SINGAPORE: Even after a price hike that will kick in in the coming days, postage rates in Singapore will remain comparable to those in other countries, Senior Minister of State for Communications and Information Tan Kiat How said in parliament on Wednesday (Oct 4).
Starting Oct 9, SingPost will increase the postage rate for standard regular mail from 31 cents to 51 cents – an almost 65 per cent increase – amid rising costs and declining mail volume.
The last significant rate increase was nine years ago in 2014 when rates were increased from 22 cents to 30 cents, according to SingPost.
Member of Parliament Yip Hon Weng (PAP-Yio Chu Kang) had asked if the Infocomm Media Development Authority (IMDA) was aware of SingPost’s projected revenue as a result of the postage increase and if IMDA’s approval was required before the postage rates increased.
Associate Professor Jamus Lim (WP-Sengkang) filed a question on whether IMDA would take into account the S$38.8 million in profit registered by SingPost in the financial year 2022/23 when working with the company to review its decision to increase postal rates.
IMDA is Singapore’s regulator for postal services.
On Wednesday, Mr Tan said in parliament that IMDA had approved SingPost’s request to raise postage rates to better reflect the cost of delivering letters. He added that after the price increase, Singapore’s postage rates are comparable to countries like Japan and the United States.
In Japan, the postage for items up to 25g is 84 yen (US$0.56 or S$0.78), while in the US, it costs US$0.66 (S$0.91) to send letters weighing up to 1 oz (28.4g).
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“NO GUARANTEE” POSTAGE HIKE WILL IMPROVE FINANCIAL POSITION
While the overall business of SingPost remains profitable in financial year 2022, more than 90 per cent of the profits were attributable to its logistics business and largely contributed by its overseas investments, said Mr Tan.
SingPost’s core business in Singapore is post and parcel, which incurred operating losses of S$16 million.
This is due to the global decline in letter mail, as well as intense competition from logistics companies and e-commerce players growing their own parcel delivery capabilities, Mr Tan said, adding that the delivery costs per letter have risen considerably as a result.
“As noted by several analysts, there is no guarantee that the increase in postage rates will improve the financial position of SingPost,” Mr Tan said.
He added that the boost to revenues may not compensate for the accelerated decline of letter volumes if customers opt for more e-substitution.
As part of the postage rate increase, SingPost is also expected to invest in transforming its domestic post and parcel business so that it remains efficient and provides high-quality service.
“Nonetheless, this is a move that could put SingPost on a more sustainable path to fulfil its obligations as a public postal licensee,” said Mr Tan.
SUPPORT FOR GROUPS AFFECTED BY POSTAGE HIKE
Mr Tan also said that SingPost will continue to provide appropriate bulk discounts, as well as other forms of customer support to consumers and businesses such as property agents, charitable organisations, small businesses and small and medium-sized enterprises (SMEs), in response to a supplementary question by Mr Yip on targeted help for those affected by the postage hike.
The senior minister of state added that all first and second local stamps will also be honoured even after the postal rate increase.
Responding to Assoc Prof Lim’s supplementary question on whether the postal hike amounts to a tax of the government on itself, Mr Tan said that the government only contributes a “very small proportion” to the total postage volume in Singapore.
Mr Tan also highlighted that it is not sustainable for a publicly-listed company to sustain a loss-making business, especially SingPost where the bulk of its revenue is outside Singapore, in response to Assoc Prof Lim’s question on cross-subsidisation.
“When the business is doing well outside Singapore, it is expected to support the not-so-profitable businesses in Singapore. But what happens (if it) is the other way around? What if businesses in other countries are loss-making? Is there (an) expectation for us to backstop those losses?”
“We have to make clear that this is not the regulatory framework which we are operating under. The revenues, the profits are ringfenced for the domestic regulator segment.
“It’s not supposed to offset the losses in other businesses and vice versa,” said Mr Tan.