• Postal service has faded into irrelevance: Prof. Samarajiva
• Complete privatisation of postal service impossible: Dr. Wijewardena

By Shenal Fernando Globally, most countries have for centuries subscribed to the notion that postal monopolies are beneficial for the public at large. Therefore, state postal services were established with an extensive network and legal monopoly on mail delivery in order to shield the postal services from the negative consequences of a competitive market. Consequently, the states were successful in ensuring that postal charges were set at affordable levels even in highly lucrative delivery routes and that postal services extended to even the sparsely populated and poor regions of the nation, fulfilling its universal service obligation. Before the internet, the post office was an integral part of any community and paper mail played an integral part in binding the four corners of a nation together. However, following the internet revolution, the way society communicates has completely transformed, which in turn has adversely impacted the importance of the post office to the everyday workings of society. When looking at contemporary society it is clear that rather than paper mail, it is electronic messaging that binds a modern nation together. In Sri Lanka, the Department of Posts commonly known as Sri Lanka Post has a rich history dating back to 1798 and has enjoyed a complete monopoly over the postal service industry. However, following the internet revolution and the rise of electronic messaging, the value of a postal monopoly has declined significantly in Sri Lanka similar to most countries. While the service offered by Sri Lanka Post continues to hold both social and economic value, the inefficiencies inherent in the organisation, its failure to adapt to digitalisation, its excessive workforce entitled to a Government pension, and continuous excessive losses stretching back decades have made it a burden on the taxpayer.   Privatisation   In 1977, the Sri Lankan Government under J.R. Jayewardene embraced an open market economy and brought to an end the nationalisation policy that existed since the mid-1950s, under which most public utility systems and essential industries were nationalised and were monopolised by the Government. Privatisation of State entities was introduced as a State policy in 1987 and was given legal status by the enactment of two statutes – Conversion of Government Owned Business Undertakings into Public Corporations Act No. 22 of 1987 and Conversion of Public Corporations or Government Owned Business Undertakings into Public Companies Act No. 23 of 1987. The Business Undertakings (Acquisition) Act No. 35 of 1971 was repealed in 1988 by Act No. 58 of 1988, bringing an end to the previous nationalisation policy.  The first privatisation took place in 1989 and since then over 100 State-owned commercial institutions have been privatised. However, most of the strategically important State-owned commercial entities that provide essential infrastructure and public services with the highest impact on economic growth, development, and overall well-being of the population were never privatised due to political ideology and trade union resistance. Over the past few decades there has been a growing consensus that even such strategic State-owned commercial institutions must also be privatised due to the operational inefficiencies which have plagued such enterprises, translating into poor financial performance, subpar quality of products and services, and supply shortages. Furthermore, these enterprises have become a significant burden on the taxpayer due to their excessive workforce, recruitments driven by political considerations rather than the needs of the organisation, and their inability to mobilise resources to meet large investment requirements. Due to the current economic crisis in the country, there has emerged significant political will and public support for the privatisation of the loss-making government entities, and it appears that the stage is set for the privatisation of key State-owned commercial entities. Therefore, in this climate, a reasonable question arises regarding the possibility of the privatisation of the Sri Lankan Department of Posts.   Arguments for privatisation   The value of a mail monopoly has decreased significantly following the large-scale adoption of electronic messaging. This is reflected by the statistics published by the Central Bank of Sri Lanka (CBSL) in its Annual Report which shows that letters delivered have decreased from 26 letters per inhabitant in 2001 to around 15 letters per inhabitant in 2020. This clearly reflects society’s decreasing reliance on paper mail for communication. It is likely that this reliance has decreased further following the large-scale digitisation measures embraced by commercial entities due to delivery disruptions caused by Covid and the lack of paper due to the economic crisis. This decreasing social relevance of Sri Lanka Post was outlined by LIRNEasia Founding Chair and Advocata Institute Advisor Prof. Rohan Samarajiva. Speaking to The Sunday Morning Business, Prof. Samarajiva pointed to the recent announcement by Sri Lanka Post that it would operate for only three days a week (Tuesday, Wednesday, and Thursday) and asserted that if the country’s postal service was a public utility like in many other countries it shouldn’t shut down during a crisis. “Over the years, the failure of successive governments to improve and reform the postal service has pushed it to irrelevance, so people don’t even complain when the postal service shuts down. This is a great pity, because this is the only public utility service that has been explicitly mentioned in a major constitution, which is the US Constitution.” He explained that due to the inefficiency of Sri Lanka Post caused by its failure to implement reforms, most of its functions had been taken over by more efficient alternatives. Therefore, electronic communications, emails, and courier services have emerged to fulfil the needs of society, and the postal service has faded into irrelevance.   This is supported by the fact that Sri Lanka Post, while not paying any taxes as a Government department, has incurred losses worth billions for decades. According to statistics published by the Ministry of Finance in its annual report for 2021, Sri Lanka Post had only generated a revenue of approximately Rs. 7.2 billion in 2021 while incurring an approximate expenditure of Rs. 14.3 billion, which translates to a loss of Rs. 7.1 billion that must be borne by the taxpayer.  Therefore, there is no longer any merit in maintaining a postal monopoly in Sri Lanka, so the market must instead be opened for tax paying private companies. Furthermore, Sri Lanka Post is struggling to compete in the parcel delivery market due to increased competition from private sector market entrants. Competitors function more efficiently through their streamlined organisation structure, flexible employment models, and performance-based remuneration. In contrast, Sri Lanka Post is burdened by a rigid and outdated employment model and is unable to effectively compete in the industry due to its status as a Government department. This inability of Sri Lanka Post to compete with private sector players in parcel delivery is reflected by the fact that the number of parcels delivered by Sri Lanka Post has been on a decreasing trend since reaching an all-time high of 1.5 million parcels in 2006. In 2020, it delivered only around 145,000 parcels as per CBSL statistics. Another argument for the privatisation of Sri Lanka Post is that State ownership has led to underfunded capital investment stretching back decades. Decades of low cash flow and continuous losses have forced Sri Lanka Post to defer much needed investments in digitalisation and adoption of modern technology in its processes. Therefore, privatising Sri Lanka Post will ensure access to debt and equity markets for much needed long-term investment.   Arguments against privatisation   According to Prof. Samarajiva, the privatisation of Sri Lanka Post as presently constituted is impossible. No private investor would be interested in the organisation given its current business model, which is simply not profitable due to its decrease in relevance in the face of falling paper mail volumes. Moreover, its previously profitable postal banking, telephone, and telegraph business components have either been carved out to form new organisations or have become obsolete.    “In the past, the Sri Lankan postal service had under it the profitable telegraph and telephone business while also providing postal savings banking services. Since then, the postal service created two highly profitable businesses – Sri Lanka Telecom and the National Savings Bank. N.M. Perera took postal banking away from the postal service and established the National Savings Bank, and so this highly profitable business was removed from the postal service. In the case of telegrams, the technology has become obsolete.” Prof. Samarajiva explained that this was inevitable as successive governments had ignored issues within the postal service and allowed it to atrophy, compelling people to adopt and move on to alternatives which have seen significant investment and innovation. “All that is left of the Sri Lankan postal service is a shrivelled up corpse which no private investor would be interested in,” Prof. Samarajiva opined.  Similar sentiments were expressed by Economist and former Deputy Governor of the Central Bank Dr. W.A. Wijewardena, who shared with The Sunday Morning Business that at present, Sri Lanka Post had embraced an early form of privatisation by contracting out the delivery of paper mail along certain routes to private couriers. However, he opined that complete privatisation of Sri Lanka Post was impossible because no private investor would be interested due to the excessive workforce employed in the organisation, which was also highly organised into trade unions. He stated that therefore the only way in which the Government would be successful in completely privatising Sri Lanka Post would be by offering the workforce a “golden handshake” i.e., offering payment to retire early.        If not privatisation, then what?   Prof. Samarajiva pointed out that issues plaguing Sri Lanka Post could not be remedied merely through privatisation and that instead an extensive reform process must be implemented first in order to adapt the postal service to modern demands. “The private sector can be involved in some form of public-private partnership to implement the reforms. This simplistic formula of privatising everything doesn’t work. In most countries, even in the UK, the privatisation of the postal service failed,” he added.  In his opinion, the postal service can be revived by embracing the needs of Sri Lanka’s rapidly developing e-commerce industry, which has experienced a rapid adoption in the aftermath of the Covid pandemic. “Sri Lanka has one of the densest networks of postal offices in Asia, which is second only to the postal network in Singapore and Hong Kong, which are city states. We have an incredible network of post offices in this country covering every corner. Considering the recent transport disruptions, the postal service can cater to the retail e-commerce market. Accordingly, goods can be physically delivered to the consumer’s neighbourhood post office to be picked up or they can be delivered to the consumer’s house, using the existing system for delivering letters,” Prof. Samarajiva elaborated.   He further stated that Sri Lanka Post should enter the pharmaceutical delivery business for State hospitals, pointing out that most patients were forced to travel considerable distances to visit State hospitals to merely obtain medication. Therefore, Sri Lanka Post can intervene and deliver the medication to the patient following an online consultation with the doctor.