Philpost has turned the corner

James Thornton, CEO, Mailing Lists Asia
World Mail Review May 2008 Cultural Change is Underway

Positive changes now seem to be under way at the Philippine Postal Corporation (Philpost).  Until the last Postmaster General (Dario C. Rama), the tradition was that the President appointed retired military generals to run Philpost – and the service had holes in it (to say the least)

In my early (innocent) days in the Philippines I tested Philpost for an overseas mailing with response back to the Philippines.  I did this once.  Not all the mail was despatched and I began to hear stories of colleagues in the business who had visited the central sorting office in Manila where they saw employees holding up envelopes to the light to see if there was cash inside.

Nowadays it has all changed.  There are 47 cameras watching the sorting process and pilferage has been reduced to the point where it is no longer an issue.  Over 128 employees have been dismissed over the past 24 months. According to Hector R.R. Villanueva, the current Postmaster General and CEO, “more heads in the organisation will roll” while he continues his  “relentless campaign to get rid of erring employees”.

At the same time reliable people have been brought in to manage procurement, mail is being delivered with a high element of certainty, and plans are in place to fully computerise internal systems.  As Hector Villanueva puts it: “we are most satisfied with the results of the cultural and organisational changes we are introducing from within”.   He further states “we look forward with excitement to Philpost graduating into a fully fledged technology driven institution”.

The Philippines is a Highly Competitive Market

One of the challenges Philpost continues to face is the 214 private courier companies (no less) who compete with Philpost in the more profitable city centres leaving the  Post to fulfill its Universal Service Obligation in what are described as the “missionary areas”. This is neither a simple nor a low cost task bearing in mind the Philippines consists of 7,107 islands!

Meanwhile many private couriers deliver mail in the city centres and then simply offload mail for the loss making outlying missionary areas into the postal system (which they are permitted to do).

This private sector problem for Philpost is further compounded by the fact it has no monopoly on lightweight mail delivery (below 50 gms).  A 20 gm mail item can quite legitimately be carried and delivered by a private courier (probably one of the reasons there are so many of them in the Philippines).  It is widely recognised that some of these courier companies were set up by senior executives at companies which are responsible for mailing large volumes of utility statements every month.  Meanwhile Government departments and agencies are permitted to make use of Philpost services free of charge resulting in a significant loss of revenue each year.

Winning Back Business

What are the consequences of Philpost’s efforts to improve its quality of service and profitability?  Many banks, financial institutions and credit card issuers (Citibank, for instance) now give 100% of their mail business to Philpost because mail is being delivered with a high degree of certainty – and on time.  Fundraisers (such as Unicef), and other companies using direct mail, are experiencing better delivery, and therefore higher responses,  from Philpost than from private courier delivery.

Philpost is also now offering the direct mail industry an unaddressed advertising mail service (which seems to perform) and a low cost customer address updating service.

So confident is Philpost with  its service improvements that it now employs 12 sales representatives to call on businesses, direct mail users, banks and credit card issuers to persuade them to open new accounts.

Philippines is the seventh largest incoming mail market in the world.  This is due primarily to the large number of  OFW’s (Overseas Filipino Workers) who live and work in the Middle East, Japan, California, Western Europe, Hong Kong, Singapore and elsewhere.  The value of their remittances sent back to the Philippines is around US$14 billion annually.  Their mail volumes have created favourable terminal dues balances with many major countries which actually (and potentially) provide solid ground for bilateral agreements.

Moderrnisation Project Proposed

Currently, Philpost operates about 2,000 Post Office branches and distribution centres, employs 18,000 staff and owns about 2,500 delivery mail vans and motorcycles.

A critical development eagerly anticipated by the organisation is a 5.7 billion pesos (US$ 140 million) build–lease – transfer modernisation project proposed by the Japanese software developer Renaissance of Age (ROA) under which ROA will computerise the Philippine Postal System by leasing to Philpost computers and other equipment to build and maintain new business systems.  This is projected to increase Philpost’s annual revenues to 13 billion pesos from the current level of 3-3.5 billion pesos.

Utilising computerised systems and the Internet, Philpost could finally improve its track and trace system, and upgrade its sorting and accounting systems which would be online nationwide – thereby further discouraging and reducing fraud.

The proposal was put forward a few years ago and has been endorsed by the National Economic Development Authority (NEDA), the Investment Coordinating Committee Technical Board (ICC-TB) and the Commission on Information Technology and Communications (CITC).  However, the project still has not gone ahead. Philpost is waiting patiently!

Privatisation a Possibility?

Fundamentally, the Philippines is in reasonably good shape.  Despite a rising peso, exports are strong, property values are increasing, OFW remittances are stronger than ever and (contrary to what you may read in the international press) the country is politically stable.

A 110 year old institution, Philpost had quite a rugged time when it was managed by a series of former generals who allowed a culture of corruption to continue .  The current Postmaster General and CEO, Hector R.R Villanueva, and his predecessor, however, have both taken a very strong independent stand in actively purging the Post Office of corruption and fraud at all levels.  The results are self evident in improved profitability and performance.

Philpost is now open to the possibility of partial privatisation, and interest has apparently been expressed by several groups. It also could make sense if another postal administration invested, This would enable Philpost to acquire a modern, fully computerised system and to share know how with a view to further strengthening Philpost’s efficiencies leading to higher revenues and greater profitability in the future. The timing could be good right now.