Rationale for Recent Increase in Postage Rates

Mdm Speaker, the global postal landscape has become increasingly challenging for national postal operators. Letter volumes are declining worldwide, while operating costs continue upwards. SingPost's experience is no different, which was a key consideration for IDA when granting its approval for the revised postage rates.

Over the past few years, SingPost has been facing pressures from higher labour and operating costs. In addition, the rates which SingPost pays to overseas postal operators have increased by about 40% since 2010 and are set to further increase by more than 30% by 2017. These rates are determined by the international body, the Universal Postal Union Congress.

SingPost has not increased its postage rates over the last eight years. SingPost has also not resorted to cost-cutting measures such as reduction of postal staff, closure of post offices and scaling back on daily deliveries, unlike other national postal operators. Instead, it has treated postal workers responsibly by raising workers' salaries and hiring of older workers. SingPost also committed to invest $100 million in service improvement measures and will further invest in mail sorting infrastructure to increase accuracy and efficiency of mail processing. In addition, to mitigate the immediate impact of the postage rate increase, SingPost has offered each household a free six-stamp booklet. This is the number of letters that an average individual posts per year.

Mdm Speaker, while IDA regulates dominant licensees to ensure that they do not impose excessive charges, IDA's policy principle has been to allow these licensees to recover costs in the provision of such basic services. IDA is also mindful that dominant licensees are not obliged to use revenue from the unregulated business segments to subsidise basic services. These principles were similarly applied to SingPost, which is a dominant licensee.

The number of complaints received against SingPost has remained fairly low. Out of the estimated 1 billion mail items delivered annually, there is an average of about 100 complaints per year, or about one complaint per 10 million letters. IDA takes a serious view of all complaints and will impose penalties on SingPost for non-compliance of IDA's postal

Page: 10

Quality of Service framework. I would like to assure this House that IDA will closely monitor SingPost's service enhancement measures, so as to improve the reliability and quality of basic postal services.

Mdm Speaker, I thank the Minister of State for answering the question. I have two supplementary questions. First, postal rates have been rising steadily throughout the years, from 10 cents to 30 cents. SingPost's net profit showed an average of nearly 3% increase per annum. I would like to ask the Minister of State whether there would be another round of increment to local and international rates in the future years, even when SingPost shows continuing profits, bearing in mind that SingPost is a public listed company that operates a monopoly for the essential postage service in Singapore. Secondly, how is the $100 million service improvement plan disbursed? Is it disbursed in stages throughout the years?

I thank Mrs Chiam for her supplementary questions. In terms of postage rate increases over the years, I would like to reiterate what I have shared with the House just now, which is that postal rates have not increased for the last eight years. As for the profit increases that Mrs Chiam had alluded to, in SingPost's case, the bulk of it actually came from the unregulated mail as well as the unregulated business sectors that are not related to post.

In terms of whether or not we foresee another round of increases, I think the principles that IDA uses to evaluate any such possible increase is that we need to look at the impact of the cost and the various drivers of the regulated mail segment. In submitting their case for this particular round of postal rate increases, SingPost has made references to, for instance, increase in labour costs and the cost that they have to pay to international post operators. IDA has felt that these are relevant to the regulated mail sector.

The assurance to the House is that we would look very carefully at the reasons that the operator gives for requesting for a round of postal rate increases. We are also very careful about the impact on consumers. This includes not just the postal rates, but also what kinds of service improvements we can expect out of it.

As for the plans for investing the $100 million into service improvements, I do not have a staged timeline, but my understanding is that SingPost is keen to do this as quickly as possible. This includes service quality improvements, postal infrastructure improvements and it also involves more deliveries. My understanding is that they would like to implement this as quickly as possible.

Page: 11