Was the decision to privatize Singapore’s postal service truly prudent?

On 9 October 2023, as Singaporeans face the most significant postal rate hike since 2014, many might find themselves reflecting on the spirit and promises that accompanied the privatisation of Singapore’s postal service in 1992.

With standard regular mail rates surging from 31 cents to 51 cents, SingPost’s justifications echo the changing times: the need to cope with digital disruptions and dwindling mail volumes.

This momentous decision nudges us to rewind to three decades ago. Were the foundational principles of privatisation, as eloquently stated back then, adhered to in today’s context?

Tracing the lineage of Singapore’s postal and telecommunication transformations, the 1980s and 1990s were pivotal. From the merger of the Singapore Postal Services Department with Telecommunication Authority of Singapore (TAS) in 1982 to the corporatisation of Singapore Telecommunications Private Limited in 1992, and eventually SingPost’s public listing in 2003.

The then Minister for Communications, Mr Mah Bow Tan, during the 2nd Reading of the Telecommunication Authority of Singapore bill in 1992, remarked, “The need for the postal authorities to innovate and compete… applies also in the case of the postal authorities… Corporatisation of the postal authorities would also allow them to take advantage of these changes and to compete in the same arena, like the courier companies and so on.”

Concerns over privatising postal service were raised, even back then. The then MP for Jalan Kayu SMC, Mr Heng Chiang Meng, notably observed the difference between the telecom and the postal sectors.

Mr Heng said, “Sir, unlike the telecommunication services, the postal services are not a growth industry. It is, in fact, a very mature industry, and the reasons for corporatising our postal services are not as clear-cut as those for telecommunication services. If we look very briefly at the history of postal services, it was first performed by a Government Department, then by a statutory board, and now we want to corporatise it. Is there a need to corporatise postal services? Could the Minister please clarify on this issue?”

He also asked the Minister to assure the House that the conditions would be such that the Government has, at all times, formal control over the operations and pricing of these services to be provided by private companies.

“Sir, it is important that, because of their public service role, this control should be imposed and firmly in place. The Government has control to ensure that the public service role will not be neglected,” said Mr Heng.

Minister Mah’s assurance was clear: “Postal services have also changed. Today, with electronics and the computer, the nature of postal services is going to change even more rapidly.” He also highlighted international trends, noting that countries like New Zealand and Malaysia had already ventured down similar paths.

Fast forward to the present, Senior Minister of State for Communications and Information, Tan Kiat How, elucidated on the broader profit landscape. With SingPost’s core post and parcel business reporting a loss of $15.8 million in FY2022/2023, the challenges are evident.

However, we should also note that while SingPost reported a loss for the recently concluded financial year, it reported a profit of 24.8 million for its post and parcel activities in FY2021/2022, 43.5 million in 2021, and 119.8 million in 2020. Years before that, they reported even healthier profits.

（Note graph does not include the profits from SingPost’s other activities)

So where have the profits from operating a monopolistic company gone? It shouldn’t be the case where profits are taken up by shareholders when times are good, and when the company’s revenue drops, consumers are told to pick up the pieces. Is this yet another case of privatizing profit and socializing cost?

The central query is: as SingPost treads its current path, are the commitments of 1992 still at its heart?

As the balance seemingly shifts between commercial gains and public service, Mr Heng’s concerns from 1992 seem prophetic.

He had urged then for conditions that ensured “the Government has, at all times, formal control over the operations and pricing of these services to be provided by private companies.”

Today’s rate hike might be a fiscal necessity for SingPost, but it also underscores the challenges in harmonizing public service commitments with commercial dynamics and the financial interest of shareholders.

To make things even more convoluted is the seemingly declining standards of the postal service. While SingPost on its website states near 100% delivery of its letters, consumer trust in delivery does not seem to be optimal.

Had the postal service remained with the Singapore government, wouldn’t the profits over the years from postal and parcel services contribute to the reserves and its accumulated returns, sustaining the essential public service without introducing a price hike in light of the escalating cost of living in Singapore?