In more than 10 countries overseas, including the United Kingdom, Germany, Holland, Sweden, Finland, the United States, Australia and New Zealand, private-sector enterprises are now entering the postal services market. In these countries, incumbent postal service enterprises (postal service public corporations, postal service corporations, etc.) aiming at becoming comprehensive distribution companies are competing with private enterprises that have recently entered the postal services market. This competition has resulted in the dual benefit of strengthening the structures of the incumbent postal service enterprises and significantly improving the standard of postal services.
In response to this trend, the Japanese government will set up the Postal Services Agency on January 1, 2001 as an extra-ministerial bureau of the Ministry of General Affairs in accordance with the Basic Law on the Administrative Reform of the Central Government. Two years after that, this extra-ministerial bureau will be turned into a state-operated public corporation and the government will determine concrete conditions for the entry of private enterprises into the postal services market.
Compared to the ongoing deregulation of postal services overseas, Japan's efforts in this direction are lagging about 10 years behind. In view of the need to improve the standard of postal services and to adapt to the new age of international competition among postal services, it is now essential that Japan realizes the rapid entry of private enterprises in accordance with the Basic Law on the Administrative Reform of the Central Government.
The Ministry of Posts and Telecommunications has already set up a research group of academic experts to study issues related to the entry of private-sector companies into monopoly areas. However, Keidanren requests that the government to rapidly establish a forum for neutral investigation of this question and proposes the following approach to the participation of the private sector in postal services.
Postal services are broadly divided into parcels and letters. Since parcel delivery services are already open to free competition, "deregulation of postal services" refers here to the deregulation of letter delivery services.
The growth rate of Japan's postal services market has been low in recent years because demand for postal services is closely linked to business activity. The general trend, however, has been steady expansion with economic growth and the volume of mail increased by about 25% between 1988 and 1997. In view of the diversification of means of communication such as facsimile, e-mail and mobile phones, it has been predicted that demand for postal services may decrease in the long term. In fact, however, a synergy effect has arisen between electronic communications and conventional postal services, and it is now anticipated that, provided postal services respond appropriately, the diversification of the means of communication should not have a significant negative influence.
Nevertheless, government-run postal services are burdened by high structural costs and have fallen into the red. In fiscal 1998, Japan's postal services were initially expected to make a profit of 30 billion yen, but ended up with a deficit of 62.5 billion yen. Deficits of 74.2 billion yen for fiscal 1999 and 59.6 billion yen for fiscal 2000 are also forecast. In June 1997, the Ministry of Posts and Telecommunications announced that it would not raise postal charges until 2005, but if losses continue to increase at the present rate an increase in charges before this will be unavoidable.
One of the main causes of this high cost structure is personnel costs, which account for about 60% of the costs of postal services. If the cost of employing temporary staff is added to this, the proportion of personnel costs is even higher. Since employees fall into the category of national public servants, it is difficult to make flexible adjustments to manpower and wage levels. Therefore, in addition to there being no prospect of a significant reduction of personnel, increasing personnel expenses as staff grow older cannot be avoided. Even after the transition to a public postal services corporation, this structure will not change because of the special status of national public servants.
Furthermore, in a monopoly business without any competition, the incentive to cut costs or reduce charges is low.
Government-operated postal service enterprises are thus characterized by this vicious circle of structural cost increases followed by postal charge rises, and Japan's postal charges are already the highest in the world. In Japan, the postage for the lightest sealed letter is 80 yen. In Germany it is 1.1 mark (approx. 60 yen), France 3 francs (49 yen), United States 33 cents (36 yen), United Kingdom 26 pence (46 yen), Australia 45 cents (31 yen), and New Zealand 40 cents (22 yen) (based on exchange rates as of March 1, 2000). Moreover, the charge for postcards is the same as that for letters in some of these countries. Although exchange rate fluctuations have to be taken into account, it is still clear from these figures that Japan's postal charges cannot be raised any further.
If the present situation continues, postal charges will have to be raised in the near future to make up for cost increases and the deficit, further increasing the burden on Japanese citizens.
In the past, "protection of secrecy" has been put forward as a basic reason for having government-operated postal services, but with the deregulation of telecommunications services this argument has lost much of its force. In recent years, some have opposed the entry of the private sector and insisted on the need to maintain the national monopoly, justifying it as a "natural monopoly" required by an "economy of scale." However, this argument has been considerably weakened by the fact that postal services are labor-intensive rather than capital intensive, by the expansion of the postal services market along with long-term economic growth, by the diversification of means of communication, and by dramatic changes in the environment surrounding postal services resulting mainly from technological innovation. Judging from the situation in overseas countries, there is an increasing trend toward focusing on the network aspect of postal services and promoting the introduction of competition in the same way as in the telecommunications field.
Telegraph and telephone services have traditionally been viewed as a natural monopoly, but as a result of deregulation and privatization they have expanded dramatically, permitting the provision of diverse services at low rates. In the postal services field too, in most countries where competition has been introduced and government-operated postal service concerns have been turned into public corporations or completely privatized, diverse services impossible under government operation have been developed and the deficit has turned into a surplus, making it possible to bring down rates while maintaining universal services.
In view of this, in Japan too, it is essential to promote the rationalization and greater efficiency of the Postal Services Agency and the public postal services corporation that succeeds it and to realize the rapid entry of private enterprises in order to accelerate this process.
Judging from the examples of overseas countries where private-sector participation in postal services is already underway, although some countries have started with the deregulation of particularly urgent mail, most countries have adopted the method of determining the scope of the monopoly in terms of weights and rates and then steadily reducing this scope according to a deregulation schedule. We also believe that the most suitable approach in Japan would be to promote deregulation in stages in order to maintain universal services.
With regard to criteria for "letters," which currently fall within the scope of the monopoly, private-sector delivery businesses have been trying to get permission to handle the delivery of such items as credit cards and regional promotion coupons. The Ministry of Posts and Telecommunications has responded that it views these as falling in the category of letters and a legal decision has not yet been reached. According to the Postal Law, if an item delivered by a private enterprise falls into the category of letters, not only the party making the delivery but also the sender may receive a prison term of up to three years or a fine of up to one million yen. Therefore, the Ministry of Posts and Telecommunications only has to indicate that it interprets a delivered item as being a letter to compel not only private businesses but also senders to exercise self-regulation. In view of this situation, when the entry of private enterprises is allowed, clear criteria based on specific figures should be stipulated as far as possible.
In view of this situation, we propose that the first phase of deregulation should be implemented together with the planned shift to a public corporation in 2003 and that, three years later, the extension of the scope of deregulation should be considered based on a review of the state of competition.
{Scope of Deregulation in the First Phase}
The maintenance of universal services, i.e. provision of the delivery services throughout Japan, is a fundamental prerequisite for the introduction of competition in the postal services field. In overseas countries that have promoted the entry of the private sector into the postal services field, they are attempting to identify the impact of this entry by implementing deregulation in stages. However, since organizations possessing nationwide networks are highly competitive, only the incumbent postal service enterprises in these countries are required to provide universal services. At the same time, most of these postal services concerns recognize that the provision of universal services is a valuable strategic weapon for a network-based business. In all of these countries, therefore, they have continued to provide universal services without setting up a special fund for this purpose. In Japan, it is conceivable that private enterprises providing universal services will appear. However, in order to encourage the entry of private enterprises, the public postal services corporation should be obliged to provide universal services for the time being. In the meantime, establishment of a fund in response to the growth of competition or the replacement of the public corporation by a private enterprise should be considered.
According to the Basic Law on the Administrative Reform of the Central Government, the postal services public corporation will be able to conduct autonomous and flexible management. However, it will be necessary to invest it with management freedom of sufficient scope to the extent that private enterprises are not put under pressure, and to promote rationalization and increased efficiency.
In Europe, the incumbent postal service public corporations and postal service companies are already increasingly acquiring domestic and overseas distribution businesses with the aim of becoming comprehensive distribution companies. It is anticipated that successive mergers and tie-ups will take place, as in the telecommunications industry. In Japan too, the time has come for the formulation of strategic postal services policies based not only on the domestic situation but also on international trends.
In order to ensure unrestricted business development in Japan and overseas, it is now necessary to boldly introduce competition into the postal services market and to promote strong postal service enterprises, including the entry of new players into the market.