Delivering Economic Development: Reflections and Considerations

1
Delivering Economic DevelopmentReflections and
Considerations

• Tim Walsh
• Vice-President
• Strategy and Regulatory Affairs
• Postal Development Action Group
• Berne, 11th October 2006

2
Agenda
PDAG has asked for a review and update on the
issues raised in Delivering Economic Development,
five years after its first publication

• Background and Themes to The Report
• Genesis and Methodology
• Personal Objectives
• Causes, not just Symptoms
• Typology and Elements of Reform
• Key Issues Identified
• UPUs Renewed Development Focus Since 2004
• Framing A Discussion For Private Sector
  Involvement
• Constraints
• Options
• Functions
• Interfaces and Structures
• Conclusions Toward an Integrated UPU Development
  Agenda
• Annex Possible Untapped Funding Sources

The views represented here are those of the
author alone and do not necessarily represent the
views of FEDMA or the Consultative Committee
3
Background The Challenge of Economic Development

• Half of the worlds 6 billion people live on less
  than 2 a day
• 40,000 people die of preventable diseases every
  day
• 130 million never go to school
• 1.3 billion people do not have clean drinking
  water
• 2.4 billion lack basic sanitation services

Development of postal services needs to be viewed
in this context and positioned around primarily
the economic benefits of reform, rather than the
human rights aspects to communication services
4
Delivering Economic Development Genesis

• Report based on practical insights gained during
  eight years experience working with developing
  and transition country posts while at Royal Mail
  (including non-executive role with BPCS) in
  Africa, Latin America, Asia Pacific and CEE
  states
• Informed by discussions with ministers, PMGs,
  postal management officials from IB, APPU, CPU,
  PAPU, PUASP CCPA, Bolivia, Jordan, Barbados, St
  Lucia, Thailand many of whom passed through
  London/RM HQ
• Tested in various workshops with posts including
  in Dar es Salem Dominican Rep Panama Bangkok
  Kuala Lumpur, Barbados Rugby (Royal Mail
  international postal management course) and with
  World Bank postal team
• Stimulus was absence of robust data and analysis
  (at that time, 2001) on the postal sector in the
  economic development literature

Also available in Spanish Factor de Desarrollo
Económico Infraestructuras Postales y Reforma
del Sector en los Países en Desarrollo
5
Postal Development Issues Analysed in Academic
Papers
Research Papers
Précis

• Globalisation, Posts and the UPU A Functional
  Critique, Current Directions in Postal Reform,
  Crew, M. and Kleindorfer, P. (eds), 2000
• Postal Infrastructures and Economic Development,
  in Postal and Delivery Services Pricing,
  Productivity, Regulation and Strategy, Crew, M.
  and Kleindorfer, P. (eds), 2002
• Exit, Voice and Postal Performance in Developing
  Countries, in Postal and Delivery Services
  Delivering on Competition, (eds) Crew, M. and
  Kleindorfer, P. 2002

• Examined role of UPU in changing industry
  identifying importance of technical assistance
  and private sector participation within the
  councils of the UPU
• Positioned posts as an infrastructure service,
  reviewed the economic literature and development
  benefits of postal services and proposed future
  research agenda
• Applied Hirschmans analytical framework to
  postal services in developing countries,
  identifying policy implications for governments

Also first proposed the principle upon which the
Quality of Service Fund was ultimately
established percentage supplement to terminal
dues based on inward mail volumes (as a proxy for
targeting funds to networks valued by mailers)
6
Objectives For The Report
Outcomes
Report Aims

• Helped stimulate various pieces of work on postal
  reform including The Postal Sector in Developing
  and Transition Countries, (ed). Guislain, P.
  June 2005, World Bank Group
• Hoped report helped to identify what works and
  what doesnt, as a lever to spread best-practice
• Usefulness best judged by others but as Keynes
  remarked, economists can only aspire to be
  perceived as useful as dentists to the extent
  that they join forces in evaluation
• Report does evaluate, form judgements, compares
  and contrasts
• Influenced creation of IPDPs at 2004 UPU
  Congress
• Interest in report still exists, demonstrated by
  todays presentation and regular requests for and
  downloads of the report

• To bring visibility to the sector in the
  infrastructure and economic development
  literature
• To evaluate what was happening on-the-ground, and
  draw some conclusions
• Questioned sustainability of the Argentine reform
  project for failure to address the USO issue in a
  competitive market
• To be useful to, and influence, policy-makers and
  postal leaders based on
• objectivity of analysis
• assessment too many postal reports eschewed
  drawing conclusions
• turn myriad of facts into frameworks see the
  woods from the trees
• To be interesting and thereby extend the
  shelf-life of the report beyond what is usual in
  these sort of outputs

7
Methodology

• Framed the analysis firmly in the context of the
  economic literature, particularly that relating
  to the benefits of infrastructure services to a
  countrys economic development
• Examined all the World Bank postal change
  projects since the mid 1990s and a range of
  domestic sectoral change programmes from Latin
  America to Africa, and from Asia to the
  Caribbean
• Undertook case-studies examining change in
  practice, drawing general lessons from specific
  cases of reform for postal managers and
  government officials in the pursuit of postal
  services improvement (Jamaica, Costa Rica,
  South Africa, Kenya)
• Drew additionally of BPCS experience in working
  with posts across Africa, Asia Pacific and Latin
  America, including on the processes of
  contracting and executing on reform projects in
  the regions
• Input from regional advisers
• Developed a typology of various initiatives and
  projects as a guide for policy-makers - to ask
  relevant questions of any particular postal
  change project and, in the process, to provoke
  debate about whether the suggested change is
  indeed sufficient to the task at hand
• Classified the various postal projects and tested
  these against key elements for successful reform

Stimulating action was an explicit goal of the
report analysis as a catalyst for action
8
The Challenge Facing Posts Was Often Systemic in
Nature Downward Postal Service Spiral
Various development, modernisation and reform
initiatives have been implemented across the
world. Only postal reform seems capable of
tackling the causes and not merely the symptoms
of postal decline
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Typology of Postal Development, Modernisation and
Reform

• Reform
• government steers not rows
• clear financial, Qof S targets
• financial and management autonomy
• appropriate incentive structures
• independent regulator
• some liberalisation
• ability to enter commercial agreements
• explicit performance contract

• Modernisation
• separation from telecoms
• corporatisation (institutional)
• costing accounting systems
• HR development
• mail circulation review
• commercialization
• outlet refurbishment
• network roll-out
• counter automation
• re-branding
• introduction of post codes
• NPD

• Development
• basic business planning
• occasional operational audits
• QofS improvement
• pipeline security reviews
• training projects
• basic costing tools
• limited autonomy

This typology was my attempt to provide a
benchmark against which to understand the many
initiatives in the sector which, hitherto, had
been loosely badged as postal reform projects
Source Walsh, 2001
10
Elements of Postal Reform More Art Than Science

• The experience of postal reform is mixed
  successful postal reform takes account of the
  specifics of the sector, the capability of the
  state and the needs of an economic, appropriate
  and sustainable USO the World Bank postal team
  has usefully developed this last point on USO

• Though an art, there are fundamental principles
  in the use of technical co-operation and funds
• Comprehensive development frameworks necessary to
  build the ownership and consensus for what is
  needed (amongst post, government, employees,
  other stakeholders), reduce the burden on DC
  posts and channel funding to specific
  objectives, within an overall programme

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Cost Accounting, Tariffs and Strategic Management
Cost Accounting
Strategic Management

• Performance Review Reporting
• efficient management control in day-to-day ops
  regional/mail centre benchmarking
• Network Optimisation
• development of network for efficiency and
  effectiveness
• Investment
• priorities in light of volume trends, customer
  needs and ROI
• Product and Pricing Strategies
• evidence to re-balance prices and boost
  profitability cost-reflective and value-based
  pricing
• product specifications that generate volumes for
  transactional, advertising, fulfilment and social
  mail volumes - priced appropriately
• Other Commercial Strategies
• Commercial Policies
• Channel management

• Cost categorisation must satisfy a number of
  management requirements simultaneously
• Overall cost structure as a general management
  and accounting tool - with a breakdown of costs
  overtime to measure the efficiency of various
  postal functions
• Detailed cost information by region, unit etc to
  support operational decisions
• Assessment of costs also crucial in any
  evaluation of investment decisions
• Cost information is critical for sustainable
  pricing policies and product development
  purposes

In retrospect the report should have given more
consideration to methodologies for improving cost
accounting and volume measurement processes
within less developed posts. Such data critical
for the strategic management of posts, as well as
for postal development, modernisation and reform.
It is commercial strategies, not structures,
that may be the key differentiator.
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Key Issues Identified in The 2001 Report

• Policy and Capacity
• describes the sort of policy and institutional
  environments that are conducive to effective
  postal reform, and for maximising the
  contribution posts play in national economic
  development improving institutional capacity is
  an important objective in its own right
• Integration and Ownership
• Called for greater integration between the post
  and the government about the need and benefits of
  particular development initiatives success of
  execution depends on clear ownership of the
  initiative by the recipient country all
  stakeholders, not just the post
• Fungibility and Evaluation
• Avoid substitutability of funds
• Periodic, independent evaluation and measurement
• People
• Posts are labour intensive and winning the
  support of the people who work in the posts is an
  important consideration in developing and
  executing improvement and reform
• Private Sector and Donors
• Examined models to introduce private sector
  partnerships to bring in specialised skills and
  investment capital (consultancy service
  contracts residencies concessions/IPO
  build-operate-transfer schemes)
• Called for more effective co-ordination of donor
  countries limit requirements for conditionality
  not linked to integrated development plan

13
Renewed UPU Postal Development Strategy Under M
Dayan
Under the leadership of Director-General, Edouard
Dayan, there is a renewed energy, seriousness and
substance to UPUs technical co-operation and
postal development strategies. M. Dayan, of
course, was

• the founding father of the Quality of Service
  fund a fund where evaluation is a critical part
  of the process
• instrumental in establishing a postal economics
  function within the IB under the direction of
  Jose Anson with a focus on, amongst other things,
  optimal growth models and the scope of the USO in
  emerging countries
• strengthened the cost accounting capabilities of
  the UPU as a critical building block of technical
  co-operation
• elevated, and consistently emphases in speeches
  etc, the issue of postal financial services,
  including the need for cost-effective money
  transfer networks to support remittance from
  emigrants to home countries
• promoted the Integrated Postal Development Plan
  approach to technical co-operation launched in
  2004, under the leadership of Elena Fernandez
  (Correos)
• boosted regional execution by ensuring regional
  advisers focus on development issues, including
  optimising QSF in context of IPDPs, supported by
  a dedicated IB resource in the re-organised
  DCDEV IB taking responsibility to balance
  day-to-day regional focus, with a medium-term
  development outlook
• continued to direct resources to sharing
  best-practice on technical co-operation for
  example in the recent UPU-World Bank postal
  development workshops for Africa and Asia
  Pacific, led by Lahcene Chouiter (kindly funded
  by DPWN)
• ensured that the Consultative Committee is
  established and ensuring the smooth integration
  of stakeholders from the private sector.

14
Framing A Discussion on Private Sector
Involvement

• Looking to the future what role, if any, should
  the private sector play in the UPUs technical
  co-operation strategies?
• Background posts own dedicated postal
  consultancies closed or significantly downsized
  (Neopostel, Detusche Post Consulting, BPCS)
• This was a question posed in discussions which
  established the High Level Group which, of
  course, culminated in the CC
• All state and non-state actors should be in
  membership who can contribute to the goals of the
  UPU, who are willing to do things jointly, and
  who are prepared to accept the obligations and
  responsibilities of membership, such as support
  for developing countries infrastructures
  (Walsh, 2000 Globalisation, Posts and the UPU A
  Functional Critique, Current Directions in Postal
  Reform, Kluwer Academic Publishers
• ITU sector members include individual companies,
  and the ITU-D (Development Sector) seeks to
  promote private partnerships between public
  telecom operators and private sector ITU members

This part of the presentation has benefited
enormously from discussion with and input from my
colleague Jean-Phillipe Ducasse and discussions
with a major postal member of the Union
15
Constraints To Further Private Sector
Participation

• Purpose
• Private sector involvement in technical
  co-operation is not about private suppliers
  trying to make money but about stakeholders
  willing to provide technical knowledge and
  expertise to help grow the value and volume of
  mail in developing and transition economies
• UN Code of Conduct
• Direct private sector involvement in technical
  co-operation projects is more problematic UN
  Code of Conduct Governing Relationship Between UN
  Agencies and Private Companies (confidentiality,
  property rights, non-discrimination, tendering
  etc)
• Direction
• Should PDAG or DCAG have a remit to develop
  private sector involvement in UPU projects
  should CC focus on how it can support technical
  co-operation for the benefit of the wider network
  and its members (CC member skills in this area
  e.g. FEDMA projects for CEE transition
  economies)

16
How could private sector stakeholders bring more
value to the work of the UPU?

• Tactical
• IB/PDAG could provide, through the CC
• a list of projects for which specific expertise
  would be needed (feasibility studies, developing
  direct mail products, small scale consultancy)
  and for which all stakeholders could volunteer
  resources
• Use CC as a neutral sounding board, and
  third-party advocate, in respect of
  posts/governments requests for funding to the
  various agencies
• Project-Oriented
• addressing standards and postcodes standards to
  facilitate variety reduction in technology for
  less developed posts revenue collection process
  improvement cost accounting direct mail growth
• Strategic
• Unlock trade support resources that might be
  available to private sector participants from
  their respective governments (e.g. USTDA, US
  Export-Import Bank (EXIM) US Overseas Private
  Investment Corporation (OPIC) UK DfID, etc in
  support of bilateral or, if possible
  multi-lateral initiatives (Annex)

PDAG/DCAG might play a role in developing
functionning private sector participation in
technical co-operation for the mutual benefit of
posts (POC), ministries (CA) and private sector
(CC)
17
Functions That Need Fulfilling To Support Postal
Development

• Strategy Process-Oriented
• Review, develop, validate and disseminate all
  tools necessary to maximise success of
  development, modernisation and reform projects
  including the securing of funds
• Integrate the different elements from project
  formulation to evaluation procedures, seamlessly
  (including relationship to QSF principles?)
• Produce toolkits, manuals, templates, glossary to
  support postal reform, and refine methodologies
  for practical uses regionally
• Set metrics as basis for evaluation
• Funding Resources-Oriented
• Identify and secure funding for the development,
  modernisation and reform of the postal sector
• Includes economic research to promote the
  economic development preference for the postal
  sector
• Marshall the people-resources in support of
  postal projects, (including from the private
  sector?)
• Performance Review Results-Oriented
• Oversee the results of the UPU technical
  co-operation activities, including budgets,
  RDPs, IPDPs, twinning projects, regional
  activities, missions etc
• Review results against key metrics, including
  overall Nairobi Postal Strategy goals

18
Functions That Need Fulfilling To Support Postal
Development

• Strategy Process-Oriented
• Review, develop, validate and disseminate all
  tools necessary to maximise success of
  development, modernisation and reform projects
  including the securing of funds
• Integrate the different elements from project
  formulation to evaluation procedures, seamlessly
  (including relationship to QSF principles?)
• Produce toolkits, manuals, templates, glossary to
  support postal reform, and refine methodologies
  for practical uses regionally
• Set metrics as basis for evaluation
• Funding Resources-Oriented
• Identify and secure funding for the development,
  modernisation and reform of the postal sector
• Includes economic research to promote the
  economic development preference for the postal
  sector
• Marshall the people-resources in support of
  postal projects, (including from the private
  sector?)
• Performance Review Results-Oriented
• Oversee the results of the UPU technical
  co-operation activities, including budgets,
  RDPs, IPDPs, twinning projects, regional
  activities, missions etc
• Review results against key metrics, including
  overall Nairobi Postal Strategy goals

Strategy
Strategy
Operations
19
Current Structures In Support of Development
Functions
Development Co-operation Action Group
Postal Development Action Group

• Development of Integrated Postal Development
  Plans (what is the methodology to optimise IPDP
  templates and context to maximise funding
  chances)
• UPU Missions
• Regional Strategy
• General advice and guidance

• Economic research
• Relationship Management of Funding Agencies
• Fostering dialogue between posts, governments and
  intl funding agencies
• Practical Guide to Unlock Funding Sources
• Own resources
• QSF and UPU
• Multilateral Development Banks
• World Bank
• UNDP
• Co-operation Funds (EU, posts)
• Trade Support Resource (going-forward
• Measurement/effectiveness

What are the functional overlaps and which
functions, if any, fall through the gaps?
20
Delivering Economic Development Towards Nairobi?
Integrated UPU Development Agenda?

• Recognition of the nature and scope of the
  challenge remains essential
• what more can the UPU do to bring visibility to
  the economics of the sector in the development
  terms, including successful case-studies

PDAG Leadership

• How does the UPUs strategy and support for
  technical co-operation evolve in the years to
  Nairobi and beyond, based on what PDAG knows
  about funding sources and implementation issues

Strategy

• Could there be synergies by a more formal
  networking of funding agency relationships
  (web-site newsletter joint research, including
  evaluation)
• Can PDAG work with CC and CA C1 to develop
  proposals aimed at increasing private sector
  involvement in the postal development agenda

Resources

• Is best-practice on appropriate commercial
  policies and cost accounting methodologies
  effectively disseminated for the better strategic
  management of posts domestic businesses
• Can toolkits support this process

Commercial Polices and Cost Accounting

• Are the process, resource and review functions of
  the development agenda suitably supported by
  appropriate structures

Structures
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Summary Delivering Economic Development

• investigated the reality of postal development,
  modernisation and reform and sought to search
  out and classify the general lessons out of real
  life experiences
• the report had a utilitarian bias disdained for
  disciplinary boundaries (economic, social,
  political) and was based on personal
  observations and research in the field
• framed the specific postal issues in the context
  of what was known about the reform of public
  enterprises in the economic development
  literature
• aimed to provide objective and critical
  assessments of the state of posts in developing
  countries, with a views to focusing on the causes
  and not merely the symptoms of current levels of
  performance
• finally, the report discussed and proposed ways
  forward for maximising the return of investment
  from funding agencies of various kinds.

the reports conclusion was fundamentally
optimistic that while there are significant
differences in postal performance between
countries only some of this is explained by
resources and geography
22
Annex Possible Untapped Funding Sources
In addition, to well known funding sources from
development banks private sector participants in
the CC might be able to unlock trade support
resources in support of national postal
development, modernisation and reform
initiatives. Taking the US and EU as an example

• United States
• A number of US multinational and foreign agencies
  will support export by US manufacturers for the
  ultimate benefit of offshore buyers, at little or
  no cost to the beneficiary
• The various types of support include financing
  (direct and through guarantees), market research
  and feasibility studies, and includes
• Overseas Private Investment Corporation (OPIC)
  promoting U.S. Investment by Backing Offshore
  Projects
• U.S. Trade and Development Administration
  (USTDA) marketing Assistance and Advocacy for
  U.S. Exporters in the Emerging Markets
• U.S. Export-Import Bank (EXIM) guarantees of
  third-party financings for offshore buyers
• European Funds
• European Bank for Reconstruction and Development
  (EBRD) providing project financing for banks,
  industries and businesses in Eastern Europe
• European Union providing aid and investments in
  developing markets

23
Overseas Private Investment Corporation
Promoting US Investment by Backing Offshore
Projects

• OPIC primarily supplies third-party financing
  sources with loan guarantees, loan insurance and
  lease insurance, typically
• up to 90 of the project cost) for physical
  facilities and/or projects in emerging markets
• terms of guarantees between 3 and 10 years
• OPIC is currently attempting to provide more
  financing to smaller projects (lt 10 million),
  which might, for example, benefit revenue
  protection infrastructures, sorting centres of
  the like
• As a rule, OPIC will not guarantee a project
  involving a government owned or controlled
  company, but depending on the transaction
  structure, it may be feasible to accomplish

24
U.S. Trade and Development AdministrationMarketin
g Assistance and Advocacy for U.S. Exporters in
the Emerging Markets

• The agency funds various forms of technical
  assistance, feasibility studies, training,
  orientation visits and business workshops that
  support the development of modern infrastructures
  and fair and open trading environments
• Of particular interest is the funding of
  feasibility studies for the planning of projects
  that support the development of a modern
  infrastructure
• The USTDA has indicated that the building of a
  modern post would likely qualify as the
  development of a modern infrastructure
• The grants are provided to the host countries to
  fund feasibility studies or other forms of
  project planning assistance
• The studies evaluate the technical, financial,
  environmental, legal and other aspects of the
  development project
• Typical grants are in the 300k to 600k range,
  but can be larger for larger infrastructure
  projects
• The grants are generally paid to the third party
  consultant that performs the study

25
Some Recent Examples of USTDA Funded Studies

• grant to Mexicos Secretaria de Comunicaciones y
  Transportes for 1.3 million to fund technical
  assistance in the development of a plan to
  promote efficient multimodal corridors
• 526k grant for a study on an integrated
  infrastructure and economic development project
  at the Port of Flore, Albania
• In Kyrgyzstan, 247k study on the implementation
  of an e-government program
• 562k grant to the Romanian Ministry of
  Environment and Water Management for a
  feasibility study to develop drinking water and
  wastewater treatment facilities for four
  municipalities in the Siret River basin region

26
U.S. Export-Import Bank (EXIM)Guarantees of
Third Party Financings for Offshore Buyers

• EXIM is the official US export credit agency
• The agency, typically working with third party,
  private lenders, assumes credit risks and country
  risks for US exporters that finance the sales of
  their goods and services to offshore buyers in
  emerging markets
• Generally, the maximum term for smaller
  transactions (lt10m) is five years, and the
  maximum for larger deals (gt10m) is ten years
• Some of the benefits of EXIM-backed financings
• For larger deals, the all-in rates to the buyers
  are typically competitive with or cheaper than
  local rates.
• Often the lengths of the terms available through
  EXIM are longer than are available locally.

27
EBRD Providing Project Financing for Banks,
Industries and Businesses in Eastern Europe

• EBRD is owned by 60 countries and 2
  inter-governmental entities
• Direct investments generally range from
  5m-230m
• Small projects are generally financed through
  financial intermediaries
• EBRD provides loan and equity financing,
  guarantees, leasing facilities and trade finance
• Example of EBRD investment investing in the
  Slovenian energy sector with direct loans for
  renovating and upgrading the national grid and
  power production capabilities

28
EU Providing Aid and Investments in Developing
Markets

• The EUs development strategy focusers on
  financial and technical assistance to improve
  developing countries basic physical and social
  infrastructures
• Example the relatively recent EU Postal Project
  for the Carribean
• Most of EUs aid is in the form of non-repayable
  grants
• Some loans and investment capital is made
  available from the European Investment Bank), the
  EUs long-term funding body
• The EIB makes long-term financing available for
  sound investments it does not make outright
  grants, for example
• 250m loan for the upgrading of a Romanian
  railway corridor and a 250m loan for the
  construction of a new motorway in the same region
  of Romania.

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Tim.walsh_at_pb.com Telephone [phone]