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Directorate Seminar: “NEW Government Business Case Guide”. Hongkong Post Business Cases. Mr. TAM Wing-pong Postmaster General 30 May 2008. 167 Years of Service. Established in 1841 Trading Fund operation since August 1995 Over 7,000 staff 127 Post Offices

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Presentation Transcript
slide1
Directorate Seminar:

“NEW Government Business Case Guide”

Hongkong Post Business Cases

Mr. TAM Wing-pong

Postmaster General

30 May 2008

167 years of service
167 Years of Service

Established in 1841

Trading Fund operation since August 1995

Over 7,000 staff

127 Post Offices

Handles 4 million mail items per day

2

post office trading fund
Post Office Trading Fund

Objectives

  • Viability
    • Maintaining a profitable business operation in a competitive market
    • Generating a return of 8.4% on ANFA
  • 3 Categories of services
    • Universal obligation
    • Semi-commercial services (e.g. PayThruPost)
    • Commercial services
post office trading fund1
Post Office Trading Fund

Difficulties

  • Having to operate as a government department on a commercial basis, and to compete with operators in the private sector without the essential flexibilities available in the commercial arena
  • Making profit without overall control over the costs of operation or the freedom to price our products and services
closing down under utilized post offices
Closing down under-utilized Post Offices

Background

- In 2006-07, only 22 out of a large network of 133 post offices are profitable, all other offices are operating at a loss

closing down under utilized post offices1
Closing down under-utilized Post Offices

Situation Audit

In 2006-07, post office counters incurred an operating loss of around $13 million

There has been considerable resistance to closing down a post office as people are used to paying bills at post offices

Considered that closing of four loss-making and under-utilized post offices i.e. Garden Road, Harbour Building, Canton Road and North Point would cause a low level of impact to local community

Wong Chuk Hang and Causeway Bay were also closed owing to re-development and lease termination respectively

closing down under utilized post offices2
Closing down under-utilized Post Offices

Implementation

HKP followed a strategy of proactive communication with the District Councils to obtain their understanding and assured them that HKP remained committed to providing counter services generally in line with ‘Hong Kong Planning Standards and Guidelines’

closing down under utilized post offices3
Closing down under-utilized Post Offices

Implementation Review

Closure of the four post offices results in an annual savings of $14 million in staff, accommodation and overhead costs

Traffic was diverted to other post offices in the vicinity

Resources are better utilized

Post offices are more reasonably distributed

e cert
e-Cert

Policies and Departmental drivers

To support Government’s Digital 21 Strategy

To support the development of electronic commerce in Hong Kong

To offer the Certification Authority services as a new business initiative under the POTF operations

10

e cert1
e-Cert

Hongkong Post Certification Authority (CA)

Risks of launching new services

The government’s technology-neutral approach does not mandate the use of e-Certs

Review concluded not commercially viable

CA operation outsourced to private sector operator from April 2007

11

e post service
e-Post Service

The Business

- One-stop-shop service from data printing to mail delivery

e post service1
e-Post Service

Analysis of Requirements

Policies and Departmental drivers

Explore new business stream for revenue generation

Grow and sustain postal business

e post service2
e-Post Service

Analysis of Requirements

Objectives

To capture a market share $46.55 million per annum by service enhancement

To log on bulk mail users

e post service3
e-Post Service

Analysis of Requirements

Gap analysis

Existing service – government services, technical and security requirement is low

Future requirements – financial sector, hi-tech in data management and machine capabilities, high security requirement in data transmission and physical environment, development of Business Continuity Plan

slide16
Options Selection and Evaluation

Short term – strategic cooperation approach

Long Term – self-investment approach

Risk Analysis

investment by phases to minimize the risk of the business

Leverage the expertise of market players/partners to improve the chance of success

e-Post Service

e post service4
e-Post Service

Implementation

A dedicated driving team to steer the e-Post business development

Setting up of a clear roadmap for business pursuit

Careful appraisal on the performance of business at each stage of development and investment

e post service5
e-Post Service

Latest Achievements

Secured a contract from a multi-international bank

Started to provide service for OGCIO

Commenced business negotiations with leading insurance companies

post office box
Post Office Box

Background

Provided historically for public with inconvenience in receiving mail

There are currently 53,000 P.O. Boxes

Situation Audit

The urbanization of Hong Kong renders the delivery service more convenient than in the past

post office box1
Post Office Box

Situation Audit (cont’d)

There is a vacancy rate of over 15% (i.e. over 9,000 vacant boxes)

Rigid fee revision mechanism

The box rental fee is far below the accommodation cost and the associated service costs

There is an operating deficit of $3.98 million in 2007-08

post office box2
Post Office Box

Decisions

Cease the provision of P.O. Box service in new offices

Withdraw P.O. Box service when there is office closing down

cease accepting mail 30 minutes after post office closing
Cease Accepting Mail 30 minutes after Post Office Closing

Background

With the growth of Internet business, there is an increasing trend of home office operations for such business and postings at some small scale branch offices continue to increase

The tendency to make postings at late hours corresponds to the movement of merchandises from the Mainland in late afternoon

cease accepting mail 30 minutes after post office closing1
Cease Accepting Mail 30 minutes after Post Office Closing

Background (cont’d)

Late office closing means staff will be working on extended hours on OT basis

Late postings also affect subsequent mail collection and processing schedules

cease accepting mail 30 minutes after post office closing2
Cease Accepting Mail 30 minutes after Post Office Closing

Actions

Effective 19 May 2008, new arrangements introduced to cease accepting all postings 30 minutes after office closing time

Provide alternatives for late postings at General Post Office, Tsim Sha Tsui Post Office and Tsuen Wan Post Office up to 7.00pm

cease accepting mail 30 minutes after post office closing3
Cease Accepting Mail 30 minutes after Post Office Closing

Implementation review

Postings were observed to be advanced

Transport network and downstream management are under better control

OT work are better managed with an expected reduction of a total of at least 50 OT hours per day at all counter offices, equivalent to about HK$2 million a year

cease accepting payment by credit card at post offices
Cease Accepting Payment by Credit Card at Post Offices

Background

Credit card was accepted as means of payment since 1997

Situation Audit

Commission amounted to $6 million was paid to credit card company annually

Since May 2007, ceased to accept credit card for purchase of postage stamps

future of post office trading fund
Future of Post Office Trading Fund
  • Corporate governance needs to be strengthened
  • Trading Fund operation can only be an interim arrangement
  • Trading Fund operation is not conducive to a sustainable and profitable operation
  • To be more competitive, it is necessary to introduce bold and profound corporate reforms
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