Viability of Singapore Post’s Domestic Post and Parcel Business

11 Mr Seah Kian Peng asked the Minister for Communications and Information given the declining traditional letter mail volumes, what measures are being taken to ensure that Singapore Post’s domestic post and parcel business remains viable and there is continuity of postal services for Singaporeans.

The Senior Minister of State for Communications and Information (Mr Tan Kiat How) (for the Minister for Communications and Information): Sir, Singapore Post (SingPost) is both a public postal licencee with universal service obligations and a private listed company.

As a public postal licencee, SingPost bears primary responsibility for providing Singapore's postal service and is allowed to access and operate postal infrastructure, such as the national postal code system and physical letterboxes to support this. At the same time, SingPost is constituted as a commercial entity with obligations to its shareholders. As such, it must be able to maintain a viable business model.

Since the COVID-19 pandemic, the speed and scale of digitalisation has led to a sharp decline in domestic letter volumes, from around 490 million letters in Financial Year (FY) 2015 to just 260 million in FY2022. This trend is expected to persist. Many individuals have gone online, opting for paperless communications for convenience and cost savings. At the same time, most Government agencies have digitalised, communicating with citizens through online channels. Today, businesses account for more than 80% of mail users and the average consumer sends less than one letter per month.

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. As such, a balance must be struck to allow SingPost to fulfil its responsibilities in a sustainable manner, while ensuring the continuity of postal services for Singaporeans. The Infocomm Media Development Authority (IMDA), as the postal regulator, will work with SingPost to review its costs and operations, including optimising and automatic post office services for greater cost effectiveness. 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.

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. Domestic postal rates have largely been held constant since 2014, apart from a small increase at the start of the year. The upcoming adjustments will have to be of a sufficient degree to allow SingPost's business model to remain viable without requiring direct Government funding.

Finally, as SingPost reviews the company's business transformation strategies to remain relevant, we will work closely with SingPost on a fundamental review of the future of Singapore's postal service, recognising the larger shifts in the delivery ecosystem and changing needs of our local context, including the rise of logistics and e-commerce players.

Mr Deputy Speaker: Mr Seah.

Mr Seah Kian Peng (Marine Parade): I thank the Senior Minister of State for his reply. Just a few supplementary questions. Given the decline in volume and given that I can understand SingPost having their challenges, how does the Ministry ensure that there is no degradation of services that are provided by SingPost?

Secondly, the Senior Minister of State alluded to the fact that there will be more regular adjustments to the postal rates. I can understand that. Could the Senior Minister of State give an indication of the quantum we are looking at, in terms of the adjustment?

Finally, for my third supplementary question, I know that SingPost employs a number of Singaporeans in the postal services. As we go about doing this restructuring, I hope we pay a lot of attention to making sure that the jobs are preserved and we do all our best to keep as many of them in their current employment or in new jobs.

Mr Tan Kiat How: Sir, let me take the three questions by Mr Seah in turn. Firstly, on the quality of service, I would like to assure the Member that there is a quality of service framework in place for the regulated service offered by SingPost. IMDA, as the postal regulator, will continue to ensure that the postal licensee keeps up and complies with the quality of service.

The second question is around adjustments. Sir, I am mindful that SingPost is a listed company and many of these reviews will have to be taken together between the regulator and the licensee as part of their regular discussions. I would like to assure the Member that all these discussions will be in the context of the cost overheads, postal rate adjustments, declining volume and the operating environment. These factors will be considered as part of the discussions.

Thirdly, on the part about local employees, this something that we are mindful of. I am sure that SingPost, as a responsible employer, would be mindful of this as well. In fact, I think there are regular conversations between them and the unions representing the postal employees. So, these are the issues that we have to discuss as part of the overall discussion around the future of the postal services, and as part of the discussions between the regulator and the licensee.

Mr Deputy Speaker: Mr Leon Perera.

Mr Leon Perera (Aljunied): Thank you, Mr Deputy Speaker. Just one supplementary question for the Senior Minister of State. He referred to the service quality framework that the Government uses vis-à-vis SingPost because SingPost is a Government licencee. Are there periodic surveys of customer satisfaction similar to what is done by the Land Transport Authority (LTA) vis-à-vis the public transport system, for example? I am not suggesting that that be done necessarily every year. But is that something that is done regularly and is that something where the Government will discuss the findings and hold SingPost accountable?

Before I end, I just declare my interest as chairman of a company that does market research and consulting.

Mr Tan Kiat How: Sir, I do not have an answer at this point in time to the Member's question. I would invite him to file a Parliamentary Question and we can take a look at that.

But broadly, let me set the context by saying that the quality of service framework, which broadly looks at the service level agreement between the licensee and its customers, and how it delivers the basic postal mails, these are issues that have been around for many, many years. It is something that was continually refined to make sure that it meets the needs of the consumers in Singapore and the needs of the licensees. These are things that we benchmark with the rest of the world. In fact, Singapore has one of the most stringent quality of service framework compared to comparable cities and countries around the world.

Mr Deputy Speaker: Mr Louis Chua.

Mr Chua Kheng Wee Louis (Sengkang): Thank you, Mr Deputy Speaker. Just two supplementary questions.

Firstly, in relation to the domestic postal obligations, which is the framework which the Senior Minister of State has talked about in terms of the regulatory framework that IMDA has, what recourse does the Government have if SingPost, as the operator, is unable or unwilling to carry out their obligations any further because of the constraints that it is facing and so on?

Secondly, related to that, the company has also made an announcement that it is reviewing the commercial sustainability of the domestic postal business and it was also mentioned just now that there have been various discussions between IMDA and the company. Do these discussions involve the direct subsidising or funding of the company in relation to this aspect?

Mr Tan Kiat How: Sir, there seems to be a lot of interest in postal services today. Let me take Mr Chua's questions in turn.

First, about the recourse that the Government, as a regulator, has in respect of the terms and conditions of the licence. Let me first explain that SingPost is a public postal licensee. It means that it applied for a licence to deliver a service in Singapore. So, there is no subsidy to the postal licensee. It is actually operating a business in Singapore and has applied for a licence to do so. IMDA, as the regulator, imposes certain conditions as part of that licence, and one of the conditions is the quality of service of the licensee. I hope that helps to address Mr Chua's first question around the obligations and recourse. These are all part and parcel of the terms and conditions of the licence and its regulated operations.

The second question is around the commercial aspect. Like I mentioned earlier, SingPost is a publicly listed company and has its own set of corporate governance rules around its financial statements and its own set of considerations that it shares with its shareholders. So, I will not touch on that because it is 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. And when it talked about its specific segment of post and parcels, we should see that in that context as well. Even in the post and parcel segment of its business, basic postal service or the regulated service, is just one part of that sub-business that it operates.

Lastly, can the Member Mr Chua repeat the second question or have I answered all the questions? Okay. I have replied to all.