Privatisation on government agenda for Russian Post reform

The Russian government is preparing postal reforms that could include a public flotation of Russian Post, ministers revealed this week. Russian communications minister Igor Shchegolev said on Wednesday that legislation to enact major postal reforms will be submitted to the State Duma – the lower house of Russia’s Federal Assembly – soon.

Speaking in the Duma, the minister said there were many questions being raised by all political parties regarding Russia’s postal network and the modernisation badly needed within it.

He said public investment in Russian Post was not leading to the desired results, but that it was difficult to maintain the universal service obligation in a competitive market where private sector operators were cherry-picking the best market segments, leaving less financially attractive services to the state-owned Post.

“We need to find mechanisms that will allow the more even distribution of the proceeds of the market,” Shchegolev said.

Although Russian Post is currently working on major infrastructure improvement projects, including IT system upgrades and new automated sorting centers to reduce costs and improve efficiency, it is still beset by deteriorated facilities and a reliance on low-income manual labour.

The minister said previous financial hand-outs from the government had not gone far enough to create long-term sustainability in the network.

Reforms

A draft law, “On Postal Communication” is being prepared by the Russian government that will allow for the sale of shares in Russian Post.

Following the minister’s speech, Russian Post said such a move would “greatly enhance” its effectiveness in a competitive postal market.

The Post said the government’s reform proposals will also allow it to provide a wider range of financial services – including money transfers, savings and loans – without requiring a banking license. And, it will respond to the growing challenge from electronic forms of communication.

Existing postal regulations date back to 1999, with Russian Post stating that the use of traditional mail has declined since then. Although thanks to its optimisation efforts it emerged from several years of losses in 2008, and has remained profitable since, Russian Post said the nation’s postal law “no longer meets modern requirements”.

“Despite all the measures taken, Russian Post is still in a very difficult position today,” the Post said in a statement to the media, and noted that the minister had said “very, very large sums of money” were needed to upgrade the technological base of the postal network.

Russian Post has around 390,000 employees and 40,000 post offices across the country.

Its status changed from a government department to a unitary enterprise in 2002, meaning that while its assets are owned by the Russian state, it operates independently from the government.