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We want them to succeed as we’re asking them for dividends. So obviously we have to support them
The recent announcement that the Government has injected K40 million into Post PNG comes as no surprise. Post PNG has been in financial difficulty strife for some time and the recent Government assistance through IPBC is a further indication that the company’s situation has not improved.
One of the main reasons outlined by Post PNG Chairman Rueben Aila for the critical situation it is now in is that its traditional business model of “letters and letter boxes” is on the decline. This is largely due to the introduction of the internet technology and mobile technology where most communicate via email and text messaging.
IPBC Chairman Paul Nerau has been quoted in The National saying that “We want them to succeed as we’re asking them for dividends. So obviously we have to support them”. We’ll come back to this quote again.
There are several reasons why we don’t quite buy into the “letters and letter boxes” excuse. The first is that email and text messaging were introduced in the country about a decade ago. Surely, the company would have foreseen the possibility that technology in either the internet or mobile would greatly affect their “letters and letter boxes” business model. In other words, the reason for the decline in their traditional business model might not be entirely attributable to the growing use of technology but rather management’s lack of planning and innovation for technology to work in their favor to grow their traditional business model and to expand into other associated business models where technology is relevant. It sounds more of an issue of management’s foresight, or lack of it.
The second reason why we don’t buy into the excuse is that one of the reasons why there is a decline in the use letters and letter boxes is that the service has become inefficient and unreliable hence people tend to use other modes of communication. There have been instances where people have posted letters for delivery in the same city only to find out that it takes a week or even two for the recipient to receive it. In some cases, people have not received their letters at all.
If the service was efficient and reliable perhaps the situation wouldn’t be as bad as it has turned out to be.
In Australia, Australia Post has had its fair share of financial troubles in the “letter” mail service department which is one of the reasons why Australia Post has proposed to cut a significant number of jobs. One of the reasons why the job cuts have been proposed is that Australia Post has a mandatory community service obligation to provide the letter service for a given number of times during the week. That community obligation has partly affected the profitability of the letter department for Australia Post. But as it stands, there is nothing Australia Post can do while the obligation still stands. Unless there is a similar sort of a community obligation for Post PNG, Post PNG has always been in a flexible position to improve the letter service without such impediments.
Recently, Post PNG announced that it would no longer operate the “registered post service” but offer clients the alternative “Express mail service”. Assuming that the main reason for Post PNG’s struggle is the decline in “letters and letter boxes” business model, would the profitability in their freight forwarding and express mail service offset the losses in the letters?
One of the problems in answering this question is that parcel/express mail service is an increasingly competitive sector, and reinvesting in next-generation technology is paramount. While other logistics companies such as DHL, EMS and TNT can return a profit to investors and still invest equipment, transport and development, the situation with Post PNG is that because it is an SOE under the watch of IPBC, it must return a dividend to the government while also compensating for significant losses in its core business – a business it is bound to by law.
This comes to the earlier quote of IPBC Chairman Paul Nerau : “We want them to succeed as we’re asking them for dividends. So obviously we have to support them”. It may be that the reason why PNG Post is not or will not invest in itself to grow is because the IPBC is asking them or will ask them for dividends.
The rural areas which are not affected much by the internet and mobile technology could be an area in which the letter service could still be used. The problem here is that the very Government that is asking for dividends probably hasn’t done much to provide the necessary infrastructure for Post PNG to operate the letter service in the rural areas.
As it stands, technology is here to stay and the onus is now on the management to come up with innovative products and services beyond the traditional mail service. Post PNG already provides money transfer services and perhaps in partnership with the Government offer basic government business services such as paying passport fees, land rentals and other utility services.
Otherwise, it’s better of privatizing it.