Postal authority prepares for free competition

Postal Authority director-general Yossi Shelley trimmed manpower slots by 230 positions (including seven or eight highly paid executives), slashed overseas travel, cut back phone expenses, dispatched superfluous secretaries from executive offices to post-office teller courses – and survived.

Union heads threatened, senior officials complained to the communications minister and workers went out on sanctions, but Shelley got his way.

"There is still fat, as in any other government body," he conceded in an interview in his office on the seventh floor of Postal Authority headquarters in Jerusalem this week. But postal services, he said, will work more efficiently with fewer workers; "the ones we dismissed were unnecessary. We have made significant progress in increasing efficiency – and we will do more when the authority is turned into the Israel Postal Company."

The Postal Authority, formed out of the Communications Ministry's postal services 16 years ago, is to become a much more flexible and streamlined state-owned company in 2004. The Budgets Law and Arrangements Law regarding the transformation passed on their first readings, and the second and third readings are due to be approved on January 1. A few months later, the company will be launched with signatures from the finance and communications ministers and gradually face competition from private mail-service companies through 2007. Another 500 staffers will go on early pension over the next three years, leaving the number of postal employees at about 4,000, and pension arrangements are being finalized. The Postal Authority will then have to sink or swim on its own.

The 46-year-old director-general (the seventh since 1987), who speaks fluent English, French, Russian and Arabic, completed a bachelor of science degree in industrial and management engineering and a degree from a private law school. He was nominally a Likud-affiliated political appointee (by then-communications minister and now Knesset Speaker Reuven Rivlin), but he has won high marks from senior Treasury officials for being an innovative, tough-acting manager who shuns political appointments.

Married to a former Russian immigrant and the father of two, the 1.95-meter-tall Shelley was a career officer in the Israel Defense Forces and chairman of the students' association at Ben-Gurion University. He later served as an adviser to the mayor of Beersheba, an official in charge of the income division and the manpower division at the Beersheba Municipality, chairman of the board of Issta Lines Ltd., a private businessman in real estate, metals and economic counseling, and, from April 2002, chairman of the Postal Authority. When the acting director-general retired, Shelley was named acting director-general and then in July was made fully fledged director-general; Likud activist Ya'acov Edry has been officially named chairman.

The authority hopes to emerge from its ongoing red ink in three years. In 2002, its operating deficit was NIS 150 million; in 2003, it was NIS 200m., but NIS 130m. of this resulted from paying compensation to workers who left the company before the official retirement age. In 2004, Shelley predicted, the operating deficit will be only NIS 40m., with NIS 130m. for worker compensation. Aside from authority staffers, the number of independent postal agencies owned and run by contractors will be reduced in areas where there are already enough postal branches.

There are two other major reasons for the authority's deficit: Postal tariffs are the lowest in the Western world, and the law barring private companies from delivering letters in bulk has not been enforced by the police and the government authorities.

Shelley noted that it costs less to send a letter from Israel to Stockholm than a letter from one Swedish city to another. The two ministries refused to allow the authority to raise postal rates for four-and-a-half years, he explained, because they wanted the postal services to increase efficiency and feared that it would add to inflation. The cost of a domestic stamp is still NIS 1.30. But when the Postal Company is launched, it will be allowed to raise postal charges by 12 percent – to partially compensate for the 18% Value Added Tax that it will then have to pay.

Currently, private mail delivery companies are allowed to handle packages, but not regular enveloped mail. Nevertheless, in the past few years, the authority has lost NIS 20m. annually due to illegal competition, especially from the Messer Company (comprised of Aviv Shigur, the Be'eri Print Company and Bar Hafatzot), which nevertheless handles bulk-mailed envelopes.

Shelley noted that entrepreneurs deliver mail only on profitable urban routes, while the Postal Authority has had to bring the mails also to every distant settlement inside the Green Line and out, which are not profitable routes. It will continue to do so as the Postal Company. Postal staffers in the new company will be encouraged to be more pleasant to customers and more efficient because they will have to worry about the competition, he said. But even now, a recent independent customer survey found the Postal Authority was voted No. 2 in service, after Israel Railways.

The authority has complained endlessly in recent years about the pirates, but the law has not been enforced. A plea to the High Court of Justice is due to have a hearing in February. Shelley declared that such flagrant flouting of the law is disconcerting and a bad example – and he is clearly concerned that piracy will continue, even when the Postal Company is gradually exposed to competition. But the fine for violation will by law be increased from the current NIS 20,000 to NIS 250,000 and be a criminal violation. He hopes this will serve as a deterrent.

The company will try to increase income by introducing a variety of new services, much according to the model of European postal services. It has already issued Visa-Cal debit cards for customers with Postal Bank accounts and introduced a variety of state services such as facilitating changes of address, renewal of identity cards and passports for the Interior Ministry and collecting used batteries from schools for safe disposal. The company intends to improve its Express Mail Service (from Israel to abroad) to raise it five to seven places above its currently 29th place in an international comparison.

Shelley said he wants to install computers in postal branches by which customers can consult the banks to determine which is the best for investments. The Postal Company would also be thrilled to have its branches serve as polling stations for municipal and Knesset elections, but the director-general says he doesn't think the local or parliamentary authorities believe the time is ripe for this.

The Postal Bank, which does not charge banking fees, is to be officially unified with the Postal Company, which will "be able to hire better employees and give bonuses for improved performances," said Shelley, who added that a government authority is bound by a straitjacket of civil- service limitations.

With the explosion of e-mail, Internet and fax usage, said Shelley, the Postal Authority is aware that the volume of regular letters is steadily decreasing. Even holiday greetings and invitations are often dispatched electronically rather than on printed, mailed cards. But the slack will be covered by the dispatch by mailmen and special messengers of packaged products sold via the Internet and catalogs, he asserted. There will always be a place for postal services, Shelley concluded.

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