Hongkong Post chief credits his staff for the growing profits after reversing five years of deficits

POSTMASTER-GENERAL Allan Chiang Yam-wang knows just how important it is to deliver messages on time – not just the mail, but also corporate news to staff.

When Mr Chiang took the helm in 2003, he was faced with a sea of red – Hongkong Post's five consecutive years of losses.

While he was there to make decisions, he realised that the staff needed to know what the financial position was with the post office.

"We had not done enough in linking people in the past," said Mr Chiang, who defined the interaction between his staff and the public as a way of linking people.

And all the hard work is paying off, with the post office posting a $225 million profit in the last financial year – up 1,223 per cent on the $17 million profit of 2004, ending five years of deficits.

How this has been achieved is a lesson in teamwork, with everyone from senior managers to frontline postmen racking their brains to think of new business.

While managers came up with business diversification, such as the post office becoming a bill-payment and collection point for credit-card company gifts, postmen promoted philately and express postal services.

Still, the post office is not resting on its laurels. "We are still looking for business partners," Mr Chiang said.

Like postal offices around the world, Hongkong Post suffered a slump in stamp sales when email emerged in the late 1990s. It suffered a further revenue blow when magazine companies shifted the printing and distribution of publications to other Asian cities.

And not every new business segment has been a success. Hongkong Post's electronic certification service has seen almost $90 million in losses in the past five years.

The government, which conceded that the user rate was "considerably far" from expectations, has decided to tender the service to the private sector.

Hongkong Post is one of six government branches converted into a self-financing department managed independently as a commercial venture since 1995. It must share half of its profit with the government after repaying what it owed. Its annual business and corporate plans also need government approval. The post office has repaid its $900 million government loan and $2.1 billion equity injection with dividends, taxes and loan interest over the years.

With debts repaid, Mr Chiang faces the challenge of making profits. It may help him that 5,400 of his 7,300 workers are civil servants and therefore not eligible for bonuses. But the post office is in dire need of funds to update its mail-sorting machine and renovate its 30-year-old Central headquarters.

"We are talking about hundreds of millions of dollars for the two projects," he said.

As well as inspiring his staff to come up with money-making ideas, Mr Chiang has driven profit growth by spearheading projects.

One of the ventures he is heavily involved in is an express delivery system for Asia jointly set up by the Hong Kong, mainland, Japan, South Korea, Australia and United States postal services.

Analysts say the move will boost the profitability of the postal services involved, as they take away business from private carriers such as DHL, UPS and Fedex.

The system, built around a joint tracking database, will allow Hongkong Post's international express service, SpeedPost, initially focused on small and medium-sized companies, to cater for larger corporations, the main market of private carriers.

Mr Chiang, who has been involved in the project since 2000 when he was the deputy postmaster-general, is responsible for implementing the idea.

"Hongkong Post has an outstanding position among the other players," he said.

With the joint venture in place, Mr Chiang recently spotted business opportunities with promotional mail and internet merchandisers.

"I really hate people calling them junk mail. People may not read all the materials, but that does not make it junk," he said.

Mr Chiang said a typical household in Hong Kong received 10 promotional mail items earlier this year, from an average of seven last year. In contrast, Britain's rate for the same materials was five times Hong Kong's, while in the US, it was 10 times, he added.

"I don't know whether there are any seasonal factors behind these figures, but it is definitely increasing," he said.

Unfortunately, as a self-financing and independent department, Hongkong Post cannot offer discounts to advertisers to capture the growing promotional-mail market. However, Mr Chiang said it would provide better services to advertisers, such as avoiding address duplication and delivering letters on time.

"Sometimes, the deadline for delivery is tight to catch weekend promotions," he said.

Also on the rise is the number of local internet merchandisers posting parcels overseas.

"Right on the close of business every day, we have a lot of people rushing in to post parcels. We are not turning them away. We also offer packaging and weighing services to facilitate their deliveries," he said.

Hongkong Post handled 3.5 million items every day last year, a 1.2 per cent annual increase. The international service business saw a 6.2 per cent boost, with 22,067 tonnes of letters and 5,893 tonnes of parcels being handled.

To address the underuse of post offices and vehicles, Hongkong Post has also introduced warehouse and logistics services, which allow customers to store stock and have it packaged and delivered.

Mr Chiang is also focusing on staff development and making sure their efforts are rewarded.

For instance, the year's best-performing local postmen are sent on an exchange programme to other countries' postal services for experience sharing and sightseeing.

While postmen are not eligible for bonuses, Mr Chiang set up a fund to finance events and celebrations such as giving out mooncakes for all staff during the Mid-Autumn Festival. Such incentives cannot be done in government-financed departments.

Although last financial year's profit looks spectacular and represents a return of 8.1 per cent on net assets, that was still below the government's target of 10.5 per cent, critics say. "The expected return was set a decade ago and is being reviewed," he said, adding that the business environment was not as good as in the past.

Now it is business beating a path to the post office. There is speculation that the Hong Kong Association of Banks is considering a deal that would allow customers to use the 133 post offices for bank transactions.

Mr Chiang said his organisation would definitely consider such a deal. While the association had yet to approach him, he said the charge for each transaction and banks' requirements would be important factors for consideration.

Mr Chiang declined to comment on reports that Hongkong Post was seeking a local listing. He did say, however, that since a listing would require full privatisation, it could mean higher profits as they would not have to share their earnings with the government and they could offer discounts to customers.

Strangely enough, posting a letter typically costs $1.40 while the handling cost is $1.60.

"This is why we need other business segments, such as philately, to subsidise mail operation," he said.

It is probably this ability to cross-subsidise its various businesses that bodes well for Hongkong Post's financial [email protected]