post sell-off”, Post Box, Special Campaign Edition, April 1999; and, Australia Post, Annual Report, 1997-98.


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hybrid and electronic services and products provided by the new operations (such as direct mail, marketing, data and electronic mail services) have low levels of unionisation.

It is also the case that the private international logistics and express parcel and courier operators (TNT, DHL, UPS and FedEx) have low rates of unionisation compared to that of European national postal services for example. Where these private sector companies are unionised this tends to be with trade unions in the transport sector (such as the Us Teamsters union).

The increasing provision of postal services through subsidiary business units will also put pressure on the existing wages and conditions of the highly unionised traditional domestic operations of national postal services.

Clearly, the global trends in the postal industry can be anticipated to increase pressures on employment levels, working conditions and unionisation throughout the sector. As the merging of the private and public sectors continues apace as it can be expected to do, the challenge for postal unions will be to secure employment levels and working conditions, and retain and expand their memberships throughout the whole of this global corporate architecture. Otherwise, there may emerge an increasing threat to existing unionised areas as the employment and industrial relations practices of the private sector are extended to the domestic postal services arms (or owners) of these global companies.29

2.5 The International Agenda for Postal Reform

Despite these range of challenges, the postal sector has to date generally resisted such radical reforms as postal privatisation. Indeed the World Bank has stated that the postal sector is “one of the last bastions of the old order.”30 In this regard, the OECD recently reported that in many countries postal services:

· operate as large, vertically integrated state-owned enterprises;

· generally are un-profitable and in a few cases, incurring large losses (with Italy for example incurring a loss of 12% of revenues);

· enjoy a monopoly or reserved service over the handling of certain classes of mail, with few countries allowing competition in all sectors of the postal industry;

· are required to fund internally non-commercial community service obligations, the most important being the obligation to maintain service quality on un-profitable, high cost or low volume delivery routes when other concerns (such as uniform price obligations) limit the ability to raise prices; and,

29 CI, Multinationals in Postal Services, April 1999; CI, Developments, Trends and Issues in Postal Services, April 1999; and CEPU, “Unions Eye the Future”, The Postal National, July 2000, p. 8.30 Ranganatham, K., Redirecting Mail: Postal Sector Reform, (The World Bank, 1996), p. 1.


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· operate with a lack of competitive neutrality between the incumbent and competing postal operators on issues such as taxation, civil liability, mailbox access and rights to mail collection on public highways.31

Yet the push to reform postal services is now accelerating throughout the world. One of the major reasons for this is the international push for deregulation and privatisation of government services. This movement is now turning its attention increasingly to the postal sector.

This agenda has arisen from a range of factors. The decade of the 1980’s witnessed a worldwide ideological trend towards economic liberalisation, encompassing deregulation, the opening up of capital markets and the privatisation of state assets. This push was also associated with reducing public expenditure and making existing public assets profitable. This agenda has been referred to as a neo-liberal approach to political economy. At its centre is a preference for the so-called free market. In this view private sector service provision is advocated over public sector service provision. This is not only considered to be more efficient, delivering more cost-effective services, but the whole role of government was redefined to exclude many services previously considered core public services. A whole range of services, ranging from telecommunications, energy, water and community services, were transferred to private enterprises through sell-offs or contracting out. This was most pronounced in the UK and US (with the Thatcher and Reagan administrations), its impact was felt across the globe. Where OECD countries deregulated their economies, the developing world followed this agenda through the influence of the IMF and World Bank’s structural adjustment programs.32

While this neo-liberal agenda has been and is being challenged in various countries, it has nevertheless become to a large extent the economic and political orthodoxy in the developed world (irrespective of political party affiliations) and increasingly in the developing world through the actions and influence of the United Nations financial arms (such as the World Bank). Increasingly it is left to the organised labour movement and other social and consumer movements to oppose this orthodoxy in the broader public and social interest.

As a result of this orthodoxy, governments throughout the world have advocated and implemented various levels of deregulation of the postal market (effectively reducing the level of the monopoly assigned to the public postal service), corporatisation and even privatisation of the postal service itself. One commentator has described this push as having developed into “a broad international movement”, with political leaders, civil servants, postal officials, leading mailers and academics advocating a common approach to the reduction or elimination of the postal monopoly, substantial privatisation of the post office, corporatisation and product diversification.33 International think tanks have urged

31 OECD, Op.Cit., p. 7-11.32 The political and academic nature and extent of this movement is summarised in - Institute for the Future, Surviving Postal Deregulation: A Postal Scenario for 2010, Future of Global Mail Project 1998, pp. 1-8. Also see O’Brien, R., et al, Contesting Global Governance: Multilateral Economic Institutions and Global Social Movements, (Cambridge, UP, 2000), p. 7.33 Campbell, J.I., Op.Cit.


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governments and postal administrations to initiate these measures in response to this orthodoxy, often in apocalyptic terms.34

Despite this elite support, to date only Sweden, New Zealand, Finland and Argentina have fully deregulated their postal services by removing the monopoly to deliver letter mail from the public operator. There are government proposals to partially privatise the German postal service and in 1989 the Netherlands became the first and to date the only developed country to privatise a majority interest in its post office. Yet while the success of the push to fully deregulate and privatise postal services may be limited to date, the pressure to extend these “reforms” is continuing apace. An overview of some major recent developments reveals that the international push for postal deregulation and privatisation is continuing to pressure national governments.

The following summary discusses the postal reform initiatives generated by various inter-governmental bodies - the Universal Postal Union, the European Union, the OECD and the World Trade Organisation.

Universal Postal Union

Since its Seoul Conference in 1994, the Universal Postal Union, the international organisation representing the world’s national postal administrations, has been a key player in promoting postal sector reform. It has urged government’s and postal administrations to transform postal services from government departments into “business enterprises, endowed with management autonomy and financial self-sufficiency”. It also sought to promote reforming organisational, financial and legal structures, adopting better business practices and implementing more customer-oriented operations. It has also sought to promote the utilisation of new technology as well as universal service.

Recognising the increasing liberalisation of the postal sector, globalisation of services, increased competition (including from the private sector) and the impact of new technologies on postal markets, the UPU has sought a major role in promoting change in the postal sector. As it states “it should not be perceived as an institution responsible for protecting the status quo, but rather should be the source of changes and developments.”

The UPU states that it does not promote “a single standard system of postal reform” and asserts that actual reform measures must take account of specific national environments, the maturity of the market, the level of development of postal infrastructures and the existence of “viable participants in the private sector” as well as political and government factors. It also states that reform must balance the application of commercial principles and the notion of public service, in industrialised and developing countries alike.

Yet the implications of its analysis are that a number of key reforms are preferred and advocated. These include

34 Institute for the Future, Surviving Postal Deregulation: A Postal Scenario for 2010, Future of Global Mail Project 1998.


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· Independence and Business Management. The need to obtain administrative and financial management independence, and the general introduction of business management principles;

· Customer and Market Focus. A dynamic corporate policy with the ability to respond quickly and fully to market needs, and the need for customer focus, with the development of new products and services to meet these needs (including financial and new electronic services, such as hybrid mail);

· Profitability. Self-financing or profitability; and,

· Human Resources. The introduction of “modern human resource management methods”. This should be directed at increasing organisational effectiveness through the development of human resource policies which ensure that employees demonstrate required proficiencies for their assigned tasks, ensure a safe and diverse work environment, improve management employee relations, put in place a framework for and implementation of continued training projects which allow employees to develop capabilities and to reach their full potential.

It also aims to reduce the widening gap between developing and developed countries through various development projects. These are aimed at improving infrastructure, transforming legal and financial structures and policies, introducing commercial principles and modern management systems. The UPU aims to provide this assistance through the provision of technical cooperation and assistance.

The UPU has also begun an important collaborative effort with the World Bank and other outside donor organisations to promote “postal development and to find the finance for and implementation of real projects”.

This approach is underpinned by the UPU’s objectives for 2000-2004 adopted at its 1999 Beijing Conference. These objectives are to: ensure the provision of a universal postal service, allowing customers to send and receive goods and messages, from any point in the world to any other point; strengthen the quality of the international postal network, providing customers with reliable, secure and efficient postal services; increase the cost effectiveness of the international postal network, providing customers with affordable postal services; respond effectively, through improved market knowledge and product development, to the needs and expectations of postal service customers; enable, through the process of postal reform and development, postal customers to draw maximum benefit from technological, economic and regulatory changes in the postal environment; strengthen and broaden cooperation and interaction among the stakeholders of the postal industry.35

While the UPU stipulates the need for a balanced approach to reform, it is clear that its program is committed to commercialisation and corporatisation of the world’s postal service. It’s collaboration with the World Bank, however, takes the UPU beyond these aims. As the

35 UPU, Beijing Postal Strategy - The Right to Communicate, Challenges and Opportunities for the Post , 1999. http://www.upu.int/upu/an/sp_beijing_an.html. Downloaded 8 August 2000; and UPU, Beijing Postal Strategy - Action by the Permanent Bodies of the Union, Congres-doc 64.Add 2, 16 March 1999.


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UPU states, “the World Bank and the World Trade Organisation have taken a strong interest and stake in accelerating the pace of the movements (for reform)”. As will be explained, the UPU is therefore aiding and abetting the promotion by these organisations of the privatisation process in the postal sector.

European Union

In December 1997, the European Union adopted a legal instrument or Directive setting common rules for the Europe Union postal market, including a common limit on the extent of the postal monopoly. This Directive allows universal service providers to have a reserved service area on mail weighing up to 350 gms and/or 5 times the price of the standard letter. 36

Cross-border mail and direct mail (addressed advertising mail) is included in this reserved service area “to the extent necessary to ensure the maintenance of universal service”. It also provides for prices to be affordable, a provision that has been interpreted as a uniform rate for the standard letter. The Directive also requires the establishment at least one regulator independent of the postal operator.37

However this Directive also committed the European Union to consider “further gradual and controlled liberalisation of the postal markets” by January 2003. It specifically mentioned the liberalisation of cross border and direct mail and a review of the weight and price limits. This proposed review was to take into consideration economic, social, employment, technological and service issues.

As a result the European Union completed six studies into further postal sector liberalisation. Major concerns with these studies have been raised by both European Union postal operators and postal workers (through the latters international trade union secretariat, UNI-Europa). These concerned the studies having under-estimated the negative financial, employment and consumer effects of liberalisation. The majority of European Postal operators38 submitted a report on these studies, which amongst other substantial criticisms argues that the studies are based on “speculation” rather than supportable analysis. They point to the studies estimate that full postal liberalisation will eliminate the total profit of European postal operators valued at 1 billion Ecu’s.39

Despite these concerns from both postal operators and postal workers, the European Commission (EC) has put forward a proposal to extend deregulation of the European postal market. This proposes to reduce the reserved service to items weighing up to 50 grams and 2.5 times the price of the standard letter and fully deregulate all cross-border mail and express mail. These changes are estimated by the EC to open up a further 20% of Europe’s

36 While this has reduced the monopoly level for some European Union member states, this level is still greater than that of a number of other countries, such as Australia and Canada See Tables 2 and 3.37 European Union, “Directive 97/67/EC of the European Parliament and the Council of 15 December 1997 on Common Rules for the Development of the Internal Market of Community Postal Services and the Improvement of Quality of Service”, Official Journal, L15/21, 21 January 1998.38 This report was endorsed by all European postal operators, with the exception of Sweden, Germany and the Netherlands. The organisation which issued this study is European Contact Committee of POSTEUROPA. POSTEUROPA is the public postal operators European association covering all European countries. Within this body there is a committee dealing with European Union matters. This Committee meets the European Commission’s Postal Unit of the Commission’s Directorate General.39 UNI, “Postal Services”, 30 May 2000.


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postal market to competition. It is argued that these changes will assist Europe seize the opportunities offered by new technologies (such as e-commerce and just-in-time-delivery). These changes are proposed to be implemented by January 2003, with further changes to be announced by the end of 2004 for implementation by January 2007.40

Despite assurances from the European Commission, government, postal operator and union critics estimate that these changes will adversely affect existing postal services. They are estimated to do so by undermining the viability of post offices and the ability of postal operators to provide universal services, and by creating massive unemployment. Where Royal Mail estimate that these changes will result in higher charges and the loss of 50,000 postal jobs, UNI has estimated that 500,000 European postal jobs are threatened by these measures.41

OECD

The Organisation for Economic Cooperation and Development (OECD) is also supporting postal reform. A recent major study conducted by the OECD, entitled Promoting Competition in Postal Services, has advocated further postal deregulation and competition throughout the world. The study makes a number of key recommendations to government:

· Access Arrangements. It argues for encouraging regulated access to the facilities and services of incumbent postal services to develop “effective competition;

· Community Service Obligation Funding. It argues that non-competitive CSO’s are not incompatible with increased competition and recommends the imposition of agreed CSO’s costs by government on the operator (such as in Sweden and New Zealand), budget funding or competitive neutrality measures to “ensure the funding of the CSO’s without restricting competition”;

· Full Deregulation. The few examples of fully liberalised postal markets are reported as resulting in “quality of service improvements, increases in profitability, increases in employment and real reductions in prices”; and,

· Anti-Cross Subsidisation Measures. It argues that “anti-competitive” cross-subsidisation cannot be adequately addressed by accounting separation (as in Australia) but requires structural or regulatory measures such as privatisation (such as the Netherlands), full liberalisation or horizontal or vertical separation (by either stopping postal services providing competitive services such as express and parcel services or separating delivery from other sections of the mail business).42

World Trade Organisation

40 European Commission, “Postal Services: Commission Proposes to Speed Completion of the Internal Market”, 30 May 2000.41 “Royal Mail monopoly under threat”, Yahoo News, UK, 30 May 2000; Hargreaves, D., and Buckley, N., “France bridles at EU postal liberalisation”, Financial Times, 30 May 2000; and, UNI, “Postal Deregulation could cost up to 500,000 jobs in Europe”, Press Release, 31 May 2000.42 OECD, Op.Cit.


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As part of the World Trade Organisation (WTO) rounds of negotiations, there have recently emerged proposals to include the deregulation of postal (and other public) services as part of a new General Agreement on Trade in Services (GATS). An initiative of OECD countries, the GATS like other WTO Agreements is an annexure to the Agreement establishing the WTO. There is consequently no opting out of the GATS - those who want to benefit from the other elements of WTO Agreements have to adhere to the GATS. The GATS came into force on 1 January 1995. The main purpose of the GATS is to provide a framework for the progressive liberalisation of markets in a range of services, with member states committing themselves to achieve this through negotiation with each other.

An OECD study confirms the broad scope of the WTO’s proposals for the GATS. Services are defined as any service in any sector. All sectors are covered, including possible future services. Communications services are specifically identified, including as a mode of delivery through the provision of any services that cross borders supplied through telecommunications and mail.43 The WTO has also produced a background paper that argues that “commercial postal services” should be included in this agreement.44 This move is considered by advocates of radical postal reform as being an opportunity to effect an expanded and “generalised” liberalisation of delivery services as the WTO did for international telecommunications in 1997.45

The role of the WTO and GATS in effecting the liberalisation of postal services has also led to the establishment by the UPU of a Council of Administration (or CA) Project Team on relations with the WTO. This relationship has resulted in a dialogue between the UPU and WTO, including the completion of significant research and papers on the issue, which would confirm the seriousness of the push for postal liberalisation from the WTO.46

Postal workers in Canada, through their union - the Canadian Union of Postal Workers (or CUPW)- have drawn a similar conclusion and have lobbied their government to oppose such a move by the WTO. In their submission to government they have emphasised that the inclusion of postal liberalisation under the GATS will undermine democratic influence and control over national postal services. The maintenance of social imperatives such as universal and affordable service will be threatened. They are advocating full parliamentary scrutiny of

43 Knapp, U., The General Agreement on Trade in Services (GATS): An Analysis, (Paris, OECD, 1994)44 World Trade Organisation, The Council for Trade in Services, Postal and Courier Services: Background Note by the Secretariat, June 12, 1998, p. 12.45 Campbell, J.I., Op. Cit., p. 13.; Campbell, J.I., GATS and Physical Delivery Networks, 2 September 1998; Plum, M., and Stumpf, U., The Regulatory Framework for Cross-Border Mail: Needs for Change and a Vision for the UPU, WIK Paper for the 6th Conference on Postal and Delivery Economics: Emerging Competition in Postal and Delivery Sectors, Montreux, Switzerland, 17-20 June 1998, and, International Chamber of Commerce, Policy Statement - Air Cargo and the WTO, prepared by the Committee on Air Cargo Transport, 25 September 1998.46 See for example - UPU, Background Note on WTO Agreements and Postal Services for the UPU Council of Administration Project Team on Relations with the WTO, 25 February 2000; UPU, Briefing on WTO Ministerial Conference, Seattle, Washington, USA, 30 November 1999; UPU, Resolution C9/1999 - International law in the filed of trade in services, WTO-UPU Memorandum of Understanding on cooperation, 1999; UPU, Obligations arising from the General Agreement on trade in Services (GATS),Congres-Doc 72, UPU 22nd Congress, Beijing, 1999; and UPU, Council for Trade in Services - Postal and Courier Services - background Note by the Secretariat , 12 June 1998. The WTO has also produced a paper to promote the GATS and postal liberalisation for conisderation by the UPU - Hartridge, D., Globalisation of Trade in Services, WTO Paper to UPU Strategy Conference, 13 October 1997.


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any GATS agreement and a commitment to public debate on trade policy to provide a social counter-weight to corporate influence on trade policy.47

2.6 Implementation of Postal Reform

This international push towards postal reform has had and continues to have a major influence over many governments in determining their domestic postal sector policies. As has been stated, Sweden, New Zealand, Finland and Argentina have fully deregulated their postal services and a majority share in the Netherlands postal service has been privatised, with Germany planning to partially privatise the German postal service in November 2000.

While a number of examples will be discussed in detail below (such as Sri Lanka, Australia and Japan), it is important to appreciate the impact of the current drive for postal reform. For while radical reform such as privatisation has been generally rejected to date, this agenda has nonetheless has a widespread impact on the postal sector. Commercialisation, corporatisation and deregulation of postal services are firmly on the agenda across the world.

The following summary discusses the key regulatory and organisational changes that have been undertaken in the postal services of a range of major developed countries in response to this push for postal reform.48

Canada

Canada Post operates as a government-owned corporation, with legislative pricing restraints, universal service obligations and a monopoly restricted to lettermail. In 1995, the Canadian government announced the Canada Post Mandate Review to investigate the appropriateness of further competition in the Canadian postal market. A major campaign by the Canadian postal workers (through their union, CUPW) and community groups argued for the retention of the current regulatory regime.

While the review recommended retention of Canada Post as a public corporation and its lettermail monopoly, major restrictions were to be imposed on Canada Post. Amongst other recommendations, this review recommended that Canada Post be restricted to its core lettermail postal service responsibilities, with courier, express, unaddressed admail, electronic products and services to be operated exclusively by private operators. Labour costs were also targeted for reduction.

47 Canadian Union of Postal Workers (CUPW), Submission to the Canadian Government on Public Postal Services and the WTO General Agreement on Trade in Services - Your Public Service: More than Just the Mail, More than Just the Quebec-Windsor Corridor, (Ottawa, CUPW, June 2000).48 In addition to the references cited, this section draws on the following documentation: CI, “Where we stand”, CI Post Asia Pacific Committee Meeting, 5-6 February 1999, Tokyo; and, the UPU, The UPU and its members - Status and Structures of Postal Administrations, Various, Updated 4 July 1998, http;/www.upu.int/status/an. Downloaded 30 August 2000. Table 2 also contains a comparison of the performance of selected postal operators, detailing their various regulatory environments and operations as of 1995.


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While the Canadian government refused to accept all recommendations of the review, amongst other measures it accepted the need for reduced labour costs and private sector provision of unaddressed admail. Canada Post were to be required to achieve financial targets, such as 11% return on equity by 2003 - despite restrictions on Post’s ability to increase mail charges. As a result of these announcements, Canada Post retrenched 10,000 admail postal workers, the largest lay off in Canadian history. It also emerged in 1997 that the government was considering privatisation. Yet following public pressure, privatisation has been discounted by the government. CUPW remains opposed to privatisation, further deregulation and commercialisation of Canada Post.49

United Kingdom

After almost 3 years of debate, the British Labour government in February 2000 introduced its legislation concerning the future of the postal service, the Royal Mail. The debate over the future of the postal service in the UK has been a long and heated one, with the UK Communications Workers Union (CWU) conducting very effective public campaigns in defence of its members and the broader community. These included the defeat of the previous Conservative government’s proposals to privatize Royal Mail. However since the election of the Labour government in 1997 the debate over the future of the postal service has continued.

Essentially this debate has centered around the options of a publicly owned postal service with enhanced commercial and financial freedoms or various measures of privatization. Reductions in the level of the reserved service have also been mooted at various times.

The CWU has played a significant part in this public debate. In response to rumours of a push for privatization, the union developed its alternative model. This sought to provide the publicly owned postal service with enhanced commercial and financial freedoms. This model was referred to as the Independent Publicly-Owned Corporation or IPOC model. In essence, this model sought to enable Royal Mail to operate on a more commercial footing, retaining more of its profits for investment and better able to compete against the increasing number of competitors in the postal sector. This was to be achieved with the context of a re-newed commitment to its public ownership.

This debate has seen a variety of options and measures floated by the government. These have included proposals for part privatization of the Royal Mail, massive reductions in the reserved service and measures that would remove large sections of Royal Mail’s financial services business.

Proposals to introduce part privatization revolved around an up to 49% share issue in Royal Mail. The reduction in the reserved service centered on a proposals to reduce the reserved service from 350 grams (the level currently authorised by the European Union) and £1 to only 150 grams and 50p. With regard to financial services, the government has proposed that all benefits payments be made via electronic funds transfer rather than cash payments over Post Office Counters. This would have the effect of reducing government costs (from 49p to under 5p per transaction) but Post Office Counter revenues would also be reduced by £280

49 CUPW, Op.Cit.


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million. Advocates of these proposals within the UK government have based their arguments solely on the assumed superior efficiency of the private sector and the need for ever increasing levels of competition in postal services. All of these measures have been vigorously and effectively opposed by the CWU.

In early February 2000, the government released its proposed new Postal Services Bill. This gives legislative effect to the “balanced package’ announced by the UK government in its July 1999 White Paper, which was itself the outcome of a two-year review of the future of the Post Office. This generally reflects the position adopted by the CWU, with a few notable exceptions. As a result, the CWU has welcomed the new Bill with a number of reservations.

Key aspects of the Bill are: re-states the government’s commitment to public ownership (thereby requiring further primary legislation should there be any change to privatize Royal Mail); the conversion of the Post Office into a Public Limited Company or PLC, with the government holding all ownership rights; provides improved commercial freedom to the Post Office, allowing it to operate more effectively in the increasingly competitive UK and European postal market. This will allow Royal Mail to offer bulk mail discounts to large mail users, rationalize internal boundaries and transfer certain priority services (such as that between Royal Mail and Parcelforce), establish joint ventures, enter new markets to re-position itself as a total distribution company and more freedom in relation to pay settlements; new regulatory disciplines which strengthen the Post Office User’s Council (re-named the Consumer Council for Postal Services), establish an independent regulator (known as the Postal Services Commission), allow the government to issue niche licences to permit private operators to provide defined services in the monopoly area and introduce a price cap on the monopoly services of the Royal Mail; and, provides for the retention by Royal Mail of significant revenues. The government also announced that the issue of the level of the reserved service has been referred to the new Regulator to recommend to the government in twelve months.

The CWU has welcomed the legislation. In many respects the above represent the adoption by government of the CWU’s own proposals for the future of Royal Mail. As the CWU state their fundamental objectives have been to achieve for the Royal Mail new commercial freedoms balanced by new regulatory disciplines in the context of full public ownership.

Yet the government has included a number of measures which are of concern to the CWU. These include: the open ended nature of the ability to dispose of shares in the Post Office (PLC) in order to further partnership or joint ventures; the unlimited nature of fines that could be imposed on the Post Office in the event of failure to meet service standards; the unrealistic limitations on Royal Mail’s new proposed borrowing limits (£75 million) compared to its revenue base; and, the absence of any specific reference criteria for counters (retail postal outlets) in the clause in the legislation on social and environmental guidelines.

As a result the CWU is currently pushing for legislative amendments to the proposed Bill to address these concerns. the most important of these is the inclusion of a “cap” on the total level of any share swap provision (i.e. up to 10% of the Post Office) with specific reference for the re-incorporation of the shares on the closure of the joint venture. The CWU aim is that any move beyond these limitations would require primary legislation to be passed by the


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Parliament, thereby providing an opportunity for the CWU to campaign against any such changes. The CWU are rightly concerned that this may lead to the privatization of Royal Mail by stealth. The CWU has recently reported that the government will adopt the union’s position on the share-swap issue.50

The CWU has also welcomed the government’s decision to abandon its proposals regarding reducing the reserved service and removing benefits payments from the Post Office. The former has been deferred from consideration pending the determination of a European-wide reserved service definition by the European Union. The government has announced that the payment of benefits payments via electronic funds transfer (EFT) will be on a voluntary basis and Royal Mail will be encouraged to establish its own EFT system in advance of any such change. The CWU is also seeking to enhance the security of basic postal services. This relates to the need to ensure that the community service obligation of Royal Mail accurately reflects community expectations. The CWU are interested in providing an expanded legislative basis for these services, encompassing access to counter services and other important aspects of the postal service. They are particularly investigating the possibility of enshrining such services in a European Union Directive on postal community service obligations.51

As has been pointed out above, the UK Post Office is responding vigorously to the regulatory and other changes in the UK - particularly the commercial freedoms its has been awarded - to enter the global postal market. As has been stated, these acquisitions have placed the UK Post Office is second largest European courier, parcels and express operator. It has expanded its operations beyond Europe, with a major joint venture with Dutch TPG and Singapore Post, as well as acquisitions in the US.52

Germany

By the end of the 1980’s the German government had decided to embark on a program of postal reform. In the government’s view Deutsche Post lacked a commercial focus, had inadequate commercial accounting practices, ineffective marketing, sales and control departments. Letter delivery performance in 1990 was approximately 80% and financial performance had resulted in losses of over $385 million (US) on gross receipts of $10.7 billion (US).53

In 1997 Germany completed the last phase of a three stage decade long postal reform program. This has resulted in -

· Phase 1 (1989). This encompassed the separation of postal and telecommunications services, the postal provider (Postdienst) operating under new management (many of whom are drawn from the private sector), with new commercial management and accounting practices and an internal re-organisation based on major business groupings;

50 CWU, “Byers bid to reassure postal workers”, Voice, July 2000, p. 6.51 CWU, Briefing on the Postal Services Bill, January 2000; and, CWU, “Union Greets Postal Services Bill as “a Victory for Commonsense”, Media Release, 28th January 200052 Suffling, D., Op.Cit., p. 8-9; Royal Mail, “Global Post Office Joint Venture”, Media Release, 9 March 2000; TPG, “TPG, British Post Office and Singapore Post in ground breaking One Billion NLG business mail joint venture”, Media Release, 9 March 2000; and, TPG, Press Conference 9 March 2000, 9 March 2000.53 Watts, C., Op. Cit., p. 57.


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· Phase 2 (1994). This encompassed the transformation of Postdienst into Deutsche Post AG, a normal corporation with shares owned by the government and constitutional universal service guarantees; and,

· Phase 3 (1997). This encompassed the abolition of the Ministry of Posts and Telecommunications and repeal of the monopoly (200 grams for lettermail and 50 grams for admail) at the end of 2002. In November 2000, the German government is planning to sell a 25-33% share in Deutsche Post to the public, which is estimated raise $10 billion (US) and thereby value the whole company at $30 billion (US).

This final phase of postal reform, referred to as Postreform III, is unique in that it imposes universal service obligations on government (not the national postal service) and provides for the funding of these obligations from a new licensing scheme for postal operators (rather than cross-subsidisation or budget funding). Any licensee with a dominant market position must provide unbundled services and post office box services to other operators.

By 1997, Deutsche Post management had reduced their workforce from 390,000 (in 1990) to 250,000, its retail outlets from 30,000 to 14,000 and more than 1,000 postal depots to 83 new high-tech sorting centres. Heavy investment in computers and new sorting equipment has resulted in faster and more reliable deliveries, with 95% next day delivery on domestic deliveries being achieved. Many logistics operations, such as order processing, warehouse management, finance inventory and sales have been outsourced. In 1997 Deutsche Post recorded a net profit (after acquisitions and restructuring costs) of $1.2 billion (US) on revenues of $23.8 billion (US). This is a major financial improvement on previous results, such as its $386 million (US) loss on revenue of $10.7 billion (US) in 1990.54

As has been pointed out above, Deutsche Post has utilised its new commercial freedoms, undertaking a major acquisitions and joint venture program, such that it is now the largest European courier, parcels and express operator, as well as a major international postal player with purchases such as a 25% stake in DHL International. The German postal union continues to conduct a vigorous campaign against many of these changes, particularly privatisation and changes to working conditions and entitlements. 55

The Netherlands

The Netherlands is the first and only developed country to have privatised a majority interest in its post office, KPN. Transformed into a private law company operating postal and telecommunications services, government ownership was reduced to 48% as a result of two sales of stock to the public.

Since privatisation, PTT Post - the postal subsidiary of KPN - has pursued an aggressive commercial strategy. It has operated joint ventures with the private sector to provide international express services and purchased the private world-wide express operator TNT in

54 Ibid.55 Campbell, J.I., “The Overview of the International Postal Reform Movement”, 4 December 1998, p. 10-11; and, Suffling, D., Op. Cit., p. 8-9


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1996. In 1998, KPN “demerged” into two independent companies, KPN and TNT Post Group (TPG). The latter is an amalgam of the national postal service (formerly KPN) and a global express company. While postal services have been privatised, TPG enjoys a substantial legal monopoly (carriage of letters weighing up to 500 grams and priced below certain limits.56

Sweden

In 1992, Sweden became the first major European country to abolish the monopoly assigned to its national postal services provider.

Sweden Post supported this abolition on the basis that it would give it more commercial flexibility to adapt to changes in the market. This was followed in 1994 by changes to the legal framework for Sweden Post, converting it into a normal stock company with all shares owned by the government. Sweden Post subsequently applied commercial taxes (such as VAT) to all of its products, in line with commercial practice. The government negotiated a 3 year contract with Sweden Post for the operation of various public services.

While private operators have entered the Swedish postal market (such as CityMail), this has been limited in effect. By February 2000, there were 59 authorised postal operators competing with Sweden Post, employing approximately 2,500 staff in total - compared to 52,000 Sweden Post employees. CityMail which pioneered a low-cost, twice-weekly delivery service for computer generated mail in Stockholm, has only recently re-emerged from bankruptcy protection.

Sweden Post has aggressively defended its market share, with exclusivity clauses, tie-in arrangements, discounts and other pricing strategies. While Sweden Post retains 95% of the total letter market and has consistently attained profitability since 1992, over 10,000 postal jobs have been lost and the number of corporate post offices has been halved, with increasing contracting-out of postal outlets (up from 179 to 853).57

United States of America

There is currently a legislative bill before the US Congress to reduce the reserved service of the US Postal Service to six times the price of a first class stamp. It will also expand the scope for private postal operators, place a cap on postal charges and proposes reviews of the universal service definition and labour relations. This bill, entitled HR22, is an initiative of a Republican Congressman. The American Postal Workers Union have opposed this bill on the basis of its potential impact on postal service mail volumes, revenue and will lead to an attack on working conditions.58

2.7 Conclusion56 Campbell, “The Overview of the International Postal Reform Movement”, 4 December 1998, p. 9-10.57 National Post and Telecom Agency, Ministry of Transport and Communications (Sweden), “The Deregulated Swedish Postal Market”, February 2000; and, Campbell, p. 8-9.58 American Postal Workers Union (APWU), “Poisonous Postal “Reform” Passed in Subcommittee”, APWU News Service, 25 September 1998, Volume 28, No. 25.


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Postal services remain a vital sector of national social and economic infrastructure. This is demonstrated by the network scope, employment and mail volumes exhibited by postal services throughout the world.

Yet postal services are facing a number challenges to their markets, with implications for the way that they conduct their business. Technological changes, customer demands, concerns over universal service and profitability difficulties and increased commercialisation and competition are transforming the organisation and services provided by postal services.

National governments are also under increasing pressure from a range of intergovernmental bodies - as well as prevailing ideological orthodoxy’s - to embark on various levels or degrees of deregulation and even privatisation of their national postal services. Corporatisation and financial transparency measures are argued, with market liberalisation and increasing the role of the private sector in the postal service as core elements of this push.

The implications of this situation for postal services, postal workers and their communities are many. Clearly postal services will be under increasing pressure to modernise, improve service quality and expand product range to meet customer needs as well as meet competitive pressures to attain profitability. However organisations who concerned at the social impact of the more radical agenda on postal reform (such as trade unions and community organisations), will need to be aware of the extent of this agenda if they are to develop successful strategies and policies to counter this international movement.


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3. POSTAL SERVICES IN THE ASIA PACIFIC REGION

Postal services in the Asia Pacific countries, like their counterparts throughout the world, play a vital role in the economic and social life of their communities. The services provided by these agencies are heavily utilised and are often the only available and affordable communications service. However these services have also been subject to the challenges facing other postal services. This is reflected in an increasing diversification of products and variations in the structure and organisation of these services.

3.1 Key Statistics59

· In 1997, the 32 national Asia Pacific postal services employed over 2.06 million employees, representing one postal employee for every 1,500 inhabitants. There has been a marginal decline in employment levels of 16,000 since 1993. The number of permanent post offices has however increased over this period by 3,000 to a total of 40,200 in 1997. Per capita permanent post offices has improved with one office for every 8,675 inhabitants (compared to 10,095 inhabitants in 1993). It should be noted that many Asia Pacific postal services also operate significant numbers of mobile post offices;

· In 1997, the 32 national Asia Pacific postal services delivered 47.1 billion domestic letter post items and 1.179 billion international letter post items for their 3.17 billion inhabitants. Compared to 1993, this represents a decline of over 2.5 billion letter post items or a reduction of between 1.13 and 1.26%;

· A comparison with industrialised countries (such as Australian, Japan and New Zealand in the Asia Pacific region) reveals a major disparity between the many developing countries in the Asia Pacific regions and more advanced postal administrations. Per capita domestic letter post items in 1997 were 392 items for industrialised countries and 15 items in the Asia Pacific region. Where domestic letter traffic between 1993 and 1997 increased in industrialised countries by an average of 1.95% per annum, this compares with a 2.13% average annual decline in developing countries, with a similar decline in the Asia Pacific from 49.6 billion to 47.1 billion items; and,

· Postal administrations in industrialised countries enjoy a higher ratio of postal employees and permanent post offices to their inhabitants than developing countries, including the Asia Pacific region. Industrialised countries have 341 inhabitants to every postal employee and 4,314 per permanent post office. Conversely, Asia Pacific countries have 1,532 inhabitants per employee and 8,675 inhabitants per office. Clearly, these statistics indicate that industrialised countries enjoy higher levels of postal services in terms of access to services than their Asia Pacific counterparts. Claims of over-employment and under utilisation of postal service in the latter need to be considered against these statistics. It also must be said that these statistics underline the important social role of postal services

59 UPU, Postal Statistics, (Berne, UPU, 1998), pp. XII-XV.


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in generating employment, with its associated economic benefits to society, especially in developing countries.

3.2 Revenue, Profitability, Regulation and Monopoly Service

As has been stated above, the overall financial performance of the world’s postal sector is problematic. While the performance of postal operators throughout the world ranges from breaking even at best to up to 30% losses on revenue depending on the wealth of countries, 60

it can be expected that the Asia Pacific region with a higher proportion of low income countries will tend to be at the lower end of this performance scale. Consequently, many Asia Pacific postal services will operate as a significant cash drain on public revenues, resulting chronic under-investment. The postal services of most developing countries enjoy a wide monopoly and access to government subsidies to offset financial losses incurred.

3.3 Structure and Ownership

In terms of structure and ownership, the process of corporatisation, deregulation and privatisation is limited throughout the Asia Pacific region, with direct government ownership and operation remaining the preferred model of services delivery. According to the UPU, 78.38% of Asia Pacific postal services are operated as government departments (or ministry’s) or parts of government departments. This is a greater extent than other regions, compared to 50% in North America and 55.56% in Europe. Only 40% of postal services throughout the region are structurally separated from telecommunications services. Only 38.09% operated in regulatory environments in which the regulatory body is separate from the postal operator.

While public ownership is the norm throughout the region, the forms of government management and the structure of postal services varies throughout the region as follows61:

· Government Ministry - India and Sri Lanka. This traditional model of postal service organisation is becoming less and less prevalent in the Asia Pacific region. This model involves all functional responsibility for the postal service being assigned to a government department, with no separate financial and legal status for the postal service. Due to the lack of accounting separation, these postal services tend to operate on the basis of subsides from other profitable government services (i.e. telecommunications or direct government funding). Alternatively, any profits made by the postal service are similarly absorbed by government. This model features low managerial accountability and incentives, and lack of focus on profitability or cost efficiencies. As a consequence, service quality tends to deteriorate due to a lack of long term investment plans and the

60 Ranganathan, K., “Providing Comprehensive Assistance”, in UPU, Universal Postal Union - 125th Anniversary Yearbook, (Berne, UPU, 1999), p. 70.61 This review of postal service structures in the Asia Pacific region draws on the status report (entitled “Where we stand”) presented to the CI-APRO, Post Asia Pacific Committee Meeting, held in Tokyo on February 5-6, 1999.


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lack of customer oriented service. Conversely, as a direct arm of government this model allows government to utilise the postal network and infrastructure within social, economic or political decision-making;

· Separate Government Administration - Japan, Korea and Taiwan. Under this model the postal service remains part of the direct government administrative structure but operates financially as a self-sufficient organisation requiring no government subsidy. While a government department, the postal service enjoys a level of organisational autonomy;

· External Government Agency (Trading Fund) - Hong Kong. Based on a separation of the executive and operational or policy functions of government, this model involves executive agencies being established under the direction of a Chief Executive and working within a framework of policy objectives and resources set by government. Postal employees tend to retain their civil service status. However this model introduces private sector management techniques and approaches into the postal service. This model can also lead to the contracting out or privatisation of services, through competitive market tests weighted in favour of the private sector competitor;

· Public Corporation - Australia and Thailand. This model involves the operation of the postal service by a statutory government-owned corporation. The postal corporation has a significant level of autonomy, with a separate financial status and its operations and management dependent on the profitability of its services. Commercial imperatives are balanced by specific community service obligations.

· Special Corporation - New Zealand, Malaysia, the Philippines and Indonesia. This model involves the transfer of government assets and service responsibilities to a new corporate body operating under domestic company law. The company can be either fully or partially government owned. Under this model, the postal service management are obliged to make profits for its shareholders, while maintaining community service obligations.

3.4 Implementation of Postal Reform in the Asia Pacific Region

This variety in structure and organisation throughout the Asia Pacific region has to a large extent arisen due the same pressures for change that have impacted on the world’s postal services.

The UPU report that developing postal administrations in the region have either achieved or are in the process of achieving a degree of management independence from government consistent with corporatisation. In 1999, they reported that 10 out of 23 in the Asia Pacific region and 8 out of 14 in Asia have developed such independence, with a further 6 postal administrations committed to this transformation from government departments to public corporations. The UPU believe that this transformation is more pronounced in fast-growing economies throughout the region, indicating a close relationship between this type of postal reform and economic development. However they conclude that this trend away from


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government department status to corporation status in the Asia Pacific region is “irreversible”.62

Government’s throughout the region have also been influenced by the international push for deregulation and privatisation. As a consequence, there has been a consistent trend towards deregulation and changes to the structure and regulatory environment of postal services. For while privatisation - full or partial - is not a feature of the postal service in the Asia Pacific region. However there are plans to partially privatise the Philippines postal service through the sale of shares.

The process of postal reform throughout the region is detailed below. Developments in Sri Lanka, Australia and Japan are discussed in detail later in this study. Some of the major developments in other countries throughout the region are as follows: 63

New Zealand

Formerly run as a government department combining both postal, telecommunications and postal bank services, New Zealand postal services have been subject to most radical change in the region. The Labour government was concerned that despite being the largest national employer, New Zealand postal services were unprofitable and with deteriorating standards. In 1987 the government transformed New Zealand Post into a state-owned enterprise (shares being held by the government, with management wholly independent as a limited liability company and stipulating profitability. While profitability was achieved, these changes have brought massive job losses and service cuts. Between 1987 and 1995, Post employment fell from 12,000 to 6,800 and post offices from 1,200 to 215 , with over 400 closed in 1987 alone), with services to rural areas deteriorating.64

In 1997, the National government fully deregulated the postal market, ending New Zealand Post’s reserved service for letters up to 200 grams and costing less than 80 cents. 16 new operators were licensed to provide competing postal services. In recent years the financial performance of New Zealand Post is reported to have deteriorated, with increased costs due to greater contract supplier costs and increases to marketing expenditure.

While a liberalised market has been achieved, universal services have suffered and profitability is not assured. This approach appears to be proceeding apace with the decision in 1999 of New Zealand Post to establish the Books and More joint venture with Blue Star International, the aiming being to gradually replace its remaining retail outlets with these franchise operations.65 One of the features of this change process has been the lack of any

62 Qureshi, P.V., “Asia-Pacific: Introducing A New Commercial Dimension”, in UPU, Universal Postal Union - 125th Anniversary Yearbook, (Berne, UPU, 1999), p. 120.63 The information in this section has been derived from the following Communications International report - CI, “Where we stand”, CI-APRO, Post Asia Pacific Committee Meeting, 5-6 February 1999, Tokyo. Table 2 also contains a comparison of the performance of selected postal operators, detailing their various regulatory environments and operations as of 1995.64 Smith, V., Reigning in the Dinosaur: The Story Behind the Remarkable Turnaround of the New Zealand Post Office, (New Zealand Post, 1997); and, Price Waterhouse LLP, “A strategic Review of Progressive Postal Administrations: Competition, Commercialisation and Deregulation”, February 1995.65 EPMU, Books and More profits for NZ Post, April 1999; EPMU, United workers rally over NZ Post sell-off”, Post Box, Special Campaign Edition, April 1999.


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consultation with either the postal workforce or the community. Indeed, many of these changes have been introduced along with attacks on working conditions and the trade union movement.

Malaysia

The Malaysian Postal Service was corporatised in 1992, changing from a government department to a state-owned enterprise called Pos Malaysia. A further review was completed in 1994, strengthening the role of its board of directors and CEO. This has improved the performance of postal services. These changes have been introduced under a consultative mechanism established between unions and management and has led to improved working conditions.

The Philippines

Corporatisation of the Philippines postal service was introduced in 1993, with the new Philippine Postal Corporation (or Phillpost) being separated from the regulator (the government department), it being required to operate profitably and fund its services internally and the introduction of a less bureaucratic and more function-oriented organisational structure. A major deficiency of the current laws is the lack of any legal definition of either universal service or monopoly provisions. Despite these changes, Phillpost has failed to produce a profit over the 1996-1998 period. The postal service argues that this is due to the burden imposed by its legal requirement to provide postal services to all public office holders at no cost. While corporatisation has provided opportunities for improved union consultation, this has been ineffective to date. The government has recently proposed partially privatising Phillpost, selling 55% equity in the corporation and the government retaining the remaining 45%.

Korea

Postal services in Korea are operated by a government department, the Ministry of Information and Communications. Postal services have been operated separately from telecommunications since 1982. In 1994 the government unsuccessfully sought to corporatise postal services following a campaign by Korean postal workers (through their union, the KCWU). The latter sought to guarantee civil service employment status, improved working conditions and increase postal charges to improve financial performance.

In 1997, the government introduced a reform package with the support of postal workers. While corporatisation was rejected with the postal service operating as a government department, greater management autonomy has been introduced through private sector management techniques and a focus on customer needs. The government has announced a long term plan - called Open 2001 - which seeks organisational re-invention, productivity improvement and employee participation. They have also committed themselves to a review into the future of postal services conducted by the US Stanford Institute.

Taiwan (Republic of China)


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Postal services in Taiwan are operated by a government department. The government has proposed corporatisation of the service to provide greater management autonomy. Other measures proposed have included separation of postal savings service from mail services, as well as privatisation. A campaign by the postal workers union (the CFPW) has resulted in structural separation and privatisation being dropped by government. The union is committed to retaining the postal service as an integrated public enterprise, operating with a monopoly of letter mail.

Singapore

Postal services in Singapore are unique in that since 1992 they have been re-organised in such a way that Singapore Post operates as a subsidiary of Singapore Telecom (the publicly-owned telecommunications service provider). All shares in Post are held by Telecom and are not listed publicly. This situation encourages management inter-change between both organisations and the development of advanced technologies and hybrid products.

Thailand

Postal services in Thailand are operated, along with telecommunications services, by a government authority, the Communications Authority of Thailand. Government is currently considering proposals to separate postal and telecommunications services.

3.5 Global Competition in the Asia Pacific Region

As has been pointed out above, global competition in the postal sector has arrived in the Asia Pacific region. The most important of these has of course been the establishment of the Dutch TPG, Royal Mail and Singapore Post joint venture operation early in 2000.

In addition, New Zealand Post has played an increasingly role throughout the region - and in other regions - as a technical and management consultant, promoting and assisting the process of postal reform. These examples have been discussed in detail in section 2 above.

Australia Post has also pursued a limited number of international joint ventures. These include the establishment of the domestic and international express operator Australian Air Express (a joint venture with Quantas) and International Data Post (or IDP), a joint venture with nine other postal services to develop and market e-Post, an international electronic bulk mail system.66

While this has been limited to date, global competition can be expected to expand in the future with serious implications for the operations of domestic postal administrations. These implications can be anticipated to be as dramatic as the changes that have occurred in the developed world, particularly Europe and North America.

66 See section 5.1.2(b), p. 65.


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4. THE WORLD BANK AND THE POSTAL SECTOR

The World Bank is a key economic player in the economies of developing nations. It’s principal financial lending facility has given it enormous power to influence and direct government’s to adopt its neo-liberal economic agenda, including market liberalisation and large scale privatisations. While its charter commits the bank to reduce world poverty through stimulating economic development, studies reveal that its conservative economic approach has failed. Nonetheless the World Bank remains committed to introducing this approach to the developing world’s postal sector. While this is ostensibly directed at creating profitable and modernised postal services, the clear preference of the World Bank is to encourage deregulation, private sector participation and ultimately privatisation in the postal sectors of these developing countries.

4.1 The World Bank - A Neo-Liberal Study in Failure

The purpose of the World Bank, as defined by its founders, is “to assist in the reconstruction and development of territories of members by facilitating the investment of capital for productive purposes”. It has pursued this goal through the provision of financial assistance to developing countries. Yet there has been much criticism of the Bank and much doubt as to its effectiveness and the desirability of its approach.

Most importantly, in terms of its overall objectives, the Bank has failed to reduce world poverty. Over the fifty years of the Bank’s existence the wealth disparity between the developed and developing world has increased and is estimated to further widen in the near future. 67 In addition, the Bank’s objective that income disparities within developing nations should be decreased has not been achieved. United Nations studies show that 40% of the population in these countries still receive no more than 15% of national income, with similar disparities with regard to access to health services, education, food, safe water and sanitation. In all these categories, according to the UN, women are worse off than men and rural populations are worse off than city dwellers.68

The prime mechanism of the Bank - that of lending (not giving) money - has also had major negative effects. The Bank lends in western currency and insists on repayment in this currency. Increasingly, the Banks lending concerns refinancing of existing debts as developing countries are unable to repay the original loans. The Bank has responded to this situation by undermining the political sovereignty of debtor nations.

As Caulfield states, “no creditor is willing to keep refunding without exerting some control over the way the debtor conducts business”.69 The Bank has done this by insisting on how countries manage their finances, make their laws, provide services to their people and conduct themselves in the international market. Lack of compliance carries the threat if

67 Caulfield, C, Masters of Illusion: The World Bank and the Poverty of Nations, London, Macmillan, 1998, p. 331.68 Ibid., p. 333.69 Ibid., p. 336.


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international financial isolation. A senior Mexican representative with the Bank responded to this situation with the statement to the Bank - “please, do not lend us any more money”. The Bank has therefore sought to exert major influence over the internal direction of debtor governments and how they provide services. Many commentators have saw this as undermining the self-reliance and self confidence of debtor nations and therefore undermining their capacity to make decisions in their own interest. Muhammad Yunnus, founder of Bangladesh’s Grameen Bank, has blamed such development aid for the “fast erosion of national self respect”.70

To make matters worse, many of the Bank’s vast investment projects have taken little account of ecological, social and even economic implications. It has sought to respond to this criticism by investing in health and education projects, for small-scale agriculture projects and for urban renewal. Yet critics argue that this advice is given over the heads of other more experienced agencies (such as other international institutions, national governments, voluntary organisations) and certainly the people who are supposed to benefit. As Caulfield concludes:

“the Bank’s decades-long series of grand experiments in poverty reduction have cost billion of dollars and millions of disrupted human lives, and required the sacrifice of vast areas of productive forests, soils, rivers and coastlines.”71

4.2 The World Bank and Privatisation

The Bank has always been a keen promoter of private enterprise. It has done this through direct lending to or investing in the private sector. Through its International Financial Corporation arm, the Bank has also sought to help the private sector by - in the words of one of the Bank’s Directors - “straightening out the public sector”.72 This has been achieved through its advocacy of neo-liberal economic prescriptions. This encompasses smaller government, reduced government intervention in the economy generally and the privatisation of public sector enterprises.

An analyst has described this program of “structural adjustment” as directed at achieving nothing less than the transfer of real assets to foreign capital or joint ventures. The most profitable state enterprises of indebted countries are thereby effectively exchanged for debt reduction. International capital thus gains control and/or ownership over the most profitable state enterprises often at very low cost. Moreover, with a large number of indebted countries selling (or trading) their public enterprises at the same time, this process ensures a reduced sale prices to the benefit of foreign purchasers.73

70 Ibid, p. 337.71 Ibid, p. 338.72 Ibid, p. 278.73 Chossudovsky, M., The Globalisation of Poverty - Impacts of IMF and World Bank Reforms , (Annandale, Pluto, 1998), p. 63.


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While the Bank in recent years has retreated from an “across the board” program of privatisation and trade liberalisation, its programs remain committed to an encouragement of private sector provision of services.74

For example, Mexico was a major recipient of World Bank assistance and by 1994 was cited by the World Bank as a key example of successful adjustment by a developing nation. The economy effectively opened to world trade, regulations were reduced, much of the state-sector privatised, the central bank made independent of government and the fiscal deficit drastically reduced. While this resulted in reduced inflation, attracted overseas investors and gained the plaudits of the developed world (with the NAFTA Treaty and entry to the OECD key achievements), the World Bank’s aims of real economic growth and poverty reduction were not achieved. This Mexican boom was due to overseas borrowing and investment and the sale of state enterprises.75 The Mexican example reinforces the shortsighted and narrow approach of the World Bank. It’s concern is for neo-liberal economic rectitude rather than commonsense and a real concern for working people in the countries concerned.

4.3 The World Bank’s Postal Sector “Reform” Program

The World Bank has stated that it has embarked on its program of postal sector “reform” in response to the various challenges facing postal services in developing countries and at the instigation of the government’s of developing countries and the Universal Postal Union (UPU). The latter, as the United Nations agency for the postal sector and comprising representatives of all national postal administrations, has as a result formed a collaborative partnership with the World Bank.

It should be noted that the UPU has undertaken this partnership on the basis of its long term commitment to support developing countries to re-structure and modernise their postal systems. It has done this by preparing analytical studies, reform proposals and new postal legislation, as well as revisions of postal rules and regulations. In this way, these two arms of the United Nations - one the international regulatory forum for the postal industry and the other the major financial lending agency for the developing world - constitute a powerful alliance for the promotion of their particular brand of postal reform.76

The stated aim of this collaboration is to assist countries in developing, preparing and implementing postal sector reform initiatives consistent with World Bank prescriptions. Through this strategic partnership, the World Bank aims to provide advice and technical assistance to countries from a worldwide network of experts and to integrate the lessons from other countries who have undertaken or are undertaking similar reform efforts. As a part of this collaboration with the UPU, the World Bank carried out its large-scale study devoted

74 Milder, D.C., “Foreign Assistance: Catalyst for Domestic Coalition Building” in Griesberger, J. M., and Gunter, B. G., (eds.), The World Bank - Lending on a World Scale, (London, Pluto Press, 1996), pp. 147-149, 157.75 Caulfield, C., Op. Cit, p. 152-153.76 Speth, J.G., “The UNDP salutes the UPU”, in UPU, Universal Postal Union - 125th Anniversary Yearbook, (Berne, UPU, 1999), p. 40; and Qureshi, P.V., “Asia-Pacific: Introducing A New Commercial Dimension”, in UPU, Universal Postal Union - 125th Anniversary Yearbook, (Berne, UPU, 1999), p. 124.


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exclusively to postal reform, (entitled Redirecting Mail: Postal Sector Reform), which has become the foundation for reform efforts in numerous countries around the world.77

The World Bank asserts that its postal reform program is based on a recognition of the importance of postal services to economic progress and social development and is a response to the various challenges facing the postal sector. These challenges, which have been discussed earlier in this study, are identified as being the advances in competition from alternative media (such as the private courier industry and telecommunications-based services) and the evidence that postal services in many developing countries are operating with heavy financial losses.

In this regard, the World Bank has stated its recognition that the postal sector plays a critical role in facilitating economic progress and social development. It serves as a solid communications mechanism accessible to all residents, as well as a vehicle for the provision of financial services. For most developing countries, the postal service is in fact the only communications medium and link serving the entire nation. In addition, given the poor accessibility to banking services in many developing countries, the postal service has tremendous potential to encourage savings mobilisation and to become a facilitator for payment and funds transfer, particularly for rural and low-income residents.

However the World Bank argues that the postal service in many developing countries is one of the worst performers in comparison to other enterprises It argues that in terms of quality of service, productivity and efficiency levels the performance of these postal services are extremely low. The operating subsidies required by many of these post offices year after year lead governments, with their tightening public revenues, to redirect scarce funds from other needy public sector programs. Significant investments are also needed to increase efficiency and quality of service, since most resources and facilities are in a poor or unusable condition. There is an urgent need to undertake comprehensive reform to improve quality of service and facilitate the financial self-sufficiency of the postal service.

The reform program promoted by the World Bank encompasses regulatory reform, structural and legal reform, enterprise reform and the effect of current technological developments. The stated objectives of the World Bank’s postal sector reform are:

· Universal Service. Establish a low cost universal postal service that provides a solid communications medium and link to all citizens;

· Financial Services. Create a convenient means of savings mobilisation, and a payments and funds transfer system for the entire country through the postal network; and,

· Commercialisation and Profitability. Eliminate government subsidies and develop postal service into a commercially viable entity.

77 This section draws on inforamtion provided in various World Bank publicaitons and statements, including Postal Sector Reform - Overview, The World Bank, Private Sector Development, http://www.worldbank.org/ html/fpd/privatesector/postal.htm (downloaded August 2000).


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The World Bank has implemented this program by assisting developing countries in designing and implementing postal sector reform programs to achieve the above basic objectives. Over the past few years, 30 countries have received technical assistance and investment funds from the Bank for postal reform in areas such as:

· Policy reform: developing an effective policy framework for creating efficiency and enhancing effectiveness in the sector;

· Legal and regulatory reform: establishing a legal and regulatory framework for the postal sector that facilitates its development and financial self-sufficiency, while ensuring monopoly privileges are not abused;

· Capacity development and training: improving the institutional capacity of postal management and staff, as well as regulators, to ensure the postal service is prepared to meet the challenges of a rapidly developing communications industry;

· Private sector participation: introducing private sector partnerships to expand into new products or service areas and bring in specialised management expertise and investment capital;

· Selective investments: providing investments for operational equipment, network rehabilitation, service expansion, etc.;

· Market repositioning: establishing the postal service as a high quality, efficient provider of market-oriented services, including mail service, financial services, commercial communications services (such as e-mail, fax and Internet), and other value-added services (such as distance-based learning); and,

· Introduction of new technology: introducing technology to improve operational efficiency and quality of service.78

The World Bank as one of the chief international financial agencies for developing countries has played a critical role in assisting the actual process of postal reform in these countries. The UPU has admitted that this has been crucial to convincing governments in the Asia Pacific region to adopt a commercial approach to their postal services.79

4.4 Concerns with the World Bank Postal “Reform” Program

The World Bank argues that its reform program recognises the importance of access to postal service to economic and social development. It states that one of the aims of its postal “reform” is the modernisation of the postal service in developing countries to that ensure that

78 Postal Sector Reform - Overview, The World Bank, Private Sector Development, http://www.worldbank.org/ html/fpd/privatesector/postal.htm (downloaded August 2000).79 Qureshi, P.V., “Asia-Pacific: Introducing A New Commercial Dimension”, in UPU, Universal Postal Union - 125th Anniversary Yearbook, (Berne, UPU, 1999), p. 120.


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all inhabitants have access to postal services. In this regard, the World Bank argues that a commercial focus, improved financial performance and embracing new technology and services (such as electronic communications mechanisms) will deliver important benefits to the postal services and communities of the developing world.

Many of these objectives are laudable. A commercial focus and the embracing of new technologies and services are important deliverers of financial profitability and universal service, thereby assisting economic and social development. The World Bank’s claims that it is merely encouraging developing countries to “take a fresh look at how the sector should be organised and the systems engineered” sound innocuous enough.80 However the World Bank’s program combines these aims with other prescriptions which are of serious concern to all who support the role of public ownership and community service obligations, as well as opposition to job losses.

Therefore, the key concerns with the stated World Bank postal reform program are:

· Reductions (or preferably abolition) in the reserved service or monopoly;

· Privatisation or significant private sector participation in the postal service; and,

· Employment losses from existing postal providers.

The World Bank’s view on these issues is reflected in the statement by its chief advocate for postal reform that:

“In fact, government ownership and control, and wide monopoly, by and large have not served the sector well in many countries.”81

4.4.1 Regulatory Reform and the Reserved Service

The World Bank supports the view that exclusive privileges and market guarantees are “closed systems” which are detrimental to the customer. Countries which have removed the postal monopoly to aid the emergence of private sector competitors (such as Argentina, Finland, New Zealand, the Philippines and Sweden) are presented as successful examples of reform. The vast majority of postal administrations throughout the world, who consider the maintenance of a reserved service a guarantor of community service obligations and seek to balance this with their commercial focus, are generally not cited in such terms. Commercial focus is not incompatible with maintenance of a level of reserved service as the World Bank seems to suggest.82

80 Ranganathan, K., “Providing Comprehensive Assistance”, in UPU, Universal Postal Union - 125th Anniversary Yearbook, (Berne, UPU, 1999), p. 69.81 Ibid.82 Ibid.


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4.4.2 Privatisation and the World Bank’s Postal Program

The union movement is under no illusions that the World Bank’s postal reform program is restricted merely to the publication of studies and offering words of encouragement to governments. Since the establishment of its relationship with the UPU, the World Bank has been actively promoting its program of postal sector “reform” with an emphasis on encouraging both private participation in national postal services (via contracts) or outright privatisation.

The central role of privatisation in the World Bank’s program is exposed in its various publications supporting its postal sector reform program. For example, one of its publications describing the state of play of its reform program is entitled - “Postal Privatisation Takes Off”. 83 Indeed the World Bank’s interest in postal sector reform was initiated by its Privatisation Services Group and who was awarded the chief credit for its postal sector study.84

Currently, the World Bank is supporting postal reform programs in 30 countries. The World Bank concedes that most of these projects are concerned with “encouraging private sector participation in the management and operations of postal services”, as well as the provision of investment financing and support for market-repositioning efforts. The privatisation of postal services is seen as a continuation of previous programs to privatise the telecommunications industry in these countries. Some of these programs for which the World Bank is providing assistance involve partnership agreements between postal administrations and the private sector to expand into new product or service areas, such as financial services, using the specialised knowledge, industry reputation and investment capital of the private sector. Some of examples of the extent to which the World Bank is encouraging privatisation is seen from the following examples:

· Philippines. The World Bank is “assisting” the Philippines government in developing an “effective approach” for introducing private participation in the national postal service, as well as the postal savings bank;

· Trinidad and Tobago. The World Bank has “assisted” the government to transform the postal department into a corporation, with a competitively recruited private operator (New Zealand Post) to take over the management and operation of its service. The legislative basis of this change also calls for major World Bank financed investments in the postal service and reform of the law regulating postal services; and,

· Argentina. The World Bank’s financing arms in Latin America are providing a financial package of $285 million (US) to a private sector postal operator, Correo Argentino S.A., to modernise its postal network and operations. The financial package includes the Bank holding a $12 million equity and quasi-equity stake in Correo Argentino. In 1997 this private operator (which is a consortium consisting of an engineering and construction

83 Business News, A newsletter from the Business Partnership Center, The World Bank Group, Vol 2, No. 2, (December 1999), p. 3.84 Ranganatham, K., Redirecting Mail: Postal Sector Reform, (The World Bank, 1996), p. IX.


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company, a private bank and the British Post Office, as technical adviser) has been awarded a thirty year, $3.1 billion (US) contract or concession to use the 6,000 Argentine postal outlets to provide retail banking, advanced communications and other value added products and services.85

These examples expose the World Bank as being an agent of privatisation of the postal service. The Bank has not merely provide assistance (both technical and financial) to encourage national postal administrations to modernise and become profitable. The Bank has actively encouraged - including through the granting of financial assistance and taking equity in operations - the establishment of private sector operators with the aim of their taking over key areas of the existing or project postal industry.

4.4.3 Public Sector Employment Reductions

The World Bank’s postal “reform” program specifically endorses a push for labor rationalisation. Based on the assumption that postal administrations are “generally over-staffed to start with”, the World Bank argues that commercial imperatives - such as providing the best service at minimal price - require a reduction in overall employment levels within postal administrations. The World Bank states that such redundancies occur with the provision of social assistance, that “good employment practices” should be offered to remaining employees (with improved working conditions, increased training, mobility and remuneration rewards based on performance).86

Due to the fact that many developing countries have extremely limited social protections with respect to unemployment (which the World Bank makes no commitment to assist in improving), these proposals have the capacity to cause enormous social dislocation throughout the developing world. While improvements to human resources, training, mobility and additional remuneration are laudable and essential for workplace change initiatives, the World Bank would appear to be less concerned with these developments than ensuring private sector development in the sector. It should also be noted that with respect to relative staffing levels, the evidence does not support contentions of over-staffing in developing countries relative to developed countries (see Section 3 above). Consequently, the World Bank’s job reduction plans for postal services in the developing world appear more based on ideology than evidence.

85 Business News, A newsletter from the Business Partnership Center, The World Bank Group, Vol 2, No. 2, (December 1999), p. 3.86 Ranganatham, K., Redirecting Mail: Postal Sector Reform, (The World Bank, 1996), p. 29; and World Bank, Postal Sector Reform - Responses to Typical Concerns about Reform, (Berne, World Bank, ?), p. 33.


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4.5 The World Bank In Action - Sri Lanka

As has been stated, the World Bank has provided assistance to over 30 countries in pursuing its program of postal sector reform. A number of these have been discussed above. The following discussion outlines key aspects of the involvement of the World Bank in promoting postal sector reform in Sri Lanka. It reveals not only the World Bank’s preference for private sector operations but also the lack of employee and community consultation over the reform process. In fact, it is only as a result of the actions of postal employees and their unions (including the Communications International) that the community was able to become informed of what was being proposed and to enable them to influence the process.87

4.5.1 The Sri Lanka Postal Service - Background

The Sri Lanka Post Office is operated separately from telecommunications services, by a government department, the Department of Posts. It was created over 180 years ago by the former British colonial administration, functioning on the lines of the British Post Office and the like in the Indian Sub- Continent. Up until the mid 1970s the Post Office provided both postal and telecommunications services. In 1980, postal services were separated from telecommunications services.

There is no independent regulator, the Ministry of Posts, Telecommunications and Media, exercising administrative and financial control, and deciding policy and budgetary matters. This includes responsibility for determining the scope of the postal service and the tariffs charge’s, as well as monitoring compliance with the rules on the monopoly. The UPU reports that the universal service and the limits on competition in domestic and international services are ill-defined. While the service is required to balanced income and expenditure, it receives state subsidies, any profits made are paid to the state treasury and it does not retain revenue from the terminal dues owed to it. In 1995, the service made a financial loss which was covered by the state..88

Traditionally, the Post Office has provided a wide range of services, encompassing postal, financial and other services. These were:

· Mails and Parcels;· Financial Services, such as Money Orders, Surface & Telegraph Postal Orders, Savings

Bank, Teachers' Salaries payments, Public Assistance payments, Governments Servants' Pension payments,

· Telegrams and Telephony. Transmission & delivery of telegrams, telephone calls, and, · Other Government services, such as the issue of TV & Radio licences.

87 The author would like to acknowledge the assistance of Basil de Silva (UNI-APRO Deputy Secretary) in the compilation of this section of the study.88 UPU, The UPU and its Members, Status and Structures of Postal Administrations - Sri Lanka , http://www.upu/int/status/an/XLK.html. Downloaded 30 August 2000


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These services are offered by the network of Post Offices and Sub Post Offices spread throughout the country.

With respect to employment, postal workers are government employees. Clerical workers were engaged through a highly competitive written examination, followed by a viva-voce test, to ensure that the best of school leavers were admitted to the service. Employee grades such as postmen, sorters, messengers and peons are locally recruited and chosen after a careful and lengthy screening process. Sub-post offices were located in rural areas and staffed by persons respected by the community.

The Postal Service was highly rated and regarded by the public for its efficiency and quality of service. This was internationally recognised by the UPU throughout the mid-1950’s and 60’s as one of the best in Asia.

However this reputation unfortunately was short lived. Political appointments, poor recruitment policies and inept administrative heads and the resultant deterioration in the quality of staff effectively lowered the overall operational efficiency of the service. Added to these factors were the ageing and dilapidated Post Office buildings, furniture and equipment and transport vehicles, withdrawal of part of the Railway Mails Services called the "Travelling Post Offices" - all of which contributed to the present poor standards and quality of service.

Post Office business too has seen a quantum decline because of the customer patronage of commercial banks in preference to the Post Office for money transactions and savings. Payment of Teachers' Salaries, Pensions, Public Assistance Payments, issuance of TV & Radio licences were withdrawn by government. The Post Office presently have reduced itself to providing mails, low volume Money Order transactions and parcels.

The World Bank has confirmed this recent record of inefficiency and service declines with regard to the operations of the Sri Lanka Post. The following problems have been cited by the World Bank:

· inefficient operations;· poor service quality;· lack of customer and commercial orientation;· due to under-investment in the sector, the postal network is in poor condition and requires

significant investments for modernisation and rehabilitation;· substantial operating losses, totaling Rs 4.06 billion over the past ten years (in nominal

terms), representing a significant drain on government finances; and,· the financial services business of the Post is ineffective as a channel for savings mobilisation

and funds transfer, despite their having access to a huge network of retail outlets and a large customer base.89

4.5.2 The Sri Lankan Government and Postal Reform

89 World Bank, Sri Lanka Postal Sector Reform Project, 9 October 1998.


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The genesis for postal reform has developed from government, across various political persuasions. In 1989 the United National Party government mooted the idea of Postal re-organisation and, with the involvement of the Universal Postal Union, preliminary studies were conducted. Despite a change of government in 1994 (with the Peoples Alliance taking power), this policy and the studies initiated by the previous government were continued. However the new Peoples Alliance Government accelerated the re-organisation process and sought to the aid of the World Bank. The World Bank subsequently selected the Sri Lanka Post Office - along with Trinidad & Tobago and the Philippines - effectively as pilots for its own postal reform program.

The Sri Lankan government’s postal agenda has been described as seeking “to transform the national postal service into an efficient, high quality provider of both postal communication and financial services.” It’s program is a comprehensive one, seeking to rapidly improve the quality of service and financial performance, with technical and investment assistance from the International Development Association, a borrowing arm of the World Bank.

The government’s postal reform agenda will encompass policy reform, institutional reform, the commercialisation of operations and the introduction of new technology. However it is clear that one of the main mechanisms to achieve this is the encouragement of private sector participation in the Sri Lankan postal service. Key aspects of the government’s agenda are:

· Conversion of the Sri Lanka Post Office into a state-owned corporation with full operating autonomy and commercial freedom to enter into private sector partnerships;

· The scope of the Post Office’s monopoly will be gradually reduced “to encourage private involvement in the sector and develop a competitive environment in the postal service”, while a regulatory body will be established within the Ministry to regulate reserved services;

· A voluntary separation program and operations improvement plan will be undertaken to maximise efficiency;

· Post offices will be transformed into modern, attractive retail outlets providing a diversified portfolio of market-driven products and services (such as e-mail, fax and internet services). Counter automation will be introduced to improve the speed and accuracy of transactions;

· Modern accounting systems will be introduced to improve financial management; and.

· Financial services will be overhauled, with the government aiming to use the financial services system as a vehicle to increase savings mobilisation and provide a convenient means for funds transfer, particularly for consumers whose needs are not being met by Sri Lanka’s banking systems (i.e. rural residents, low income communities, small enterprises, senior citizen’s students etc.). The government aims to achieve this through Post’s financial services entering into a partnership with an experienced (and presumably private


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sector) financial institution in order to attract significant investments in financial services infrastructure and supplement the lack of institutional capacity within the Post Office.90

4.5.3 The World Bank Project

The World Bank’s postal reform program for Sri Lanka is to assist the government in achieving these aims. Therefore the objective of the World Bank’s postal reform program91 is to “rehabilitate, renew and strengthen” the Sri Lankan national postal network and institutional capacity of the sector in order to:

· sustainably and effectively provide reliable, efficient, low cost postal communications services to all citizen’s of Sri Lanka; and,

· use the national postal network to promote savings mobilisation and funds transfer, especially in the rural areas and among low income communities.

The project comprised three main components, to be provided by technical assistance and/or investment:

· Strengthening the Network. This encompasses transforming 50 post offices into modern, new type post offices with counter automation for mail and financial services (through technical assistance and investment), and a strategy for reconfiguration of retail network (through investment);

· Institutional and Regulatory Reform. This encompasses establishing an independent regulatory authority, capacity development through structured training programs and financial advisory services and commercial communications services, such as e-mail, fax etc.(through technical assistance); and,

· Operational Improvement. This encompasses decentralisation of the sorting function and mail operations equipment (through investment), introduction of a voluntary separation program (through technical assistance), introduction of commercial accounting systems and strengthening of the delivery fleet (through investment).

Funding for the program is shared by the Sri Lankan government and the World Bank, with the former providing 34% (or approximately Rs. 700 million) and the latter 66%. The project will be implemented over a five year period.

The Proposal had the complete concurrence of the UPU or they were in fact the promoters of World Bank involvement in Postal Reforms.

90 World Bank, Sri Lanka Postal Sector Reform Project, 9 October 199891 Further details of the World Bank Postal Reform Project in Sri Lanka are contained in the following document: World Bank, Sri Lanka Postal Sector Reform Project, 9 October 1998.


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4.5.4 Workforce Consultation

Despite the fact that the world Bank project brief states that the “sutainability of the project requires the full support of labor and management during project implementation”,92 the level of workforce consultation on this postal reform program was initially disappointing.

With respect to the Sri Lankan government’s proposals, it is important to stress that postal workers and their unions were not consulted or officially engaged on the various government’s proposals for postal reform.

It was only following action by the union movement that any moves were made to consult with the workforce. Firstly, the then PTTI and later CI sought to obtain comprehensive information on the project from the World Bank. After some considerable difficulty, contact was made and dialogue commenced between the Asian Pacific Regional Representative Basil de Silva as well as the PTTI/CI Consultant/Coordinator in Washington Jim Sauber with the World Bank project manager on postal reform, Mr. Kumar Ranganathan.

4.5.5 The Sri Lankan Postal Reform Bill

Meanwhile, the Sri Lankan Postal Administration and the World Bank had by the end of 1998 had a series of bi-lateral consultative meetings and consequently made a number of unilateral decisions, without any kind of consultations with Unions, to implement the reforms project. This blue print encompassed the preparation of a Postal Reforms Bill for adoption in Parliament.

The Sri Lanka trade unions movement was in the meantime engaged in a concerted campaign against the PMG and the Postal Ministry for keeping them completely uninformed and unconsulted on the reform project. The unions were also distrustful and suspicious of the World Bank. The main PTTI/ CI affiliate (UPTO) was in the forefront of the campaign.

In May 1999 the CI Asian Pacific Regional Representative organised a "National Symposium on Postal Reforms in Sri Lanka". The Minister of Posts & Telecommunications, the World Bank Project Manager, the CI Asian Pacific Representative and the Postal Sectoral Director were among those who addressed the conference. For the first time the Ministry of Posts, the World Bank and the major unions were able to develop a dialogue. All parties appreciated this development and recognised the role of the CI in establishing the groundwork for it.

A joint statement of the unions was adopted at the Symposium and this became the basis for the appointment of a Ministerial Committee on 8 July 1999 to examine and report on the modalities for the reforms. The Reforms Committee included six union representatives, three representatives of the Government, three members of the Public, the CI Asian Pacific Representative and four officials of the Postal Management.

92 Ibid.


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Meanwhile a group of Postal employees sought a Court decision on the premise that the Postal Reforms Bill was inconsistent with the Constitution of the country. The Court having examined the complaint determined that 14 clauses in the Postal Reforms Bill was in fact inconsistent with the Constitution. The Postal Reforms Committee too which closely examined the Reforms Bill recommended amendments to 15 other clauses which were seen as unfavourable to employees. Hence a Bill incorporating 29 amendments was finally ready to be tabled in Parliament.

According to the Government and the World Bank the Bill should have been adopted in Parliament before June 30, to keep in line with the World Bank deadline. Otherwise, according to World Bank sources, the allocation would go by default.

Some of the unions' opposition has been mounting again on the grounds that the contents of the Bill was not made known to them and that in any case they were totally opposed to corporatisation. There are however a number of unions which have shown acceptance of the reforms including, the tacitly World Bank involvement. The discussion in Parliament of the Bill has been postponed on a number of occasions. It has been like a "hide and seek game". When the Bill is tabled in Parliament, the major unions threaten trade union action and the government postpones the discussions and the unions suspend action. When the Unions suspend action, and after some cooling off period, the government tables the Bill in Parliament when again the unions threaten trade union action.

It is anticipated that the Government will temporarily relent until after the forthcoming general elections due in October 2000. Whatever political party comes to power, the Bill might be once and for all finally adopted. Presently the Bill if adopted will have political implications for the governing as well as the opposition political parties. Once adopted the World Bank will release the loan finance for the project and the reforms process will be set in motion but not entirely smoothly. Some major trade unions will demonstrate opposition whilst some trade unions will tacitly support changes.

However it should be pointed out that the Sri Lankan government has proceeded to implement some of the aspects of its postal reform agenda, such as with respect to the introduction of new technology and services. It was recently announced that 38 new post offices with electronic and computer facilities would be constructed.93

93 Ameresekere, P., Op.Cit


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4.5.6 Conclusion

The reforms process if and when begun is bound to have mixed union responses. The UNI will have even a major role to play in order to ensure that reforms will:

· Not render job losses;

· Ensure complete security of employment and continuation of all facilities and terms hitherto enjoyed by employees;

· In effect provide better salaries, allowances and other terms and conditions;

· Guarantee Trade Union rights;

· Ensure Postal Services development with Universal Service guaranteed; and,

· Not result in eventual privatisation

The UNI will need to assist local unions in the pursuit and achievement of the above and to develop and strengthen the dialogue with the World Bank. This dialogue must be aimed at ensuring that the World Bank must respect unions and workers, and have consultations with the UNI in acknowledgment of its' commitment to protecting and promoting the rights of its members/ affiliates.94

94 The information and data contained in this section has been provided by Basil de Silva (UNI-APRO Deputy Secretary) and the relevant UPU and World Bank documents cited.


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5. AN ALTERNATIVE APPROACH TO POSTAL REFORM - AUSTRALIA AND JAPAN

This section discusses in detail two experiences with postal reform in the Asia Pacific region - Australia and Japan. In both countries, national governments have embarked on programs of postal reform which have been consistent with the direction taken by the World Bank However these examples have been selected on the basis that the trade union movement in each country was able to exert considerable influence over the direction of postal reform in each country. In this way, the outcome of postal reform in these countries has been the retention of public sector postal services, operating in a more commercial environment. The latter includes the need for efficiency improvements and financial profitability, as well as commercial and customer focus. this is considered an alternative and more balanced approach to postal reform than that encouraged by the World Bank in many developing countries.

5.1 Australia Post - Introduction

Australia Post is Australia’s national postal administration. For the past twenty-five years, Australia Post has been subject to major change in terms of its organisational structure, legal and regulatory framework and commercial direction. These changes encompassed consideration of similar options as those currently proposed by the World Bank - corporatisation, commercialisation and varying levels of deregulation. It has not to date involved formal privatisation, although there have been changes to service delivery that have involved the inclusion of privately-owned operations within Australia Post’s network. These proposals were developed as part of domestic political debates to encourage a more commercial, technologically innovative and competitive environment for Australia Post.

The critical period has been the period from 1989 which saw the introduction of corporatisation, commercialisation and reductions in the legislative monopoly. Partly a response to severe industrial relations disruption, labour relations were a key component of this organisational change process, with joint union-management consultation at a premium. Introduced in a cooperative industrial relations environment and under a period of Labor government, these changes not only delivered record profitability and productivity levels for the corporation but substantial income and other benefits for the workforce.

However since 1996 and the election of a conservative government, Australia Post has been subject to a major policy review directed at increasing the level of competition in Australia’s postal sector. While direct privatisation was excluded from the review process, the changes were consistent with the direction of the World Bank reform program in that they recommended effective full deregulation and extensive private sector participation in the Australian postal service through a liberal access regime. Importantly, this change process lacked any real community consultation process and no workforce consultation. The CEPU, the union of Australia’s postal workers, conducted a major campaign to mobilise public opposition to these deregulation proposals. This campaign involved a major research effort, public submissions, community campaigning and political lobbying. It is anticipated that the


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campaign has been successful in gaining sufficient public and political support to force the total rejection of this legislation by the Australian Parliament.

The lessons from the Australian example are that legitimate postal reform must balance the need for profitability with the vital community service obligations of the national postal service. It also re-inforces the need for effective community and workforce consultation and endorsement of the changes proposed. With the exception of the abortive conservative government proposals, the existing regulatory and organisational arrangements of Australia Post have met this criteria. Contrary to the situation of many developed countries, the postal workforce and the community have been able to exert sufficient political pressure to ensure that community concerns are addressed. While the conservative government’s radical proposals were generated from a domestic policy commitment to further competition, the direct absence of the World Bank from this process has clearly been beneficial.

5.1.1 Australia Post - Background

Postal services are a vital component of Australia’s communications network. Australia Post, as the national postal carrier with its universal and community service obligations, is the major deliverer of these services.95

Australia Post is a government business enterprise (GBE), fully owned by the Australian government. Serving approximately 18 million Australians, Australia Post handled almost 4.5 billion mail items in 1999 (or over 370 million items per month), delivering to some 7.7 million household and over 838,000 business addresses or delivery points across the continent.

With a retail post office network of some 4,400 outlets (both corporate and licensed), Australia Post provides its 800,000 customers who visit it daily with easy access to postal, financial and other complementary services. This is despite the fact that Australia’s population is highly dispersed, with 99% of its 7.7. million square km and the 29% of the population who live there considered rural and remote. Nevertheless, 98% of the population receive five deliveries a week.

Increasingly important components of Australia Post’s business are financial transactions. While Australia Post does not operate an independent banking service (unlike many other postal services in the Asia-Pacific region), it does operate two types of financial services - giroPost and Billpay. GiroPost currently provides electronic banking transactions over post office counters on behalf of 24 banks and financial institutions. This comprises Australia’s largest personal banking transaction network and compares favourably to that of the major banks.96 This service is offered in over 2,700 of Australia Post’s outlets, with over half of these (1,394) located in rural and remote areas which service nearly 30% of Australia’s

95 The information and data contained in this section are derived primarily from recent Australia Post Annual Reports and other official Australia Post publications.96 Reserve Bank of Australia, Reserve Bank Bulletin, September 1999; and, The Age (Melbourne), 9-10 January 1999.


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population. In 1999, these transactions totaled 25.5 million. Australia Post is also the leader in the third-party bill payment market in Australia. Billpay enables customers to pay accounts for approximately 365 organisations (including utilities and local governments), the largest range of bill payment transactions available from any single network in Australia. In 1999, these transactions rose by 13.8% to 165 million bills paid at Australia Post. Australia Post are also introducing a telephone bill payment service.

Australia Post employs approximately 35,000 staff directly and almost 45,000 with the inclusion of contractors. It’s transport fleet consists of more than 12,000 vehicles and around 20,000 of its employees and contractors are engaged in the collection, sorting and delivery of mail.97

With respect to competition, approximately 49% of Australia Post’s revenue (or $1.69 billion AUD) is sourced from its monopoly or reserved services. These are determined by legislation as standard letters weighing up to 250 gms (or delivered for less than 4 times the standard letter rate - $1.80) and in-coming international mail. All other services provided by Australia Post operate in a totally commercial and competitive environment, with private operators providing direct competition to Australia Post’s operations.98 These services are defined as standard letters weighing more than 250 gms or delivered for more than $1.80, out-going international mail, publications delivery, parcel delivery, financial services (primarily money orders, over-the-counter bill payment and giroPost), retail merchandise (primarily greeting cards and packaging) as well as any other services that Australia Post may provide (such as Internet and e-commerce services). The non-reserved services accounted for 51% (or $1.76 billion AUD) of Australia Post’s total revenue in 1997/98 and 75% (or $278.8 million) of Australia Post’s operating profit (taking into account expenses). Non-reserved services are clearly more profitable in terms of costs, providing more than half of Australia Post’s revenue and more than two-thirds of its profit.99

5.1.2 The Australian Postal “Reform” Process

The push by government for change in the Australian Postal service emerged in the 1970’s. This arose due to a number of factors:

· The Lack of Profitability. Between 1960 and 1975, Australia Post consistently incurred losses, ranging from 5% to 20% of revenue. As a government department it was forced to charge low tariffs. This situation severely limited the capital expenditure available for modernising the service. The telecommunications services provided by the combined department effectively subsidised the un-profitable postal service;

· Poor Service Performance. Over the same period, mail service performance (on-time delivery) on an average national basis had fluctuated around 93%. However in the largest

97 An employment breakdown of Australia Post is contained in Australia Post, Annual Report, 1998-99.98 Australia Post Submission, Table 4.3, p. 25. 99 Australia Post, Annual Report, 1998-99.


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state, NSW, which accounts for 35-40% of total mail, this performance had never exceed 90%, fluctuating between 75-85%;

· Industrial Disputation. Considerable time was lost during this period due to a lack of management consultation and resulting industrial disputation. This was particularly evident in the large mail exchanges, such as Sydney; and,

· Government Competition Policy. Since the mid-1980’s the Australian Labor governments embarked on a program of micro-economic reform aimed at restructuring key areas of the Australian economy and improving their efficiency through tariff reductions, corporatisation of government enterprises, reductions in restrictions on competition and even privatisation (such as the Commonwealth Bank and the national airline, Quantas) This was formalised in 1993 into a National Competition Policy Agreement committing all Australian governments - State and Federal - to enhancing competition in key sectors of the Australian economy. Social impacts assessments were intended to be key limitations on the operation of this agreement.

In response to this situation, there have been two broad phases of postal reform in Australia. These have encompassed organisational reform (including the separation of posts and telecommunications), corporatisation, commercialisation and various levels of deregulation.

The first phase sought a measured approach to “reform”, combining the introduction of corporatisation and commercialisation with gradual reductions in the postal monopoly (or reserved service). The aim of these changes was to improve Australia Post’s performance in terms of both profitability and service standards, within the framework of continued public ownership and a clear commitment to community service obligations. The measured introduction of competition was encouraged in this regard.

The second phase adopted a different and more radical approach. While direct privatisation was rejected, the program of “reform” was informed by a neo-liberal ideology and aimed to deliver effective full deregulation of the Australian postal service, with extensive access by private operators to Australia Post’s network.


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5.1.2 (a) First Phase - Corporatisation, Commercialisation and Limited Deregulation

Structural Separation of Posts and Telecommunications

The original responsibility for providing both postal (physical) and telephonic (electronic) communications services in Australia was vested in the Commonwealth Postmaster-General’s Department (or PMG) in 1901. In 1975, the PMG was separated into postal and telecommunications entities, creating Australia Post (under the Australian Postal Services Act 1975) and Telecom (now trading as Telstra), as providers of physical and electronic communications services respectively. The newly created postal services commission was given explicit postal functions, required to cover all costs from postal charges and provide at least have of its capital expenditure requirement from its internally generated funds. Revenue and costs were therefore closely aligned and deficit funding and cross subsidisation no longer options. The tariff on standard letters was raised by 80% (10 to 18 cents), thereby dramatically improving revenue. Social obligations were stated in the commission’s legislation. These changes provided Australia Post with a clearer mission, separation from the public service workforce and more effective financial disciplines.

Corporatisation and Commercialisation

Australia Post was corporatised and given more explicit commercial objectives in 1989. This change was formalised in the replacement of the Australian Postal Services Act 1975, with the Australian Postal Corporations Act 1989.

These changes established a new financial and capital structure that brought the supply of postal services more into line with commercial practice while at the same time maintaining restrictions on competition in certain areas of the postal market. Australia Post was required to fulfill certain community service obligations (CSO’s) prescribed in the Act. Transparency in planning, the calculation of costs and the delivery of CSO’s was embedded in the system. They required Australia Post to earn a reasonable rate of return for its only shareholder, the Australian government. They were required to prepare a five-year corporate plan for operating and financing the corporation, which was subject to the review and approval of the Minister for Communications. A set of financial and other performance targets were agreed by government to reflect a gradual improvement in performance, with measurement against these targets published in the annual report. The commercial focus of the corporation was reflected in the appointment of a board of directors, selected for their commercial skills and experience, and executives drawn from the private sector. In line with the private sector, Australia Post was now subject to all government taxes and laws and employment conditions regulated by industrial awards as opposed to statutory provisions. No changes were introduced to the regulatory framework and letter monopoly. In summary, these reforms gave Australia Post an enhanced commercial orientation, strengthening the organisational and financial structure of the corporation.


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Cooperative Industrial Relations

A major turn-around was effected in Australia Post’s industrial relations environment with the introduction of a more consultative and participative approach in 1989. This more cooperative approach and the dramatic improvement in the employment relationship is dated from the signing of a joint union-management statement of understanding with the APTU (the major Australia Post predecessor union within the CEPU) in 1989100 and a managerial style more attuned to running a range of time-sensitive operations spread across thousands of workplaces. The joint statement detailed 6 important principles of participative management covering local involvement in problem solving, communication, training, prior consultation, coordination and roles, all driven by the achievement of reliability and efficiency improvements to customer service.101 This has enabled Australia Post and its employees to negotiate important reforms and achieve performance improvements.

Regulatory Reform and Reductions in the Reserved Service

Since the introduction of corporatisation in 1989, the trend in Australian postal sector “reform” has focused on regulatory reform and gradual reductions in the reserved service. These have arose from two major government-initiated reviews into Australia Post. These were the Industry Commission Inquiry into Mail, Courier and Parcel Services (October 1992) and the House of Representatives Standing Committee on Communications, Transport and Micro-economic Reform Inquiry into Australia Post’s Community Service Obligations or Vaile Report (1996).

The first of these reviews was initiated by the then Labor government. This review into the mail, courier and parcel services was conducted by the Industry Commission (a public service entity). It’s final report made a range of recommendations covering Australia Post’s performance, its CSO’s, competition and structural reform.

The reports thrust was to recommend effective full deregulation of Australia’s postal service. The major recommendations encompassed the abolition of Australia Post’s monopoly with respect to the reserved service, replacing the reserved letter service uniform charge with a maximum change for standard letters, the funding of Australia Post’s CSO’s directly from the Commonwealth budget and expanding the market opportunities for private operators. Other recommendations of the Industry Commission were:

· decreasing the minimum price other providers must charge to carry standard letters;· expanding the range of exemptions to the reserved service definition, such as document

exchanges and mail transfers within an organisation;· liberalisation of outward international mail;· clearer specifications of the CSO;· increasing the frequency of some services;· the review of roadside delivery arrangements for some households;· the review of delivery guidelines;

100 Australia Post Submission, Table 6.2, p. 38.101 Australian Postal Corporation and APTU, Joint Statement of Understanding, 1989


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· trial outsourcing of final sorting and delivery arrangements to evaluate the merits of contracting out urban post offices;

· consultation with the community about service standards;· publication of separate financial data on reserved and non-reserved services; and,· a range of general Commonwealth government policies, such as borrowings, employment

and purchasing, should no longer apply to Australia Post.

Following policy input and political lobbying from the CEPU, the Commonwealth government was unwilling to adopted all of these recommendations but nevertheless adopt a measure of their deregulatory thrust. It responded in 1994 by passing the Australian Postal Corporation Amendment Act which implemented a number of the reforms recommended by the Industry Commission Inquiry. While the government re-affirmed its social objective of making a letter service available to all Australians at a uniform postage rate (incorporating this within the Act), major changes were made to Australia Post’s reserved service in line with the direction of the Industry Commission’s recommendations. These changes included:

· reducing the reserved services market definition from 500 gm’s to 250 gm’s as well as the rate of protection from ten times ($4.50) to four ($1.80) times the standard letter rate;

· additional exemptions from the domestic letter monopoly to include documents exchanges and transfer of mail within organisations by third parties, and the carriage of newspapers, magazines and books;

· introducing new bulk inter-connection arrangements. The size of the discount for bulk lodgement with Australia Post by private operators was to be based on Australia Post’s “avoided costs” and was to be monitored by the Australian Competition and Consumer Council (ACCC) rather than the previous Prices Surveillance Authority. Private mail operators were allowed to lodge mail at any designated Australia Post mail centre for final delivery within the delivery area on commercial terms to be negotiated within Australia Post;

· deregulating out-going international mail;· international mail sent to Australia by operators other than overseas postal administrations are

required to interconnect with Australia Post’s domestic network on the same commercial terms as domestic mailers; and,

· the new regulatory arrangements were to be reviewed in 1996/97 in the light of their effects.

The Vaile Report was concerned that any changes to Australia Post should not diminish its capacity to maintain or increase its CSO’s. It also recommended that consideration be given for the expansion of these CSO’s (such as with regard to post office closures and banking services), opposed the replacement of cross-subsidy finance of the community service obligations by direct budget funding, recommended the development of a range of financial and non-financial performance standards and a service charter. The recommendations regarding performance standards and a service charter have been generally implemented through the Australia Post Service Charter which was released in June 1998.


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5.1.2 (b) The Impact of the First Phase Reforms - Successful Corporatisation

Since the introduction of corporatisation and commercialisation, along with measured reductions in the reserved service (or postal monopoly), Australia Post has undergone a major organisational transformation. Although these changes have had some negative affects from a trade union and community perspective, the Australian postal “reform” program in its first phase has been a positive success.

As the World Bank concedes, since corporatisation in 1989 Australia Post has upgraded its performance and its image. The customer focus is stronger, industrial relations have improved, innovative products and services are priorities and investment in the business is at a record level. It operates commercially, is subject to all government taxes and pays commercial dividends to its owner, the government.102 A critical element to this has been joint union-management cooperation, with the shared goals of delivering high quality customer service and best practice employment conditions. Indeed the international ratings agency, Standard and Poors were so impressed by this transformation, citing improved profitability, customer focus, network improvements and labour relations, that they awarded Australia Post a AAA domestic financial rating.103

These changes have delivered profitability to the corporation, outstanding improvements in productivity, service performance and community support. They have also importantly delivered major benefits to its organised workforce, with major real wage rises, sustained job security and consultation. Australia Post and its workforce are now better able to successfully meet the challenges facing the postal service in the new millennium.

While from the union point of view there have been two main negative impacts of these changes (a minor overall reduction in employment levels104 and the increase in private sector operators in the postal retail network under licence105), these have been heavily outweighed by a number of important achievements by Australia Post and its workforce. These include marked improvements to profitability, productivity, service delivery, security of employment and wage outcomes. These achievements have been based on a major effort by management to improve union-management consultation (particularly with respect to major change

102 Ranganatham, K., Redirecting Mail: Postal Sector Reform, (The World Bank, 1996), p. 224.103 Ibid., p. 231.104 Since 1989 there has been a reduction of 8% in total employment (or 3,052 jobs) within Australia Post. Significantly, there has also been a negative change in the employment profile of Australia Post at the same time. Within the overall picture of declining employment, there has been a dramatic reduction in full-time employment (a fall of 19% or 6,584 jobs lost) - with retail staff being especially hit (a fall of 49% or 2,939 jobs lost) - while part-time, casual and seasonal staffing has risen by 92% or an additional 3,531 jobs have been created. This represents a significant shift away from full-time, permanent employment towards a more casualised workforce.105 Since 1989 there has been steady pressure placed on Australia Post to maintain its extensive postal outlet network. Consequently, there has been a steady decline in outlets, with a net loss of more than 220 outlets since that time. Corporate (direct Australia Post owned offices) have been the big losers, with 478 offices having closed. Licensed Post Offices have declined by only 106 and there has been an increase of 360 in the number of the lowest level of service outlet, the Community Mail Agency. This signifies that Australia Post has responded to the pressure to ensure profits by reducing its costs by reducing outlets, especially targeting Corporate outlets. This has directly affected the union in that its only in these outlets that the union has members. This is also reflected in the sharp decline in retail staff highlighted above.


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proposals). These improvements have been reflected in Australia Post’s benchmark performance with respect to a range of international comparisons. This transformation of Australia Post’s fortunes is reflected in the following:

· Improved Profitability. Since 1989, Australia Post has achieved substantial improvements in profitability and returns on investment. Profit (before tax and abnormals) has increased by approximately 400% to a healthy $373 million (AUD) profit in 1999, a $38 million (AUD) increase in one year. This represents a 13.8% return on average assets. Dividends to government (Australia Post receives no government funding or tax support) between 1989 and 1999 amount to over $1.5 billion (AUD) to the Federal Government, paying an additional over $2.2 billion (AUD) in other government taxes and charges. Australia Post is an exceptionally good corporate citizen;106

· Labour Productivity Improvements. Since 1989, Australia Post has achieved a cumulative increase in labour productivity of 54.8%, despite the labour intensive nature of the postal business and increasing mail volumes. This is almost double the national average for the same period. Australia Post management concede that these productivity improvements are the main drivers of its improved profitability;107

· Workplace Flexibility. Workplace flexibility such as flexible rostering/hours of duty, completion of 29 registered flexibility agreements since 1992, the extension of part-time employment (from 4% in 1989 to 15% in 1996 of the workforce), the introduction work and family flexibility provisions. Productivity linked pay and bonuses linked to enterprise performance negotiated as part of Enterprise Bargaining Agreements and workplace quality evaluation schemes, incorporating improvement related bonuses have been introduced. Union and award rationalisation has occurred with a reduction from 23 unions in the 1980’s to 4 (and principally 2), with industrial awards dropping from 17 to 4;108

· Decline in Industrial Disputation. The indicator of improvement in industrial relations is the steady but dramatic drop in time lost due to industrial action, from 7150 days lost in 1989 to merely 60 in 1996, or 1.5 hours per employee in 1989 to the equivalent of only 3 minutes in 1996.109 However it is also reflected in both the 32.8% labour productivity improvement (since 1992) and the measured improvement in delivery performance. Some of these changes (such as new technology and Retail Post) were of extreme industrial sensitivity and would not have been achievable in the previous non-participative environment;

· Service Improvements. On-time delivery has improved from 88% in 1989 to 94.4% in 1999, in the face of 36% increase in mail volumes and staffing reductions of 8% over the same period. The profitability has enabled Post to freeze standard postage rates (45c) for the last seven years, delivering estimated savings to business customers of $800 million (AUD). This is scheduled to be maintained until 2003;110

106 Australia Post, Annual Reports, 1990-91 to 1998-99 inclusive.107 Australia Post, Annual Report, 1998-99.108 Australia Post Submission, p 46-48.109 Ibid., Table 6.1, p. 37 and 48.110 Australia Post Submission, p.41; and Australia Post, Annual Reports, 1997 and 1998.


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· Customer Orientation and Public Support. Australia Post has achieved significant improvements in customer orientation and satisfaction. As the volumes of mail processed and the over 800,000 visits per day to Australia Post offices show, Australia Post is well used by millions of Australians. Various indicators of public support for Australia Post and its services amongst both business and residential customers reinforce this support. Independent nationwide customer surveys (of over 2,400 small and medium sized business and 2,400 private customers) conducted over the past 6 years for Australia Post, indicate increased satisfaction in areas such as on-time delivery, prices and good value for money, knowledge and customer focused staff and easy to use products. The overwhelming majority of these satisfaction rates are in the 80-90% percentile range. These statistics re-inforce the real improvements achieved by Australia Post and its employees.111 To improve customer linkages, a Postal Services Consultative Council made up of representatives of customers, employees and licensees, provides Australia Post with vital feedback on services and customer needs. Joint union-management commitment to best practice in customer service is reflected in the quality service (based on world-best practice) provisions of various Enterprise Bargaining Agreements (such as Quality Service programs);

· Security of Employment. While there has been an 8% reduction in staffing since 1989,112 it is important to recognise that this has been comparatively light. Compared to the massive job shedding within other government business enterprise during the 1990’s (such as Telstra’s almost 50% reduction), the union would argue that it has been able to ensure that security of employment within Australia Post is maintained. This has been largely due to the profitability, productivity and service improvements achieved;

· Significant Wage Improvements. The CEPU has been successful in gaining significant wage improvements for its postal members. Since the introduction of enterprise bargaining (the main mechanism for achieving wage increases) in 1992-93 and up to the end of the current agreements, CEPU postal members will have gained cumulative wage increases of 38% as against a mere 21% increase in the CPI inflation rate. In this way, since corporatisation Australian postal workers have gained a 17% real wage increase over inflation without resort to industrial action.113 These improvements are some of the best gains made by any Australian workers. The current agreement compares more than favourably in terms of wage increases settled by other major Australian companies in current agreements. Australia Post employees are receiving just under 4% a year whilst employees at a number of other major companies are being offered considerably less per year over longer periods of time;114

· Innovative Products and Investment. Since 1989, Australia Post has concentrated on the development of innovative and customer-focused products and services. These include expanded public access to financial transaction services (including business banking), hybrid mail initiatives such as EDIPost for bulk mail lodgements and an advanced

111 The key results of these customer surveys in 1998 are contained within Australia Post, Annual Report, 1997-98.112 Australia Post, Annual Reports, 1989-90 and 1998-99.113 Australian Bureau of Statistics, Access Economics and CEPU-Australia Post EBA documents.114 CEPU, “EBA4 delivers 8.5% rise, plus $500 bonus”, The National, May 1999.


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electronic counter network (Electronic Point of Sale or EPOS). Australia Post’s improved profitability has enabled the corporation to embark on ambitious investment programs and new service initiatives. These include the $500 million AUD FuturePOST network renewal program which is re-organising mail management and sorting with the introduction of state-of-the-art new information technology and major job re-design and re-training efforts. Australia Post is also introducing a whole range of e-commerce services and products, ranging from Internet Fulfillment Services, KeyPost server certificates, e-Stamps, on-line Stamp sales, Internet e-mail services, expanded electronic financial services and EDI Post services;115

· Improved Union-Management Consultation. Since the joint union-management agreement of 1989 (and particularly since 1995) Australia Post has engaged in extensive consultation with the union on both general issues and specific change matters. The union is represented on a central postal service consultative body, as well as other bodies. The successful negotiation and implementation of major workplace restructuring and efficiency improvements have also been based on this commitment to prior consultation and negotiation. These changes have included the introduction of Optical Character Recognition technology in mail processing; the wide-ranging Retail Post reform encompassing new formats and counter technology, services and extended trading; the organisational split of retail and delivery functions to achieve improved efficiency; and a range of workplace change agreements involving employee participation.116 Most importantly any major change - such as the VSORT and FuturePost network renewal program - is seen by management as requiring extensive union involvement in the design and implementation stages. This consultation framework has long been advocated by the union. While the extent to which this consultation is satisfactory varies from time to time (depending on changes in government and management attitudes), the union considers this as an important pre-conditions for other improvements in Post’s operations;

· Public Ownership and Private Partnerships. Australia Post’s reform program has to date specifically rejected consideration of privatisation. This has been a key condition of the CEPU’s commitment to participation in the corporatisation and commercialisation of its operations. The CEPU has however supported the operation of joint ventures with the private sector where these do not undermine public ownership, involve additional services or specific expertise beyond that of Australia Post and contribute to the profitability of the corporation. In this regard, Australia Post operate a range of commercial joint ventures in the areas of air freight, information technology, data analysis, financial services and international bulk mail. These include - Australian Air Express, a joint venture with Quantas, to provide domestic and international air express services; GEOSPEND Pty Ltd. which develops marketing and data analysis software for the postal

115 For information on VSORT and FuturePost see CEPU, “Network renewal poses huge challenges”, The National, August 1998, CEPU, “FuturePost”, “Making FuturePost safe” and “Vertical Sorting Frames - Union concerns finally addressed”, The National, May 1999, and CEPU, “Union Rescues VSORT mess” and “FuturePost Bugs, Blips and Bloopers”, The National, July 2000. For information on Australia Post and e-commerce see CEPU, E-Commerce and Postal Services - CEPU, Response to the UNI-Apro Questionnaire, March 2000; Australia Post, Annual Report, 1998-99, Australia Post, “Australia Post increases trust in Internet e-commerce”, Media Release, 10 September 1999, Australia Post, “Internet Billpay is on the way”, Post Journal, December 1999; and Australia Post, “Post’s Internet Fulfillment Service due early next year”, Post Journal, December 1999..116 Australia Post Submission, p 46-48.


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banking, insurance and direct mail market sectors; Austrapay Ltd., a joint venture with Chase Manhattan Bank Australia, to provide electronic payment, cheque processing and remittance services used for over the counter and bill payment services. It processed over 100 million transactions in 1996/97; and, International Data Post (IDP), a joint enterprise of 9 postal administrations, to develop and market ePost, an international bulk electronic mail system to postal enterprises. Apart from IDP, Australia Post has gained small retained profits from these operations. It should also be noted that Australia Post also provides a range of other services to customers in its capacity as an agency for other largely private service providers. These encompass a wide range of financial and other services for which Australia Post receives a fee for service (detailed above). Finally, it has been noted that there is considerable private sector involvement in Australia Post’s operations through its 3,520 licensed post offices and post office agents (who provide a range of post office related counter services), the 5,179 private mail contractors, particularly in rural and remote areas, who handle Australia Post delivery, the contracting out of some parcel delivery services and the use of private air services for the movement of mail by air within Australia;117 and,

· International Comparisons. Australia Post has been ranked as one of the best postal services in the world by the World Bank.118 This a reflection of its achievements compared against other postal administrations across the world. Australia Post is ranked amongst the best in terms of domestic letter costs, customer satisfaction, overhead performance, rate of return on operating assets and sales. This is in the context of Australia Post enjoying one of the lowest levels of domestic protection and the vast distances and sparse population of Australia. For example, Australia Post’s 45c (AUD) letter rate is the fourth cheapest in the OECD (26 countries) based on purchasing power parity. The only cheaper counties are New Zealand, Spain and the USA who don’t have to carry the same “geographic costs” of Australia Post.119 These recent comparisons confirm reports in 1997 that Australia’s standard letter rate is also only 80% of the average OECD standard postage rate of 56 cents - despite Australia’s low population density.120 Despite these geographic factors, Australia Post has a more extensive network than other countries with every 4,780 Australians being serviced by each postal outlet, compared to 7,090 Americans, 6,573 Dutch residents and 5,656 Germans.121

117 Ibid.118 Ranganatham, K., Redirecting Mail: Postal Sector Reform, (The World Bank, 1996), p. 223.119 Australia Post, Post Journal, March 2000 (253), p. 14, and Australia Post Submission, p. 49. Also see Tables 2 and 3 for other international comparisons of Australia Post’s standard letter rate.120 Davidson, K., “One big problem in selling Australia Post”, The Age (Melbourne), 6th October 1997.121 Australia Post Submission.


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Social Obligations Maintained

Australia Post has been able to achieve these improvements without compromising its important social obligations. The legislative commitment to universal service for the standard letter at a uniform price has been maintained throughout this period. Indeed its incorporation in the change process has been a important condition of community support. This has been achieved through the maintenance of its extensive retail and delivery network and the affordability of its basic services. This is in recognition of both the immense geographic size of Australia and the dispersal of its population. As has been detailed above Australia Post maintains the largest retail network in Australia, with over 2,500 of its 4,425 outlets located in rural and regional areas. With regard to affordability, Australia Post has been able to maintain the price of basic postal services since 1992, resulting in a consequent cost saving in terms of CPI to all postal users. With respect to price, Australia Post has been able to maintain its 45c standard letter rate for the past six and a half years and is committed to retaining this price until at least 2003. Compared to movements in the CPI, this has delivered an almost $800 (AUD) million savings for postal users since 1992.122 As has been stated, Australia Post has been able to maintain some of the cheapest basic postal charges in the developed world, despite both its low population density and its new commercial imperatives.

Cooperative Industrial Relations Vital

As has been stated, one of the critical aspects to the success of this major transformation has been the improvement in the industrial relations environment. This is due to the commitment by management to actively involve the workforce in the determination of workplace change. The concluding of the joint union-management Statement of Understanding in 1989 provided the crucial building block for the development of a more cooperative industrial relations environment. The World Bank itself has endorsed this assessment by admitting that “these improved relations among Australia Post’s management, employees and unions ... are among the most important changes to the Post.”

5.1.2 (c) Second Phase - The Conservative Governments Deregulation Plan

Despite the fact that the above changes have resulted in a major turn-around in Australia Post’s performance, the new conservative government elected in 1996 has championed a proposal for the most radical plan of postal sector reform ever proposed in Australia.

It is important to appreciate that these “reforms” have been initiated arising from the neo-liberal ideology of the current conservative government. Committed to a “small government” agenda, this government has embarked on major privatisation programs (such as the partial sell-off of the government owned telecommunications provider, Telstra), and including the privatisation or contracting out of significant government service deliver arms (such as unemployment assistance). In addition, the government is antagonistic to the interests of workers, with fundamental attacks on the industrial rights and wages of working people and attempts to restrict the operations of their trade unions. The improved profitability and

122 The progressive savings achieved for the community is set out in Australia Post, Annual Report, 1998-99.


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service improvements of Australia Post have had little impact on this agenda. The reform program proposed is consistent with the direction proposed by the World Bank for developing countries in its push for private sector participation in the postal market. In this regard it recommends effective total deregulation of the postal market and major private sector access to Australia Post’s network. Needless to say, the proposals have been advanced with little commitment to cooperative industrial relations or workforce consultation.

This has been initiated through a review process which produced a range of options for consideration of government. This review process provided for only limited public and workforce consultation. In response to this process, the CEPU conducted a major public campaign, encompassing both policy research, major submissions, community campaigning and political lobbying. While the government subsequently slightly moderated the reform proposals, the CEPU has been able to mobilise sufficient public and political opposition to result in the likelihood that the government’s proposed deregulation proposals will be defeated in the Australian Parliament.

The National Competition Council Review

This review has been conducted by the National Competition Council (NCC) at the direction of the Federal conservative government elected in 1996. The main purpose of this study was to review the Australian Postal Corporation Act 1989 in the light of the Commonwealth Government’s obligations under the Competition Principles Agreement executed in April 1995 and its determination to accelerate micro-economic reform through improving competitiveness. The Final Report of this NCC Review was released in February 1998. The key recommendations of the NCC Review were that:

· domestic business mail be fully deregulated and opened to full competition;· in-coming international mail opened to full competition;· competitors should be allowed to lodge their mail in Australia Post’s post boxes, and to use

its CSO-funded services to deliver their mail, at less then cost;· a monopoly be kept on household mail (with competitors charging at least twice the standard

rate);· the universal service obligation to remain and be reviewed in 2005;· all postal service providers to be licensed;· the Australian Communications Authority to regulate the postal market and introduce a code

of practice and industry standards covering re-direction’s, return-to-sender, lost or damaged mail and complaints; and,

· these changes to be introduced from 1 January 2000.123

Australia Post and the Federal Government subsequently reported that the cumulative impact of these recommendations would be to increase the proportion of Australia Post’s non-reserved service market from 50% of current Australia Post revenue levels to 93%.124 thus effectively fully deregulating the Australian postal market.

123 National Competition Council , Review of the Australian Postal Corporation Act, Final Report, Volumes One and Two, (Canberra, AGPS, 1998.124 Australia Post, Australia Post and the NCC Review - Your Guide to Understanding our Response to the NCC Recommendations, 1998; and, Senator the Hon Richard Alston, “Government delivers better postal services”, Media Release - Minister for Communications, the Information Economy and the Arts, 16 July 1998.


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The Federal Government’s Subsequent Deregulation Plan

In response to these recommendations, the Federal government announced its proposed reform package for Australia’s postal services in July 1998. While these rejected a number of the specific recommendations of the NCC Review, the Federal government nevertheless adopted the broad deregulation thrust of the NCC’s approach, with changes to be introduced by 1 July 2001.

The key elements of the Federal government’s package are:

· Australia Post’s reserve service for Australian origin/destination mail will be reduced from the existing 250 gms and four times the standard letter rate to 50 gms and one times the standard letter rate;

· all incoming international mail will be opened to full competition from 1 July 2000 (with yet to be defined safeguards to prevent this being used to circumvent Australia Post’s remaining domestic reserved service);

· a review to be undertaken in 2002 (to be completed by July 2003) to assess the effects of these changes and the need for further change

· introduce measures to provide access to Australia Post’s network on a similar basis and on terms and conditions no less favourable than Post’s offers its own customers. This postal services access regime is to be administered by the ACCC, who will declare services “accessible” and also act as arbiter of disputes. Bulk mail interconnection and access to Australia Post post boxes are proposed to be declared on at the inception of the new regime;

· arrangements to assure competitors that Australia Post is not cross-subsidising from monopoly reserved services to non-reserved services it provides in competition with private operators;

· reduced costs and improved services through discounts for major mail users using bar-codes;· reductions in the volume threshold (from 2,500 to 300) for bulk mail discounts and

aggregation which will allow smaller mailers to have letters combined into larger lodgements (minimum 10,000) eligible for bulk mail discounts;

· development of a bulk mail monitoring systems and a code of practice for bulk mail; and,· the further corporatisation of Australia Post consistent with the Federal Government’s

decision that all government business enterprises (or GBE’s) should be subject to the Corporation’s Act.125

The deregulation proposals of the government will be implemented by a combination of new legislation and administrative action. The legislative changes required have been subsequently introduced into the Australian Parliament as the Postal Services Legislation Amendment Bill 2000. The other aspects of the conservative government’s announcement will be implemented by decision of Australia Post management, such as the changes to bulk mail arrangements. These measures are normal operational or commercial decisions by Australia Post. These include the establishment of the Service Charter, extending bulk

125 Senator the Hon Richard Alston, “Government delivers better postal services”, Media Release - Minister for Communications, the Information Economy and the Arts, 16 July 1998.


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discount arrangements and performance standards, and the introduction of new technologies to improve efficiencies.

The Service Charter

In an effort to soften the political impact of its postal deregulation plans, the Federal Government also announced in 1998 a Service Charter for Australia Post. This was also a response to the previous Vaile Report. This Service Charter outlines a range of service standards and related new legislative reporting mechanisms. They require Australia Post to meet the following performance standards:

· 94% of letters to be delivered on time by ordinary post;· 98% of delivery points to receive a minimum of five deliveries per week, with the remaining

2% in remote areas receiving no less than one delivery per week;· a minimum retail presence of 4,000 postal outlets of which at least 2,500 must be in rural and

remote areas; and,· a minimum dispersal of 10,000 street posting boxes.126

The government’s deregulation proposals have also been proposed in the context of other government measures which have the potential to undermine Australia Post’s financial and operational position. These relate to the introduction of a Goods and Services Tax (GST) on postal services which is estimated to have a major financial impact on Australia Post, with a $374 (AUD) million impost in its first year of operation and a further $324 (AUD) million annually). This represents a 44% reduction in Australia Post profit levels on 1997/98. The government has also introduced its Rural Transaction Centres (RTC) program, which rather than strengthen postal services, has the potential to undermine them, replacing postal outlets with private operators charging on a fee for service basis.

5.1.2(d) The CEPU Response - Concerns, Alternatives And The Hands Off Aussie Post Campaign

The CEPU had supported the need for legitimate and appropriate change in the operations and regulatory framework of the postal service. It was considered that corporatisation and commercialisation, with clear community service obligations and a commitment to public ownership, could deliver both profitability to Australia Post and improved employment conditions for its employees. This program was underpinned by a commitment to joint consultation between management and the union.

However the conservative government’s proposals rejected this approach. The policy response of the CEPU to these new proposals was two-fold - both to oppose the radical and negative deregulatory proposals of the conservative government and to propose a positive agenda for postal reform which would balance community expectations, public ownership

126 Australia Post, Putting Customers First - Service Charter, June 1998; and, Senator the Hon Richard Alston, “Australia Post puts customers first with historic Service Charter”, Media Release - Minister for Communications, the Information Economy and the Arts, 13 July 1998.


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and profitability. The CEPU mounted a major community campaign to oppose these deregulation plans.

5.1.2(e) The CEPU’s Concerns with Postal Deregulation

The CEPU has had many grave concerns with these proposals. They constitute the biggest and most radical reform program for Australia’s postal service. This is a radical agenda which would have major ramifications for the future of postal services in this country. The key concerns of the CEPU are summarised as follows:

· Financial Disadvantages. The changes to the reserved service will financially cripple Australia Post. It will increase the deregulated part of Australia Post’s market and revenue from 50 to 88%. This is critical given that Australia Post is the only postal operator in Australia to maintain such a wide and comprehensive retail and delivery network;

· Inadequate Service Guarantees. The government’s much mooted service guarantees are full of major loopholes that will result in major cuts to Australia Post services. The only services to be guaranteed are the reduced reserved services (i.e. up to the proposed 50 gm standard letter), 45c letter rate (until 2003), letter delivery standards and 4,000 postal outlets (2,500 in rural and regional areas). In addition, there are no guarantees for mail above 50 gms, parcels service, financial services, individual post offices including Licensed Post Office’s (the “guarantee’ being 400 less than current network levels), prices other than 45c and delivery times for non-reserved mail. Post “offices” are not guaranteed by the Charter but rather only “outlets”, with no definition being provided. Incredibly, Australia Post can nevertheless still close post offices for “commercial reasons”;

· Other Effects - Job Losses, Post Office Closures and Service Reductions. The other effects would be 17,000 job losses (depending on the extent of market loss) in a unionised, award condition covered employment. These will be replaced by a small number of casual, non-award jobs for overseas-owned companies such as SALMAT/Streetfile (which are owned by News Corporation). The future of up to 1,700 existing post offices will be threatened with closure. It will also have the potential to jeopardise the $500 (AUD) million FuturePost investment program and the possibility of expanding services to meet community needs (i.e. financial services);

· Rural and Regional Impact. Postal services have already declined to these areas (such as with respect to longer average delivery rates, post office changes and closures etc.). These are the most vulnerable services as they are high cost and low profit. Potential competitors have strongly argued that Australia Post retain these services as they are not interested in providing rural and regional services. Australia Post currently subsidise approximately 700 out of 2,965 Licensed Post Office’s as being un-profitable. The CEPU believe that rural and regional areas will begin to see lower services (full service post offices replaced, loss or reduction in availability of non-reserved services i.e. parcels


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etc.). In the context of rural bank closures, Australia Post excellent infrastructure will be threatened, jeopardising the potential for their use as financial institutions; and,

· Worse Than Privatisation. The CEPU has argued that once this process is started it will be almost impossible to go back. A future government will have no need to privatise Australia Post because once they’ve given away its markets, there will be nothing left to privatise.

5.1.2(f) The CEPU’s Alternative Reform Program

The CEPU also opposed these changes on the grounds that they failed to meet the real needs of the community and challenges facing the industry. The CEPU was strongly of the view that it is not enough for union’s merely to oppose the government. This is reactive and merely accepts the political agenda of the government. Those who oppose deregulation should go one step further.

The CEPU have advocated that government should embark on a reform package which assists rather than detracts from Australia Post’s ability to meet the challenges of the future. This vision for the future will assist Australia Post in meeting the needs of the community, while ensuring its on-going profitability within the postal market place. It will help create - a 21st Century postal service for a new millennium. In this regard, the CEPU have advocated support for measures to ensure that not only are Australia Post’s existing services secured into the future but that maximum community benefit is gained from this extensive and efficient public infrastructure.

In addition to specifically rejecting the conservative government’s deregulation proposals, supporting the retention of Australia Post in full public ownership and the retention of the existing definition of the standard letter (that is 250 gms and 4 times the rate), the CEPU argued that a positive government policy relating to postal services should be informed by the following key principles:

· Secure Current Services. Support for the inclusion of the existing range and levels of service provision within Australia Post’s legislated CSO’s (i.e. that parcel delivery, financial transactions, retail services etc.). These standards refer to a minimum number of “full-service, post offices” rather than postal “outlets” to ensure that standards of services are clearly understood;

· An Expanded Community Service Obligation. Recognising the need to build on the existing public investment in Australia Post’s extensive service network through the provision of relevant additional services as a key mechanism to ensure all Australians have access to communications services, the Federal Government should expand the existing CSO to encompass not only the affordable and accessible provision of the standard letter but the range of services currently enjoyed or needed by the community. These additional provisions should encompass: minimum numbers and geographic spread (i.e. metropolitan, rural and remote dispersal rates) of full service postal offices (whether


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corporate or licensed) and delivery points; retention of the existing point of delivery policy; a freeze on the expansion of Community Mail Agencies (CMA’s) and specifically the conversion of existing post offices into CMA’s; the provision of an accessible and affordable parcels and financial services; the provision of minimum service standards with regard to delivery frequency; and, the provision of additional communications services, including other emergent technologies (such as e-commerce, the Internet and electronic communications services), via Australia Post’s extensive retail network;

· Commercial Freedom. Australia Post should be free to provide any additional services that its board of management determines, without government restrictions;

· Dividend Changes. Recognition by government of these additional community services obligations in a consequent reduction in Australia Post’s dividend to government;

· Opposition to Budget Funding. The government should reject any future proposals to fund Australia Post’s CSO’s directly from the Federal budget;

· Manufacturing Impacts. Recognition that Australia Post contributes to the manufacturing base of the country and that further moves to further deregulate or privatise these services will have a detrimental effect on Australia’s manufacturing base;

· Industry Standards And Monitoring. Establishment of industry-wide standards and appropriate industry monitoring body;

· Employment Practices, Workplace Relations And Consultation. Require Australia Post to ensure that its employment practices and policies are conducted on the basis of consultation with its employees and their unions, based on a harmonious and participatory approach to human resource practices, and that award-based employment, regulated by the Australian Industrial Relations Commission, remains the preferred mode of employment within Australia Post; and,

· Community Consultation. Establishment, under legislation, of national, state and regional consultative councils (based on the existing Australia Post Postal Services Consultative Council), consisting of representatives of Australia Post senior management, appropriate other Australia Post representatives, employees and their unions, community organisations and consumers, to advise Australia Post on services at the national, state and regional levels. 127

This was not intended to be an exhaustive list but was considered by the CEPU to go some way to redressing the decline in access to a whole range of basic communications services that increasingly important to the lives of ordinary Australians, particularly those resident in rural and remote areas of Australia.

127 CEPU, Legislative Review of the Postal Services Legislation Amendment Bill 2000, CEPU (Communications Division) Submission to the Senate Environment, Recreation, Communications and the Arts Legislation Committee , May 2000, pp. 45-50.


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It will have been made clear that the CEPU believes that Australia Post’s outstanding performance, its unique importance as a provider of vital communications and other services throughout Australia and the existing political environment have set the groundwork for an innovative response by government. This response detailed above will not only provide government with a consistent vision for the future of Australia’s postal service, but also the opportunity for Australia Post and its employees to create - a 21st century postal service for the new millennium.

5.1.2(g) The CEPU’s Hands Off Aussie Post Campaign

The CEPU opposed these deregulation proposals and argued for its alternative proposals through a comprehensive campaign.

The focus of this campaign was gaining public support and credibility for the CEPU’s message against postal deregulation. As the central message of the campaign was that deregulation would lead to a loss of profitability for Australia Post and a decline in services and increased costs for ordinary customers, the campaign excluded industrial action. Commencing in 1997, this nation-wide campaign encompassed the use of substantive research and major policy submissions, a massive community campaign (involving third-party community organisations as well the union’s members) and effective political lobbying.

5.1.3 A Trade Union Assessment Of The Australian Experience With Postal Sector Reform

The recent Australian experience of postal “reform” has demonstrated how effective and successful community campaigns can be conducted in opposition to postal deregulation proposals. To this extent the Australian experience reveals a number of specific campaign successes as well as policy achievements. These will be of continue benefit to the Australia Post, the community and postal workers in continuing to oppose deregulation proposals and in defence of a more balanced approach to postal reform.

However the Australian experience also reveals how the existing policy, regulatory and organisational balance has delivered positive benefits to Australia Post, the community and postal workers in terms of profitability, public ownership, guaranteed services and an expanded postal service. These achievements have been detailed above (see Section 5.1.2(b)).

The Australian experience to date shows that commercialisation and corporsatisation can be a legitimate and necessary response to the challenges facing postal services throughout the Asia Pacific region and the world. They confirm that the World Bank’s preference for privatisation and private sector participation is not only unnecessary but a potential impediment to the achievement of these important outcomes.


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In this respect, the trade union campaign against the latest deregulation moves of the conservative government has also been a success. These relate to its mobilisation of community support, achieving its objectives (including the defeat of politicians committed to postal deregulation and significant policy gains. The latter have encompassed both policy shifts by the conservative government and, more importantly, major policy initiatives of the major opposition parties, both in the direction of trade union policy. These achievements, along with the successful operation of Australia Post, provide a positive outlook for Australia Post, its employees, customers and all supporters of a public postal enterprise.

5.1.3(a) Campaign Successes

This campaign has been widely recognised as having made postal deregulation a political and public issue and mobilised public opposition to postal deregulation. The CEPU believe that their chief campaign achievements have been:

· Innovative Campaign Techniques. The campaign utilised a number of innovative campaign techniques, including campaign aids (such as campaign vans and “dancing post boxes”), community petitions, television and newspaper advertising. These enabled our message to gain massive media coverage and publicity across rural and regional Australia;

· Widespread Community Support. The campaign was successful in gaining the active support of the major political opposition parties, including Labor, Australian Democrats and Greens, as well as a range of organisations, such as Protect Country Post, licensed post office operators, local governments, the Country Women’s Association and various farmers groups. The community petition was widely distributed and to date has gained over 70,000 signatures;

· Coalition Backdowns. The conservative government was forced to distance itself from its own NCC review, providing a range of (largely useless) postal services assurances or guarantees. Under pressure from the campaign, the government attempted to assure the community with a 12 month minimum “guaranteed” number of post offices (4,000 overall, 2,500 in rural and regional areas), “guaranteeing” the 45c standard letter rate until 2003, the uniform universal standard letter service, the internal cross-subsidy arrangement for the standard letter service, and the rejection of the immediate deregulation of all business-sourced mail (as recommended by the NCC review). While these concessions were significant compromises for the government and indicated the influence of the campaign, they nonetheless were either unsustainable or irrelevant given the potential revenue loss to the corporation that would result from the implementation of the government’s overall deregulation proposals; and,

· Defeated MP’s. The campaign targeted 13 coalition Federal politicians who supported postal deregulation in the run up to the 1998 Federal election and was successful in un-seating 8 of them.


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5.1.3(b) Policy Successes

As a result of its campaign against postal deregulation, the CEPU has achieved a number of vital policy successes. While the campaign was un-successful in convincing the conservative government to abandon its deregulation proposals, the campaign succeed in gaining the support of both major opposition parties to the CEPU’s key policy agenda. This is crucial given that not only is Labor likely to form the next government but both of these parties combined control the upper house of the Australian Parliament (the Senate) and thereby have a veto over government legislative proposals, including any postal changes requiring legislation.

The key policy achievements for the CEPU have been defeating the Government’s deregulation legislation, expanding Australia Post’s range of services and enshrining Australia Post’s Community Services Obligations in Legislation

Defeating the Governments Deregulation Legislation

As a consequence of the CEPU’s effective campaign against the government’s postal deregulation legislation, both Labor and the Australian Democrats have pledged to oppose the government’s deregulation legislation when it enters the Australian Parliament in late 2000. This pledge was reflected in the Senate Review report into the proposed legislation.128

This will almost certainly see this legislation rejected in total. This will be a major victory for the CEPU as no previous postal reform proposals have been so rejected by the Australian Parliament.

Expanding Australia Post’s Range of Services

Both Labor and the Australian Democrats have declared their commitment to support the expansion of Australia Post’s existing services. The CEPU has referred to this policy agenda as the “real new services agenda”. Building on community concerns (particularly in rural and regional areas) that access to affordable communications services is a vital issue, the CEPU has urged political parties to support the expansion of Australia Post services to include effective universal access to affordable financial services and other emergent technologies (such as e-commerce, the Internet and electronic communications services) via Australia Post’s extensive retail network. The expansion of services has been a key element in the CEPU’s policy aimed at ensuring the continued survival of Australia Post’s post office network, particularly in rural and regional areas. The expansion of services will not only ensure an even better service to the community but - most importantly - secure the on-going viability of Australia Post’s network and future employment.

In endorsing the CEPU’s proposals in this regard, Labor has identified Australia Post as a pivotal element to creating what Labor calls “a Knowledge Nation”, with all Australians having access to new communications and information technology via Australia Post’s retail network. Under this policy, a future Labor government would ensure that Australia Post

128 Parliament of the Commonwealth of Australia, Postal Services Legislation Amendment Bill 2000 - Report of the Senate Environment, Communications, Information Technology and the Arts Legislation Committee , June 2000.


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would continue to provide current postal, retail and financial services (including Giropost and Internet bill paying services), while at the same time Australia Post would play a critical role as a platform for the delivery of services, including emerging digital data services, particular to rural and regional services. Labor is thus committed to an increased role for Australia Post in the future. Post Offices have an enhanced role under this new policy, providing not only a gathering point for people to access mail services but as a hub for a range of new services, such as financial and digital data services.

Enshrining Australia Post’s Community Services Obligations in Legislation

Both the Australian Democrats and the Labor Party have agreed to the CEPU proposal to enshrine Australia Post’s community service obligations in legislation. This is a major achievement for the CEPU, its members and the community. The CEPU has long been of the view that only through securing these obligations in legislation can the CEPU, our members and the community be assured that government - or Australia Post for that matter - will remain committed to their provision.

Ideally, these obligations would reflect community expectations - not the existing minimal legislative obligations of Australia Post (which is restricted to the standard letter service). They would encompass access to mail, parcel, financial and counter services and service standards. They would guarantee a minimum number of post offices, including corporate post offices, and their geographical spread throughout Australia. These service standards should be flexible enough to account for changes in population but secure enough to bar any major reduction in services.

5.1.3(c) Conclusion: The Challenge - Supporting Positive Change

The Australian experience demonstrates that trade union’s are not in a position to halt moves towards improving the profitability of postal administrations. The globalisation of postal markets and international pressures will only strengthen this. However improved profitability and service can be an invaluable tool in defeating radical moves to privatise the postal service. Union members expect their union to play a constructive role with a cooperative management in achieving this.

The challenge for the union movement is to minimise the negatives effects of change and to direct management down the path of constructive consultation with their union and its members. This process allows union’s to directly influence the nature and implementation of change. Not only can this ensure tangible benefits to our members (such as improved wages and conditions, as well as access to training) but it allows unions to stop moves towards full privatisation of postal services.

The World Bank itself has felt compelled to praise the Australian example and identified it as a model for other postal administrations. They concede that the core of this lesson is the importance of employee participation and consultation. Thus an appreciation of the Australian postal reform experience, must encompass its commitment to public ownership,


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improved employment conditions and workplace consultation as well as commercialisation and profitability. Trade union support for the Australian example was and remains dependent on management and government commitment to this balance.

5.2 JAPAN POST

5.2.1 Introduction

Japan has also witnessed the impact of the international push for postal reform , including privatisation. While postal services in Japan remain a government service, the push for privatisation has been one of severe controversy for several years. This section will provide background on the Japan postal service, discuss the push for reform and why the radical push for privatisation was unsuccessful.129 The Japan Postal Service provides three major services to the public - the postal service itself, the postal savings service and the postal life insurance service. These will be described in detail.

5.2.2 The Postal Service

History and Current Status

It was March 1, 1871 when a modern postal service started in Japan by inaugurating official mail transportation between Tokyo and Osaka. According to the archives, it took about 78 hours to transport mail between two cities. This was introduced by Mr. Hisoka Maejima, Acting Director-General of Post in the first era of Japanese Postal Service.

Nowadays, it takes mail only one day to be delivered to the addressee inside Japan. Ordinary mail destined for all areas of Japan (except outlying islands) posted in Tokyo before 16:00 is delivered to the addressee next morning. A business letter posted by EMS in Tokyo before 17:00 will be delivered to main cities of the major Asian cities almost next day. The Japanese Postal Service is world-renowned for its reliability and advanced technology. It has also contributed to the UPU and WSBI’s wide range of activities,

The mail service is not only the basic but also the most convenient means of communications. It is the service that is easily accessible to everyone wishing to send letters, small packages and parcels through Japan’s 24,700 post offices. By offering safe, fast, reliable delivery at affordable price, the mail service fulfills an important social and economic role.

Some key aspects of the Postal Service are that it:

129 The author would like to acknowledge the assistance of Hiroshi Tabata (of Zenyusei-Japan) in the compilation of this section of the study.


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· Is available in and to all areas of the country;· Provides the same services to everyone;· Provides the most affordable rates possible, with letters and postcards sent throughout the

country at uniform rates; and,· Provides a simple system of mail collection boxes.

The Japanese Ministry of Posts and Telecommunications (or MPT) has started a number of measures designed to encourage regional development and the creation of more vibrant, attractive communities. Toward this end, the MPT utilises its nationwide network to provide specialised community oriented services. One-stop service is one of them. Under the scheme, post offices play an important role to provide residents with a wide range of government or local services.

Mail entrusted to the Postal Service from its customers is delivered throughout the country; whether to urban or remote areas (such as mountains or islands). A total of 70 millions items are delivered to 28 million locations each day. Compared to other government or local services, the post office is the most accessible public service facility. The average distance to post office is about 1.1 kilometres, which is the same as an elementary school.

Business performance

When it comes to business performance, it is hard to say that postal service have been facing serious situation.

Going back to the 1980’s, the business performance was good. For ten consecutive years between 1981 and 1990, the Postal Service earned a net profit. Subsequently, changes in the performance of the Japanese have had an adverse effect on postal operations. In 1991 the Postal Service made a 68.1 billion yen annual loss. As another major loss was projected for 1993, the MPT raised postage charges in January 1994. This raise, effected together with efforts for streamlining management, resulted in a profitable outcome for the three consecutive years since 1994. However in 1998, Postal Service however recorded a 62.5 billion yen loss. The MPT believed that this was a consequence of the introduction of the New Postal Code system. The system was introduced on February 2, 1998 to meet the demands posed by the expanding mechanisation of postal operations, to maintain and upgrade the efficiency of operation, and to ensure continued reliable, low-cost, high quality of services for customers.


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5.2.3 The Postal Savings Service


Japanese Postal Savings Service is well known as the world’s largest public financial institution. The service started in January 1875, when Postal Money Order Service was inaugurated. Postal Savings commenced in May the same year.

Why is the Japanese Postal Savings Service so popular, achieving a large financial turnover? This could have something to do with the fact that savings are popular with the Japanese public. There are also various factors that worked together to bring about a high savings rate in Japan. It is thus said that such high savings rate has supported the growth of Postal Savings and Japan to be called a “savings superpower”.

Money that is collected through Postal Savings has been using to improve people’s lives. Other than the portion needed to cover withdrawals and loans to depositors, all moneys that customers deposit in postal savings accounts are re-deposited with the Ministry of Finance’s Trust Fund Bureau. Here, along with welfare pensions, national pensions, and other re-deposited government funds, they are managed jointly as “Trust Fund Bureau Funds” and serve as a source of funding for the Fiscal Investment and Loan Program. Thus, postal savings customers’ deposits are ultimately used to develop social infrastructure and improve the lives of the people.

The Japanese financial system is currently undergoing a process of significant reform, sometimes referred to as “the Japanese Big Bang”. It is expected to result in a wider variety of financial products and enhanced services. On the other hand, the increased focus on profitability raises concerns that small-lot savers and residents of outlying areas will experience a decline in the level of services. Postal Savings offers reliable products and services as common asset to be shared by society.

Business Performance

In 1997 revenues for the Postal Savings Service’s General Account amounted to 10,308.1 billion yen, with expenditures of 9,708.7 billion yen, giving a surplus of 599.4 billion yen. The cumulative surplus in the General Account reached 4,928.1 billion yen at year-end.

The Postal Saving Service is making a major effort to encourage customers deposit again after the maturity of “Teigaku Savings” These savings are such that customers cannot save in the same account by exceeding 10 years. Many of these 10 year accounts were coming to maturity. The MPT projected that this amounts to about 24 trillion yen and it aims for about 70% to be re-deposited with the Postal Savings Service.


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5.2.4 The Postal Life Insurance Service


The Postal Life Insurance Service started in 1916 to provide basic life insurance to people throughout Japan, including those living in remote mountainous areas and other isolated locations. The Postal Life Insurance is a very unique service, taking the government institution’s offer into consideration. It is a government-operated insurance system designed to lend stability to the nation’s economic activities and to promote the public welfare. It offers simple and accessible life insurance services to all of Japan’s people. And basing its operations on sound management principles enables it to offer coverage for the lowest possible premiums.

The Postal Life Insurance Service started its operation in October 1916. It requires no medical examination for enrollment and places no occupational restrictions on policyholders. Customers can subscribe to a wide range of insurance products by following simple procedures at any post office in the country.

Key features of the service are:

· The service’s goal is not to achieve “profitability”;· Medical prescription not necessary when apply;· No restriction of application by occupation;· Insurance pays immediately to customers;· Easy to use through post offices’ nationwide network;· Amount limited for application of Life Insurance or Pension; and,· Establishment of welfare facilities for customer.

Not many countries provide these types of insurance products and services.

Business Performance

As of the end of 1998, the number of Postal Life Insurance policies held totaled 82.72 million, for a total insured amount of 208.90 trillion yen; the number of annuity policies held totaled 6.55 million with the insured amount worth 2.04 trillion yen; and the allotment totaled 111.74. New policies taken out in 1998, totaled 6.65 million (up 9.7% over 1997) with a total principal of 18.50 trillion yen (down 2.9%).


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5.2.5 Postal Services Reform Proposals in Japan

Brief Outline

There has been a long history on controversial postal reforms in Japan. The postal reform issue emerged in January 1968 when the then Posts and Telecommunications Minister announced a review into “whether or not Posts and Telecommunications Ministry should be a government-owned public corporation”. The Ministry reviewed the possible reform by setting up a specialised committee. The committee finally came to a conclusion that the postal services should remain unchanged. It was considered that if the postal services were divided into three; postal, postal savings and postal life insurance, overall management would be undermined. While the issue of separation was raised periodically after this, it was not adopted by government.

1995 saw postal reform take a more concrete shape. The then Premier Mr. Ryutaro Hashimoto expressed that his cabinet intended to put a considerable effort to implement government reforms immediately after he succeeded in the post.

On November 21, 1996, an Administrative Reform Council chaired by the Premier started deliberating the re-organisation and consolidation of government ministries and agencies, a process considered necessary for dealing with complex administrative issues flexibly and accurately. Members of the council were chosen from wide variety of field.

Interim report

The Reform Council released an interim report in September 1997 in which it was recommended that postal services be reformed as follows:

· Postal Life Insurance Service be privatised immediately;· Postal Savings Service be prepared for privatisation; and,· Postal Service remains as a government institution.

Customers’ Voice And Trade Union Movement Action

Zentei (Japan Postal Workers’ Union) and Zen-Yusei (All Japan Postal Labour Union) expressed strong opposition to privatising the nation’s postal services immediately after the Reform Council’s interim report was released. Postal trade unions were opposed to the recommendations of the interim report on the basis that they would result in:

· Three types of business as one body will collapse and the service costs will rise;· Universal Services of mail at uniform rate cannot be maintained;· Cream-skimming operations by private companies will emerge, especially in major cities,

and postal services’ business performance will worsen;· Post offices in outlying areas where the services are provided under “non-commercial basis”,

will be forced to close and postal employees will be cut as well; and,


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· “Safe and secure” financial services to public cannot be maintained under the liberalisation of interest rates.

The unions insisted that the existing national postal system be maintained, with the three main operations - mail services, savings and life insurance - continuing to operated within the Japan Postal Service. The unions therefore put every possible efforts to overturn the interim report.

Taking Zen-Yusei’s case as an example. Zen-Yusei used innovative campaign techniques including an opinion poll that was carried out with a private consulting company. This opinion poll sought to determine public opinion on the future of the postal service. The result of the poll clearly indicated that 83% of those responding favoured post offices continuing to provide all three services. Moreover, 65% of those responding favoured post offices remaining as government facility. The union also used television commercials, newspaper advertising and direct mail to postal supporters as part of its campaign. The campaign also include trade union member rallies as a more traditional technique. Furthermore, both unions were successful in gaining the active support not only of the opposition parties but also of some members of the ruling government party!

Final Report

Following its Interim Report, the investigation of the Administrative Reform Council continued and covered a range of issues. These included strengthening the Cabinet’s functions, re-organizing the primary ministries and agencies of the bureaucracy, and outsourcing and enhancing the efficiency of administrative functions. The Final Report of the Council was released on 3 December 1997.

The Final Report discussed various proposals for the re-organisation of postal services including possible privatisation. It’s major recommendations on postal reform were:

· Retention of Existing Services. The business areas of the postal services (namely, the Postal Savings, and Postal Life Insurance services) should first be placed under the jurisdiction of a newly formed Postal Services Agency (its provisional name);

· Corporatisation. Five years later, this agency is to be transformed into a new government-run public corporation. Actual privatisation is not to be considered. The public-corporation format is aimed to allow for more independence in the operations of the postal service; and,

· Savings Service. Postal savings funds (i.e., account deposits) should no longer be re-deposited with the Ministry of Finance’s Trust Bureau. They should be invested autonomously by the Postal Savings Services. The Postal Savings Service will continue to provide financial services on an impartial basis to all its customers throughout the country, including those residing in depopulated areas, whose communities are aging at a particularly repaid rate. Furthermore, when all postal savings funds come under the autonomous management of the service, they will continue to be invested in safe, secure


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long-term instruments. This will provide greater independence and flexibility in the management of savings.

A Basic Law on Government Agency Reform, which incorporated the Reform Council’s recommendations was presented to the Japanese Parliament (or National Diet) as a Bill on 17 February 1998. This was subsequently passed on 9 June 1998.

5.2.6 Current Status of Reform - Competitive and Political Edge

Competitive Edge

The trade union movement in Japan acknowledge that Postal Service has been facing a very serious situation in recent years. This includes two consecutive years of financial losses. In addition to this, it has no other choice but to organise deficit budget for 2000.

The Postal service is facing increasing competition. This includes not only small packages or parcels but also book or catalogue contained-flat items are now also under competitive pressures. Domestic private courier companies have been handling product of the same kind, targeting such major users as department stores and catalogue houses. They present lower prices than Post to customers and the volume handled by these competitors has been rapidly increasing. The Japanese Postal Service is also exposed to competition from overseas.

As mentioned in the previous section, the final report of the Reform Council has urged that the MPT investigate the possible entry of private operators to the postal service. MPT is thus now reviewing the conditions of the private entry. Under these circumstances, the private sector’s entry to postal service is anticipated to become a reality in Japan in a couple of years.

A number of other developments are affecting postal services in Japan. Keidanren (Japanese Foundation of Employers) organised an “International Symposium on Regulatory Reform” on 6 December 1999 to encourage the establishment of a market-driven socio-economy, based on self-accountability for the 21st century. It urged the Japanese Government to resolutely carry out sweeping regulatory reform. As a specific request of regulatory reform, it strongly requests the early liberalisation of national monopoly mail service to allow entry of private firms.

Postal savings amount to some 240 trillion yen, while there is about 100 trillion yen in outstanding premiums paid for postal life insurance, making the postal service the nation’s biggest financial institution.

National Association of Bankers also organised a Forum on February 23 in Tokyo on Public Financial Services. The Forum argued that Postal Services are sustained by government support, insisting that they be privatised as early as possible so that the private sector can provide services. It also insisted that as convenience stores with nationwide network have advanced their project to establish settlement bank in conjunction with private financial institutions or e-commerce business in conjunction with private courier companies and banks.


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They aim to become possible information and circulation-terminals to local residents instead of post offices.

Political edge

In October 1999, lawmakers with an opinion that Postal Services be privatised formed a non-partisan-study group. They have already held group meetings several times. Some lawmakers publicised a booklet last December describing the importance of postal services’ privatisation.

In 1999, the Japanese and the United States government’s launched new deregulation talks that cover financial, telecommunications and other markets. The United States government has unilaterally urged Japan to review quasi-public insurance schemes covered by “Kampo”, Postal Life Insurance Service, as part of these Japan-U.S. Deregulation Talks.

5.2.6 Conclusion

As we review current business performance and the status surrounding postal services, it is now at the corner of an historic change.

It is, in a sense, true that postal services are superpowers of communications, transportation and finance. The push for reform arises because politicians, private sectors concerned and foreign countries have conducted pressure in support of its adoption. However, when we look at the future of postal services, we should not forget the public and the vital community service role of the postal service. The public have a clear interest in how the postal service should be structured, what services are provided and to enhance the present system. These issues must be paramount in policy makers agenda.

Japanese Postal Services remain a key part of government services. They have been making the utmost efforts to help maintain universal service and to meet simultaneously with customers’ need and satisfaction. It can be said that Japanese Postal Services are now the most customer-oriented service provider of any other government service in Japan.

On 6 January 2001, the Japanese Postal Service is to be split into two new arms - “Planning” and “Implementation” bodies. It will be re-born as the Postal Agency (its provisional name) in accordance with the Final report of the Reform Council. This will be re-organised into the Postal Services Corporation (its provisional name) in 2003. While this a historic change, the fundamental focus of postal services will remain consistent. They will continue to play an important role in providing basic method of communications and financial transactions. However, improvements to postal services’ reliability will increase customer and public support.

The Japanese postal trade unions have sought talks with the MPT to discuss the framework of the postal corporation. These talks will hopefully provide the forum for discussing the creation of not only customers-orientated services but also a workers-oriented organisation which provides customers with universal services.


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6. CONCLUSION AND RECOMMENDATIONS - A POSITIVE FUTURE FOR POSTAL SERVICES, THEIR EMPLOYEES AND CUSTOMERS

6.1 Postal Services - Unprecedented Change

UNI recognise that postal services throughout the world are currently subject to some of the most far-reaching challenges in their history. The impact of product substitution through increasing access and affordability of new technologies, the increased competition in the industry assisted by globalisation and the un-willingness of government’s to sustain loss-making government enterprises are all key features of these challenges. These factors are challenging the traditional structure of postal services, with demands for changes to the regulatory regime, internal structure, commercial orientation, employment arrangements and even ownership of our postal services.

6.2 Postal Services - Vital Community Services

However postal services remain a vital and important communication link for the vast bulk of the world’s population. Mail and additional services (such as financial services) are important community expectations. Industry projections show that while traditional post’s portion of the world’s communications massaging market is likely to decline, the actual amount of postal communications is predicted to continue to expand. Postal services will continue to be expected to provide accessible and affordable traditional postal services into the future.

6.3 The Asia Pacific Region and the Pressure for Change

Postal services in the Asia Pacific region are particularly affected by these challenges and expectations. As many of the countries in the region are developing countries, the need for affordable and access basic postal (and financial) communications services is all the more vital. The vast majority of the populations of these countries have no practical alternative to the postal service. Nevertheless, the postal services in these countries keenly feel the challenges facing the world postal industry. Many of the postal services are not profitable and are required to be sustained by budget funding. As developing countries, the national governments throughout the region are keen to modernise their public services to enhance their international competitiveness. In addition, the business sector of the postal market in these regions is increasingly being able to take advantage of competing products and services thereby creating real pressure on the postal services to change.


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6.4 The World Bank - An Agent of Change

In recent years, the world economy has witnessed unprecedented pressure to reduce trade barriers and open domestic markets to free trade. This drive towards market liberalisation was originally sustained by neo-liberal economics with an absolute faith in the benefit of the free market and alleged “economic distortion’s” effected by government’s providing services in the economy. Recent years have seen the creation of the World Trade Organisation and continuing rounds of international trade negotiations aimed at reducing national trade barriers. It would be true to say that most if not all government’s in the world subscribe to these negotiations.

The various international trade and finance organisations have assisted in pushing this globalisation agenda. The WTO, the International Monetary Fund and the World Bank - along with other regional inter-governmental bodies (such as the European Union, the North American Free Trade Agreement and the Asia-Pacific Economic Forum) - have all advocated reducing trade barriers and the role of government interference in the economy.

The World Bank - in conjunction with the Universal Postal Union - have in recent years embarked on a program of encouraging postal sector reform. Taking as its starting point the future challenges and importance of postal services, the World Bank has endorsed a comprehensive program of review. While the stated aim of the program is the need to make postal services profitable in order that to secure their future as vital communications services providers, the Bank agenda encompasses commercialisation, corporatisation, technological change, workplace transformation, regulatory reform leading to market liberalisation and private sector participation in postal services. These options explicitly include full deregulation of the postal market and full privatisation of the provider.

While this reform program is put forward as a series of options, it is clear that full deregulation and privatisation are favoured models for this program. This is consistent with the overall neo-liberal agenda of the World Bank.

This postal reform program of the World Bank is particularly directed at developing countries. This arises from the role of the Bank as a primary financial lender to such countries to assist economic development and with the aim of alleviating poverty. With regard to the postal reform program, the World Bank provides advice to countries on the options for reform but is keen to provide financial assistance to assist this process.

Critics of the World Bank have pointed to the fact that its financial lending function also involves the Bank interfering in the domestic economic, social and political decisions of developing countries. This usually involves an encouragement of privatisation programs and a lack of concern for negative social, environmental and political effects.

Consequently, developing countries in the Asia Pacific region have in recent years been subjected to significant pressure from the World Bank to embark on its preferred model of postal sector reform. Postal services and their employees in these countries have been under pressure to commit their organisations and themselves to a program of commercialisation,


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corporatisation, regulatory reform and increasingly privatisations and full deregulation. The case study of Sri Lanka has been highlighted.

6.5 The Real Challenge - Creating a Profitable Public Sector Postal Service

It is the view of this study, that the World Bank has adopted a heavy-handed and un-balanced approach to postal sector reform. Its encouragement of full deregulation and privatisation reveals its neo-liberal economic ideology and exposes its lack of concern for issues associated with community service, affordability, accessibility and the importance of public infrastructure.

The UNI and its affiliates need no lectures on the challenges and opportunities facing the future of postal services. Over the last twenty years, postal services throughout the world have undergone massive organisational, regulatory and structural change to more effectively meet the needs of its customers. Many of the most successful postal services in the world are also the mostly highly unionised. Postal workers and their unions have taken up these challenges - with no need for the encouragement of the World Bank - and created a positive future for their services.

While examples can be cited across the world, in the Asia Pacific region the Japanese and Australian postal administrations, their employees and unions have embarked on reform programs different to that encouraged by the World Bank. They are balanced reform programs which respond to the real challenge facing postal services.

An important point has been that, while these domestic postal reform programs have been subject to government policies or agendas that have included deregulation and privatisation, the program adopted has been negotiated in the context of the domestic political and social situation. This process has ensured that social and community expectations have been more adequately balanced against neo-liberal proposals. It has been argued that the World Bank has only been able to successfully push its privatisation agenda where it has been able to exploit its financial power over the domestic political and social concerns in developing countries. Japan and Australia - along with other developed countries have not been subject to such direct policy blackmail.

The real challenge for the region is to maintain its public postal services as the deliverer of affordable, accessible and reliable communications services to the vast majority of the population while at the same time gaining sufficient market share and profitability to ensure a healthy future for the postal service, its employees and the community. It is this balance that has been lost by the World Bank.


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6.6 Principles for Change

As the representative body of some 1.1 million postal workers in 61 trade unions in 120 countries throughout the Asia Pacific region, UNI has a mandate to express its concern regarding the role of the World Bank and the future of postal services in the region.

Based on this study of the impact of the World Bank and reform developments in the postal sector, UNI would endorse a number of principles that need to be incorporated in any proposed postal reform program or policy response to the changing postal market:

· The World Bank’s Reform Program. While many elements of this program are supported as important to meeting the real challenges facing postal services, key elements of the program are rejected as un-balanced, un-necessary and as being solely reflective of neo-liberal ideological commitments. In this regard, its commitment to privatisation, extensive private sector participation in the public postal service and major reductions in the reserved service are rejected. Other aspects of the program which are supported include a commitment to universal service, commercialisation and customer focus, new technology and products, financial profitability goals and appropriate managerial independence from government (such as through corporatisation);

· The Importance of Postal Service. Access to affordable and reliable basic postal services is both a fundamental right and vital to the social and economic development of all communities. The high level of utilisation of postal services throughout the world underscores their position as the most commonly available communications mechanism. While postal communications are predicted to decline as a proportion of the total messaging market, actual physical mail transactions are nevertheless predicted to increase in the future. Any postal reform proposal must encompass ensuring the continuance (or enhancement) of affordable access to these basic postal communications services;

· Consultation and Negotiation. Human resources should be re-developed such that trade unions and their members are fully consulted on postal reform initiatives, as well as any other major change project. An organisations’ workforce is its most important and non-transferable asset. Collective agreements should be expanded in scope to encompass this participatory management approach. Participatory human resources are the key to real service improvements and organisational change;

· Universal Service, Commercialisation and Profitability. Unions recognise the importance of commercialisation and profitability to the future viability of national postal administrations. However this should complement its commitment to universal service and other relevant community service obligations (such as the accessibility and affordability of basic postal services) rather than conflict with them. The reality of product substitution and competition, as well as the need for investment, requires a commitment to best practice in customer service by postal administrations and their workforce;

· Reserved Service. Postal administrations should retain sufficient reserved service as a monopoly to sustain or finance its universal service and CSO’s as a minimum;


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· Postal Infrastructure, New Technology and Products. Postal services usually provide the largest and most comprehensive distribution and retail networks. This nation-wide post office network should be retained and the public investment in this infrastructure be better utilised to ensure that the fullest range of appropriate customer needs are met. Postal retail outlets in this way would be developed into community or customer oriented, one-stop-shops. New technology and products should be embraced by postal administrations as part of its commitment to customer focus and commercialisation. These should encompass both network renewal (such as state of the art information technology and other systems) and new services (such as hybrid mail, the Internet and e-commerce). Postal financial services should be developed and expanded as a key profit centre and customer need. This could encompass the creation or support for postal savings and insurance operations with international links. The introduction of these new technologies and services should be subject to workforce consultation and the provision of any appropriate training on a timely basis. Postal administrations should have sufficient commercial freedom to pursue these new technologies, products and services (such as e-commerce);

· Productivity and Incentives. Employment conditions should reflect collective agreements, freely negotiated by trade unions and postal management. However in recognition of the substantial contribution that employees can make to the successful outcome of any postal reform program, postal administrations should commit themselves to creating best practice employment environments for their workforces. Postal reform should enhance job security and provide additional wage incentives reflective of productivity gains and the improvements in service and financial performance. Best practice organisations should establish best practice employment conditions;

· Privatisation, Corporatisation and Public Ownership. Consistent with the other principles stated here, privatisation is rejected as a model for postal sector reform. Public ownership is endorsed as an important recognition of the social investment in the existing postal service infrastructure and as a guarantor of universal service and community service obligation provision. Public ownership, with its democratic accountabilities, provides unique avenues for social controls over this vital area of service to the community. However with respect to the model for postal services under public ownership, it is recognised that corporatisation can provide appropriate financial accountabilities and level of managerial independence to sustain the profitability and customer focus of the postal service;

· National Sovereignty. Any postal reform should be developed on the basis of local negotiated models, involving the relevant trade union, its members and the community. They should not result from the adoption of an external ideology, driven by the financial power of foreign lending agencies, such as the World Bank, or other bodies. Postal services are vital to the social and economic development of communities and should therefore be developed in line with community expectations;

· International Cooperation and Dialogue. The various international bodies associated with the postal industry (including the UPU and the World Bank) should establish a


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cooperative relationship with the UNI. Regional cooperation should complement this relationship (such as with the UPU’s Asia Pacific regional body);

· Globalisation and International Trade Union Action. UNI and its affiliates should act in concert to ensure that the interests of their trade union members are voiced in the various international and regional forum associated with postal sector reform. It is recognised that UNI (and its CI fore-runner) has sought to develop these relationships in recent years. Investigation should be undertaken immediately to identify areas of international trade union cooperation that may assist the trade union organising and policy involvement. Mutual cooperaiton between affiliates should be encouraged and facilitated by UNI, utilising all available mediums (such as the Internet). Consideration should be given to international action within the domestic markets of the emerging major international postal operators to assist trade unions and workers in other countries.

A central element of these recommendations is the need for a cooperative industrial relations environment, combined with a gradual and controlled approach to change. This environment must encompass the need to maintain and enhance working conditions and unionisation. UNI strongly believes that these are vital to a balanced approach to any postal reform program, which should also encompass the need to achieve commercial viability and the important social objectives of the world’s postal services.

It is pointed out that these principles are consistent with the following relevant UNI policy statements:

· The major policy statement on universal postal service adopted at the first meeting of the UNI World Executive Board at its July 2000 meeting in Edinburgh; and,

· The broad regional postal industrial policy adopted by the UNI-APRO at its February 2000 meeting in Tokyo.130

130 UNI, “The Universal Postal Service: A Basic Human Right Threatened by Deregulation and Liberalisation”, 1st Meeting of the UNI World Executive Board, 19-20 July 2000, Edinburgh, UK; and, CI-APRO, “Preparation for the Regional Postal Industrial Policy”, CI Post Asia Pacific Committee Meeting, February 5-6, 1999, Tokyo, Japan, p. 21.


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TABLES

TABLE 1: STAMP PRICES FOR DOMESTIC LETTER (FIRST CLASS)

Country Cost (euros)

Italy 0.62Germany 0.56Denmark 0.54Austria 0.51Sweden 0.49*Finland 0.48*France 0.46UK 0.46Luxembourg 0.45Belgium 0.42Portugal 0.42Ireland 0.38Netherlands 0.36Greece 0.36Spain 0.21

*Excluding VAT

Source: Watts, C., “The yellow on the browns”, Forbes Global, 21 August 2000


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TABLE 2:PERFORMANCE OF SELECTED POSTAL OPERATORS

Argentina(1995)

Australia(1995)

Canada(1995)

Denmark(1995)

France(1995)

1995 GDP (US $ Billions) 284 381 565 137 1,289

1994 Population (millions) 34.2 18 29 5.2 58

Area km2 (000s) 377 7,713 9,976 43 552

Owner Government Government Government Government Government

Date of last major reform 1993 1989 1981 1995 1991

1995 stamp cost (US$) 75 cents 32 cents 32 cents 59 cents 59 cents

Employees 20,037 31,621 63,478 25,027 291,254

Items handles (millions) TotalDomesticInternational - outInternational - inParcels

444N/AN/AN/A0.5

3,8273,530146151N/A

11,800N/AN/AN/AN/A

2,6622,633N/AN/A29

23,62422,577

321411315

Post Boxes 10,431 13,000 87,368* 11,000 136,500

Revenue (US $ billions) 0.45 2.15 3.6 1.5 16

Profit (US $ millions) (41.4) 176 20 101 (255)

Profit OfficesMost francished?Number of countersNumber of retail services **

Yes6,367Wide

Yes4,313Wide

No18,500Basic

No1,291Wide

No17,000Wide

Pays income tax Yes Yes Yes Yes Yes

Joint ventures No Yes No Yes Yes

Subsidiaries No Yes No Yes YesFinancial Target Break-even Profit Rate of return

comparable toprivate sector

Profit AccountingEquilibrium

Scope of monopoly Liberalizedmarket

4x standardrate, up to

250g

3x standardrate

(30-50g)

Domesticletter post

Up to 1 kg

Monopoly obligations Yes Yes Yes Yes Yes

Monopoly price cap Yes YesRPI-X

Less thanCPI

No Yes


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Germany

(1995)

Malaysia

(1995)

Netherlands

1995)

New Zealand(1995)

Sweden

(1995)

UK

(1995)

US

(1995)1,903 87 316 61 221 1,043 7,254

81 20.7 15.4 3.5 8.8 58 261

356.8 330 40.8 266 449.9 244.1 9,373

Government Government Government& private

Government Government Government Government

1995 1996 1994/95 1987 1994 1984 1971

61 cents 12 cents 43 cents 27 cents 52 cents 41 cents 32 cents

341,910 11,914 36,000 9,284 46,048 191,300 874,982

20,67419,0731,005N/A596

1,076914106551

6,100N/AN/AN/A40

93986840

N/A31

4,3734,210

932644

17,48816,751

717N/A20

184,060180,700

800719

1,841

140,000 53,415 18,500 146,000 38,000 120,000 283,000

18.7 0.2 3.4 0.42 3.1 9.2 54.3

237 11.5 258 69 107 490 1,770

No17,000Basic

No1,496Wide

Yes2,200Wide

Yes4,553Wide

Yes1,875Wide

Yes19,603Wide

No39,149Basic

No*** No Yes Yes Yes Yes Yes

Yes No Yes Yes Yes No No

Yes AssociatedCompany

Yes Yes Yes Yes No

Profit Profit Profit Profit Profit Profit Break-even

up to 250 kg Mail(All exclude

courier)

up to 500g up to US$0.52, 200g

No monopolysince 1993

up to US$1.50

3x 1st classletter rate

Yes Yes Yes Yes Yes Yes Yes

Yes Yes Yes YesCPI-X

Yes Yes No

* Excludes rural and community collection points** Wide: wide range of services offered

Basic: government and post transaction only*** Paying income tax beginning 1 January 1996

Source: Dowson, J.M., et al, Postal Performance: The Transformation of a Global Industry, Arlington, Coopers and Lybrand, 1997.


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TABLE 3: OECD COUNTRIES: DOMESTIC STANDARD LETTER PRICE AND MONOPOLY PROTECTION

Country Australia Austria Belgium Canada

Local Currency AUD ATS BEF CAD

StandardLocal Currency

0.45 7.00 17.00 0.46

Standard LetterPrice (A$ Est)

(see note 4)$0.450 $0.686 $0.603 $0.520

StandardLetter Price

Weight Limit250g 20g N/A 30g

Universal ServiceObligation

Yes Yes Yes Yes

Price ProtectionLevel

(Local Currency)45c

(Proposed)Not Specified Not Specified Not Specified

Weight Protection(kg)

50g Not Specified Not Specified 0.500

Access Regime Yes N/A N/A Yes

Population Density(People per sq km)

2.4 96.6 334.1 3.3

Other Forms/Scope of Protection

· Written, not printed, personal communications.

· No weight or price levels mentioned

· Monopoly on the collection, conveyance and delivery throughout Belgium of the following items:

· closed or open letters, postcards, advertisements, circulars, leaflets, current prices and notices of all kinds,

when they bear the address of the addresses.

· Monopoly applies to Letters up to 500 grams.

· Excluded from the reserved service are letters of an urgent nature that are carried for at least 3 times the regular price of postage for a similar addressed letter (within Canada) weighing 50g (e.g. C$0.73 for a letter up to 50g; times 3 = C$2.19).


95

Country Czech Republic Denmark Finland France

Local Currency Koma DKK DIM FRF


5.40 4.00 3.50 3.00


(see note 4)$0.509 $0.608 $0.762 $0.602


Weight Limit20g N/A 50g N/A


Yes Yes Not specified Yes


(Local Currency)

Not Specified 24.00Nil Not Specified


1.000 0.250 Nil 1.000

Access Regime N/A N/A N/A N/A


130.6 123.016.7 108.1


· Monopoly on sealed letters up to 1kg; within certain size limits

· Domestic and inward international letter post items less than 250g.

· Domestic items under 250g can be carried by a competitor providing the charge is at least 6 times the 20g price (i.e. 6 x 4.00 - 24.00 Danish Krones).

· No monopoly exists; a licence is needed t deliver “letter mail”.

· Existence of a Universal Service Obligation isn’t specified, however, Finland still offers a uniform price.

· Monopoly covers transport and delivery of domestic and international letters and postal items (including direct mail) up to 1kg.

· All other postal/courier activities are open to competition.


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Country Germany Greece Iceland Ireland

Local Currency DEM GRD Krona IEP


1.10 80.00 35.00 0.30


(see note 4)$0.732 $0.431 $0.524 $0.547


Weight Limit20g N/A N/A 25g


Yes Yes N/A Yes


(Local Currency)5.5 160.00 N/A Not Specified


0.200 Not Specified N/A Not Specified

Access Regime N/A N/A N/A N/A


230.081.1 2.6 51.2


· Monopoly applies to letter mail items weighing less than 200g and where the price charged is less than 5 times the lowest ordinary letter price that applied on 31 Dec 1997 (i.e. 1.1DM; or x 5 = 5.5DM0.

· Monopoly also covers Direct Mail items up to 50 grams.

· Current proposal is to abolish the monopoly by 1 January 2003.

· Monopoly on the conveyance of unsealed and sealed letters and postcards.

· Monopoly does not extend to items of correspondence of a current or personal nature which are charged at least double the rate, i.e. 2 times 80.0 = 160.0 drachmas).

· Monopoly covers the conveyance of “postal packets” within, to and from Ireland. This extends to the services of receiving, collecting, dispatching and delivering.

· “Postal packets” does not include the EMS (Courier) service, a newspaper or a parcel, unless the newspaper or parcel is accompanied by personal correspondence.


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Country Italy Japan Korea Luxembourg

Local Currency ITL JPY Won Franc


800.00 80.00 340.00 16.00


(see note 4)$0.633 $0.675 $0.683 $0.514


Weight Limit20g 25g 50g N/A


Yes Yes Yes Yes


(Local Currency)Not Specified Not Specified Not Specified Not Specified


2.000 Not Specified Not SpecifiedNot Specified

Access Regime N/A Yes N/A N/A


188.5 333.2 467.4 164.4


· Monopoly covers ordinary letters and registered and insured items weighing up to 2kg.

· Transportation of letters is reserved to Japan Post (MPT)

· No other person may set up a business for the conveyance of correspondence for other persons, or use their organisation or network for the conveyance of correspondence for other people.

· Exceptions to the monopoly include commercial documents, provided they are delivered within 12 hours of being lodged, or they are exchanged between/within the one company/business.

· Monopoly over the conveyance and delivery of letters and postcards


98

Country Mexico Netherlands New Zealand Norway

Local Currency Peso NLG NZD NOK


1.80 0.80 $0.40 3.80


(see note 4)$0.379 $0.511 $0.356 $0.508


Weight LimitN/A N/A 1 kg N/A


Yes Yes Yes Yes


(Local Currency)Not Specified Not Specified Nil Not Specified


1.000 0.100 Nil 0.350

Access Regime N/A N/A Yes N/A


50.1 464.3 13.3 11.9


· Monopoly on letters weighing up to 1kg; within certain size limits.

· Monopoly over letters weighing up to 100g and carried for less than 3 times the first class rate. (3 x 0.80 = 2.40 guilders).

· Direct mail is outside the monopoly.

· The Regulator plans to remove express mail items, including pickup and delivery services, from the scope of the monopoly.

· No Monopoly.· Access on

terms and conditions no less favourable than their customers.

· Monopoly covers closed addressed domestic letters weighing up to 350 grams or where the charge is less than 5 times the basic 20 gram rate (i.e. 5 x 3.80 = 19.00 Krones).

· Norway Post claims only a minority of their revenue comes from the monopoly protected business; rather the bulk is derived from the corporate market.


99

Country Poland Portugal Spain Sweden

Local Currency Zloty PTE ESP SEK


0.70 80.00 35.00 5.00


(see note 4)$0.456 $0.830 $0.357 $0.684


Weight LimitN/A N/A 20g N/A


Yes Yes Yes Yes


(Local Currency)Not Specified Not Specified Not Specified Nil


2.000 Not Specified Not Specified Nil

Access Regime N/A N/A N/A Yes


123.4 107.7 77.5 19.8

Other Forms/Scope of

Protection

· Monopoly covers the acceptance, conveyance and delivery of letters and parcels (domestic and international) up to 2kg.

· Unaddressed, printed papers and questionnaires are exempted.

· Parcels (up to 2kg) may be excluded from the monopoly provided they do not bear the name “postal” and do not contain the same goods as postal ones.

· Monopoly covers the acceptance, conveyance and delivery of all sealed correspondence, postcards and other missives, even unsealed ones provided that their contents are of a current personal nature.

· Precise limits, in terms of price and weight will be defined following adoption of a policy at the EU level (see note A).

· Monopoly covers the reception, transport and delivery of letters, postcards, packets, printed papers, telegrams and telex.

· It appears that the monopoly does not cover intracity services; competition and no universal price/service exists on intracity mail.

· No monopoly; abolished in 1993.

· Access on conditions no less favourable than customers.


100

Country Switzerland Turkey United Kingdom United States Of America

Local Currency CHF Lira GBP USD


0.90 200.000 0.27 0.33


(see note 4)$0.613 $0.912 $0.535 $0.435


Weight Limit250g N/A 60g N/A


Yes Not scoped Yes Yes


(Local Currency)Not Specified Not Specified 1.00 Not Specified


0.500 Not Specified Not Specified Not Specified

Access Regime N/A N/A N/A Yes


177.5 82.9 258.4 29.5


· Monopoly covers letters up to 500 grams and parcels up to 2kg (was parcels up to 5Kg).

· Monopoly covers sealed or unsealed letters and postcards.

· Limits of competition are not defined and the Postal Admin of Turkey does not monitor compliance with the monopoly.

· The scope of the uniform service is not defined.

· Monopoly extends to letters carried for less than 1 pound (recent proposal to reduce this to 50p was not successful).

· There are exceptions when letters are conveyed in a manner specified by s67 of the British Telecommunications Act, 1981.

· Plans in a government paper suggest future reductions in the monopoly may include liberalisation by class (e.g. remove direct mail from the scope).

· Monopoly provides the exclusive right to carry letters (covered under the “Private Express Statutes”). There are exceptions and some coverage has been suspended (subject to some conditions) for extremely urgent letters and outbound international letters.


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Sources:1. Prices from country published information most recently available.2. Details re: Universal Service and level status of monopoly from:

· Specific country sources (postal and government), and· Universal Postal Union (UPU) published data.

3. Population density (people per sq km) from ABC web site.4. Australian dollar Purchasing Power Parity (PPP) are rates issued by OECD for year 2000.

Other items/notes:

A. European Union Postal Directive (97/67/EC) came into force in February 1999. This directive required that any postal monopoly of EU members be limited to items weighing less than 350 grams and carried for less than 5 times the published 1st class tariff. Further, a monopoly should only exist to the extent necessary to maintain a universal service (for which there is a stringent test).

B. N/A = Information not available or unable to be obtained.

C. In those countries where an access regime applies, published rates apply to customers and competitors alike for mail lodged into specific parts of the network, e.g. mail centres.

Source: Australia Post


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TABLE 4: COMPARISONS OF SELECTED MULTINATIONAL POSTAL COMPANIES (PUBLIC AND PRIVATE SECTOR)

Operator Number ofEmployees

Number ofCountries ofOperation

Total AnnualRevenue

TotalConsignments

CarriedFedEx 150,823 211 $US13.3bn 1,109million

DHL 59,446 227 † 95million*UPS 331,600 200+ $US22.5bn 3,040million

Canada Post 63,111 $US3.4bn 9,200million‚Deutsche Post AG 266,823 227 $US15.6bn 21,000million‚

565millionƒNew Zealand Post 9,300 17 $US0.4bn 1,431million‚

Royal Mail 200,000 $US11.06bn 19,500million‚TPG Group 100,000 200 $US7.6bn

Dutch Post Operations

50,000 193 $US3.6bn 82.5million tonnes

TNT 50,000 200 $US3.1bn 107million*1994† Figures not available Express operating revenues‚ Total letter volumesƒ Freight items carried

Source: Communications International, Multinationals in Postal Services, April 1999.


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TABLE 5: PUBLIC AND PRIVATE POSTMEN

Name/Country Employees(thou)

1999 revenues($bil)

Market cap($bil)

1999 netprofit ($bil)

Deutsche Post/Germany 301 23.8 30.0‚ 1.19

DHL/Bermuda 67 NA NA NA

Federal Express/US 200 16.8 11.4 0.63

Japan Post/Japan 141ƒ NA NA NA

La Poste/France 306 16.3 NA 0.30

Royal Mail/UK 169ƒ 12.2 NA -0.43

TNT Post Group/Netherlands 117 9.1 12.0 0.45

UPS/US 344 27.1 67.4 0.88

US Postal Service/US 798ƒ 62.7 62.7 0.36

NA Not applicable As of July 31‚ Projected IPO valuationƒ Estimated



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TABLE 6: DEUTSCHE POST DEALS

Company/country Specialization Date Stake (%) Cost ($mil)DHL International/Bermuda Express packages Mar-98 25 700*

Global Mail/US Press and direct mail Sep-98 100 43*

MIT/Italy Freight Jan-99 90 85*

Securicor Group/UK Express packages Feb-99 50 330*

Danzas/Switzerland Logistics Mar-99 98 1,000

Nedlloyd ETD/Netherlands Logistics and parcels Mar-99 100 580

ASG/Sweden Logistics and parcels Aug-99 60 400*

Air Express International/US Freight Nov-99 100 1,140

*Estimated



105

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