Government may allow SingPost to raise postage rates in order to remain viable
Senior Minister of State for Communications and Information Tan Kiat How said IMDA will work further with SingPost on a "fundamental review" of the future of Singapore’s postal service, given the rise of logistics and e-commerce players.
The Singapore Post sign at a post office in Singapore. (File photo: Reuters/Thomas White)
SINGAPORE: With more people opting to communicate online instead of through letters, the government will consider allowing Singapore Post (SingPost) to “introduce postage rate adjustments” in the future, said Senior Minister of State for Communications and Information Tan Kiat How on Wednesday (Jul 5).
These adjustments will better reflect the cost of letter mail business, and should be “of a sufficient degree” to allow SingPost to remain viable without requiring direct government funding, Mr Tan told parliament.
Mr Tan was responding to a parliamentary question tabled by Mr Seah Kian Peng (People’s Action Party-Marine Parade), who had asked what measures are being taken to ensure SingPost’s domestic post and parcel business remains viable.
Mr Seah also sought more information on the measures being taken for postal services to continue for Singaporeans.
In his response, Mr Tan noted that domestic postal rates have largely remained unchanged since 2014, apart from a “small increase” from Jan 1 this year.
SingPost has raised postage, package delivery and doorstep parcel delivery rates in tandem with the increase in Goods and Services Tax (GST) from 7 per cent to 8 per cent, as well as inflationary cost increases across manpower, fuel, and electricity.
IMDA, SINGPOST TO WORK ON "FUNDAMENTAL REVIEW"
SingPost is both a public postal licencee with universal service obligations, as well as a private-listed company with obligations to its shareholders to maintain a viable business model, Mr Tan noted.
He told the House that the Infocomm Media Development Authority (IMDA), as the country’s postal regulator, will work with SingPost to review its costs and operations.
This includes “optimising and automating post office services for greater cost-effectiveness”, he said.
Domestic letter volumes have fallen from around 490 million letters in the financial year 2015 to 260 million in the financial year 2022.
This trend is expected to persist, with most government agencies also communicating with citizens through online channels. Businesses account for more than 80 per cent of mail users, with the average consumer sending less than one letter per month, Mr Tan noted.
“With this decline, it will be challenging for SingPost to continue running a viable business with its current operating model and at the current postage rates,” he said.
Because of this, a balance must be struck to allow SingPost to fulfil its responsibilities in a sustainable manner and ensure Singaporeans continue having postal services, Mr Tan added.
“IMDA will also review the current postal service obligations to ensure that they remain relevant in today's highly digitalised context, especially given the many alternative electronic communication channels available to consumers and businesses," Mr Tan said.
“At the same time, IMDA will consider allowing SingPost to introduce postage rate adjustments in (the) future to better reflect the cost of letter mail business going forward."
He added that the government will work further with SingPost on a "fundamental review" of the future of Singapore’s postal service, in light of changes to the delivery ecosystem such as the rise of logistics and e-commerce players.
Singapore Post (SingPost) may be allowed to adjust postage rates in future to better reflect the changing costs of the letter mail business. Senior Minister of State for Communications and Information Tan Kiat How said this in Parliament on Wednesday (Jul 5) in reply to an MP’s question. He said domestic postal rates have largely stayed the same since 2014 and adjustments will have to be enough to allow SingPost’s business model to remain viable without requiring direct Government funding. This comes as the speed and scale of digitalisation since the COVID-19 pandemic have led to a sharp decline in domestic letter volumes, dropping by more than half from FY2015 to 260 million letters in FY2022. It is a trend that is expected to persist. Businesses now make up over 80 per cent of mail users, while the average consumer sends less than one letter per month. It will thus be challenging for SingPost to continue running a viable business with its current operating model, said Mr Tan. And it has to do so because it is both a public postal licensee with universal service obligations as well as a private listed company with obligations to its shareholders. Mr Tan said the Infocomm Media Development Authority (IMDA), as the postal regulator, will work closely with SingPost on a fundamental review of the future of the postal service. They will review costs and operations, including automating most services. IMDA will also review the current postal service obligations to ensure they remain relevant in the digital era.
"MINDFUL" OF JOBS BEING AFFECTED
Mr Seah then asked how the government will ensure that SingPost’s service quality does not fall, what the postal rate adjustments would look like, and how the government will preserve the jobs of Singaporeans who work for SingPost.
Mr Tan said that the government is “mindful” of the last point, and that regular conversations also take place between SingPost and the unions representing postal employees.
IMDA will continue ensuring SingPost keeps up and complies with its quality of service, given that a quality of service framework is in place. As SingPost is a listed company, it will have to undertake several reviews along with IMDA “as part of regular discussions”, Mr Tan added.
“I will just assure that … the context of the costs, overheads; context of the postal rate adjustments; context of the declining volume and the operating environment, will be considered as part of these discussions,” he said.
In relation to the service quality framework, Mr Leon Perera (Workers’ Party-Aljunied) asked if there are periodic customer satisfaction surveys conducted for SingPost, and if the government will discuss the findings and hold SingPost accountable to them.
Mr Tan responded that the framework looks at the service level agreement between the licensee and its customers, including how it delivers basic postal mail.
“These are issues that have been around for many, many years and is something that is continually refined to make sure that it meets the needs of the consumers in Singapore, and so meets the needs of the licensees,” he added.
“These are things that we benchmark across the rest of the world.”
Mr Louis Chua (WP-Sengkang) asked what happens if SingPost is unable or unwilling to carry out its obligations due to constraints.
Mr Tan said that IMDA imposes certain conditions – including quality of service – as part of SingPost’s licence.
Mr Chua also noted SingPost’s recent announcement that it is reviewing the commercial sustainability of the domestic postal business. He asked if discussions between IMDA and SingPost involve direct subsidising or funding of SingPost in relation to this.
In response, Mr Tan reiterated that since SingPost is publicly listed, it has its own set of governance rules around its financial statements.
“I will not touch on that because it’s under the remit of the board and management of the company, but I just want to point out that even in its most recent financial statements to its shareholders, the overall company is profitable,” he added.
In May, SingPost's post and parcel unit reported its first-ever annual loss after profitability had been on the decline for years. It recorded a full-year loss of S$15.9 million (US$11.7 million), compared to a profit of S$24.9 million last year.
Net profit fell 70.3 per cent to S$24.7 million in the financial year that ended on Mar 31, down from S$83.1 million a year earlier, largely because of the post and parcel unit.
