Skerah
Business

Should Post PNG be privatised?

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Post PNG Mail

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.

 

 

Comments

comments

3 Comments

  • Hard Lotodok

    The K40 million injection is an investment by IPBC. This is normal with business investments basically to increase the company’s net worth. This means, Post PNG’s net worth/value has increased by K40 million.

    Secondly, PNG is in a transition period from paper to paperless which is basically the move into the Digital world. However, seriously speaking, bulk of the population are still lagging behind. The bulk is still behind because they lack digital literacy skills.

    Now, in any business activities, changes/investments must be made according to demand, and economic viability. So, the question is, “Are the 8 million people of PNG able to;
    1. Buy online and ship in their buy, (which normally by law for all parcels enters Post PNGs entry terminals,
    2. Consign a cargo online using purchasing softwares,
    3. Have debit/visa cards to shop online and ship into PNG,
    4. Effectively using mobile technology (USSD)commands, etc… and so on.

    You will agree with me that only a handful (the digitally literate) which makes at most 10% of the population. Thus, services tailored towards this may be considered not a good investment for now, but may be in future.

    Furthermore, the talk to privatise Post PNG is just so childish and is always said by lazy people who cannot work hard. Post PNG is an investment by the people of Papua New Guinea, why would you sell it? It is like selling yourself away. Post PNG is here to stay but the biggest thing is it is your (PNG) investment.

    Like all other SOE’s Post PNG has its up’s and down’s.

    Speaking of diversifying, Post PNG has tried by venturing into mobile money, logistics, retail, properties etc..

    The K40 million investment I believe is for Post PNG to diversify into Logistics. (as per today’s National paper (03/07/2014) – there is a full page advertisement/notice for launching of Post Logistics tomorrow 04/07/2014).

    So again, Post PNG has made a decision to invest into Logistics Industry. Now, for any developing/developed countries or say the global village, Logistics is the life line of its existence. All imports, exports, production, mining, businesses, etc… depend heavily on logistics. As such, I believe Post PNG has done a very good decision to invest in a business that will generate more revenue/dividend back to its investor (IPBC).

    Post Logistics will hereby be the business arm that will earn Post PNG much needed revenue/dividend and also fund the mail operations. It may also be the change agent that will assist in investing into the digital and technological fancy lifestyle only for the few handful.

    Wissssssss..

    Hard Lotodok.

  • Skerah

    Hard Lotodok, the point about the investment is that Post PNG is struggling. That’s the point. IPBC has helped Post PNG because it cannot help itself. You make it out to be that the Government is investing more because Post PNG has done well, the reports are quite the opposite. If you listed Post PNG on the stock exchange, hardly anyone would want to buy shares in it because of the simple fact that no one would want to buy shares in a struggling company. There is a difference in investing – one based on good prospects of profitability and strong balance sheet and the other bailing you out. Unfortunately, the reality is that Post PNG is in the latter.