An Index of Postal Sector Liberalization

1
An Index of Postal Sector Liberalization

• Presented to the 11th Conference on Postal and
  Delivery Economics
• June 7, 2003
• Toledo, Spain

Isabelle Andress, David Coulson, Juan
Ianni, Jarret Jackson, and Peter
MacKechnie IBM Business Consulting Services,
and World Bank Group
2
Agenda

• Overview of the Liberalization Index
• Liberalization Index Results
• Policy Implications

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Overview of the Liberalization Index
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Liberalization in the Developing World

• The Postal Sector provides a basic communications
  infrastructure needed for economic and social
  welfare in the developing world.
• Reserved area for Posts was designed to generate
  compensation for providing universal service.
• Current model is constrained by a governments
  resources, lacks a ubiquitous infrastructure, and
  may not provide universal service or universal
  access.
• Significant attention has been paid to other
  regulated, formerly legally protected monopolies
  Water, Utilities, Energy.
• Posts, particularly in the developing world, have
  largely been ignored.

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Major Reforms are Necessary

• The Postal industry is currently in a phase of
  fast and significant transformation, creating
  enormous challenges for this traditional service
  sector.
• - Increasing competition - New customer
  demands
• - Technological change - Globalization
• Like in the telecommunications sector, major
  legislative, regulatory and institutional reforms
  have to create the platform for vitalizing the
  sector and for increasing private sector
  participation.

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The Liberalization Index

• The Liberalization Index is designed to help the
  World Bank evaluate the role of legislative,
  regulatory and institutional changes on the
  liberalization of the postal markets.
• During the first week of April, 2002, we sent
  questionnaires to 45 postal operators in Eastern
  and Western Europe, Africa, Asia, and Latin
  America. The responses from 26 of these countries
  were used in creating the Liberalization Index.
• IBM Business Consulting Services was contracted
  to create an index of liberalization based on
  each countrys responses to the questionnaire.
• The Liberalization Index is intended to provide
  the policy division of the World Bank (CITPO)
  with additional insight into the postal sector.
  It is not intended as an investment assessment
  tool.

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26 Countries Profiled in the Liberalization Index
Sweden
Poland
Mongolia
Great Britain
Germany
Czech Republic
Hungary
Moldova
Romania
Guatemala
Vietnam
Mauritania
Honduras
Chad
Cambodia
Trinidad Tobago
El Salvador
Kenya
Thailand
Tanzania
Namibia
Malawi
Botswana
Lesotho
Chile
New Zealand
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The Five Factors of Liberalization
Market Concentration
Market-wide Privileges
Barriers to Entry
Liberalization Index
Market-wide Obligations
Market Regulation
To Entry
Barriers
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Methodology

• Using a hierarchical decision process, a group of
  industry experts assigned various weights to each
  of the factors by rank ordering the individual
  indicators within each of the factors and then
  each of the factors relative to one another.

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The Liberalization Index Guiding Principles

• Market concentration is based on country reported
  data for letter post market share.
• Incorporates only self-reported questionnaire
  data from each postal operator.
• Index creates a relative score, which is more
  important than the numerical value assigned.
• Snapshot of postal operators at the point in time
  when data were collected.

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Liberalization Index Results
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The Liberalization Index
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The Liberalization Index Two Case Studies
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Results of the Liberalization Index
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Regional Analysis

• Latin America De facto most liberal
• Very low market concentration for universal
  service provider
• High legal/regulatory barriers not enforced
• Africa De facto liberal
• Low Market concentration for universal service
  provider, numerous providers
• High legal/regulatory barriers not enforced
• Western Europe De jure most liberal
• Lowering legal/regulatory barriers
• High market concentration
• Asia Not Liberal
• High barriers to entry
• Strictly regulated environment
• Eastern Europe Not Liberal
• High barriers to entry
• High market concentration

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Policy Implications
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Trends Toward Corporatization and Liberalization

• Corporatization of the Public Postal Operator has
  begun to occur.
• Corporations remain mostly state-owned.
• De jure limits of the monopoly have been reduced.
• Western European markets have specifically begun
  to reduce legal and regulatory barriers.
• De facto competition in developing countries
  places greater pressure on historical operators.
• Historical operators remain dominant in most
  markets.
• Latin American markets tend to have greater de
  facto competition.
• African markets tend to have a large number of
  alternative providers.

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New Questions Raised and New Horizons Opened

• Similarities and differences between
  industrialized and developing countries.
• Market Dynamics (mail volumes, limited or no
  direct marketing, characteristics of the demand,
  purchase power, illiteracy)
• Universal Service (supply) versus Universal
  Access (demand)
• Competition, Private Sector participation and
  Quality of Service
• Regulatory Approach (limited competition, limited
  experience, limited resources)
• Similarities and differences in the postal and
  telecommunications sectors.
• Sequencing of sector reform
• Universal service fund versus smart subsidies

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Improvements in Sector Monitoring and Performance

• Developing countries need to have a detailed
  understanding of their postal sector.
• Market dynamics are not understood.
• Sector policies are rarely defined.
• Universal Service/Universal Access should be
  clearly defined in postal law, at least to allow
  a fair evaluation of associated costs.
• Information systems of historical operators
  should be strengthened to allow improved internal
  management (cost accounting) and quality of
  service.
• Regulators should aim at building a constructive
  relationship with operators and consumers
  (transparent markets, level playing field
  competition).
• Historical operators should improve their market
  orientation, management capacities, and financial
  sustainability.

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Next Steps

• Additional research on the effects of regulatory
  reform on postal market dynamics.
• Additional research on the impact of postal
  reform on sector growth and economic development
  at large.
• An assessment of the privately supplied market
  segments.
• Greater understanding of the market dynamics in
  the postal sector.

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An Index of Postal Sector Liberalization

• Presented to the 11th Conference on Postal and
  Delivery Economics
• June 7, 2003
• Toledo, Spain

 
Isabelle Andress, David Coulson, Juan
Ianni, Jarret Jackson, and Peter
MacKechnie IBM Business Consulting Services,
and World Bank Group