Privatisation would solve Canada Post’s ills, claims think tank

The burdens for Canada Post of declining mail volumes, costly rural routes and the need for modernisation could be solved by privatising it, a think tank in Montreal has claimed. The non-partisan Montreal Economic Institute wants to see a full opening up of the Canadian postal monopoly to private competition – and potentially a sale of Canada Post to private investors.

It has issued a briefing note pointing at success stories in Europe, where postal privatization in some countries has been followed by reduced postal rates for consumers and businesses, and where other countries must dismantle postal monopolies by 2013.

Canada Post has been continuing this week with six months of hard bargaining with unions over a new labour deal, but the Institute said giving employees shares in a privatized Canada Post could bring closer cooperation and drive up productivity levels.

Economist Vincent Geloso, who wrote the MEI report along with colleague Youri Chassin, told Post & Parcel today that “tinkering” could not solve Canada Post’s problems that have seen the postal operator announcing in 2009 that postal rates would rise 20% over five years.

He said Canada Post needed the pressure from competition and its own shareholders to drive improvements and lower postal rates for consumers and businesses.

“We advocate full step-by-step privatisation,” he said. “Partial privatisation might even be beneficial if they were to sell perhaps 25% of Canada Post to private investors, as they did in Austria where they sold a 40% share and there was a 11% drop in prices in 10 years.”

Privatisation

Geloso said the first step in privatisation should be an employee share program, with workers benefiting from efficiency improvements through share ownership.

The London School of Economics graduate suggested that the prospect of dividends for shareholders would help with “productivity problems” in an organisation that, he said, had been seeing only 38 minutes’ work from its work force on average for every hour paid.

The prospect of facing private sector competition in the letters market could also see “a mentality of cooperation rather than of conflict” between management and unions, he said, as well as necessary investment in the modernization of infrastructure.

Liberalisation and the selling off of Canada Post would then be a gradual process, said Geloso, who suggested Canada Post’s 91% stake express delivery firm Purolator could be an early target for a sale.

But while he advocated a sell-off or partial sell-off of Canada Post, the MEI economist said it would not necessarily mean breaking up Canada Post or definite lay-offs.

He said Canada Post could even be freed up in the private sector to raise new revenue sources through alternative products like cell phones, insurance or banking rather than merely “gouging consumers because they’re a monopoly”.

Rural deliveries

The MEI report regards privatisation of mail services in Austria, the Netherlands and Germany as success stories, respectively leading to an 11%, 15% and 17% drop in stamp prices after a decade.

Geloso accepted that Canada was a very different nation, with huge distances to be accounted for in logistics operations. But he said: “The question of geography should not blind us to the benefits of privatisation and liberalisation.”

The economist explained that he believed postal rates for rural areas should be allowed to increase to reflect their real costs, allowing postal rates for a Canadian population that is 80% urban based to reduce overall.

He said rural people could be compensated for increased postal fees through better tax breaks, which he said would be a more efficient way to run universal postal services.

Lower postal rates in urban areas would then translate via lower mailing costs for businesses into effective savings for consumers, said Geloso.

“The solution is not a public monopoly with a uniform price, the idea would be competition with prices allowed to fluctuate to what they really reflect,” he said. “If consumers in northern territories can be compensated by more direct means that means people in the more-populated areas can benefit.”