Hongkong Post - The Postmaster General's Statement

Hongkong Post registered an impressive growth of 3.6% in overall mail traffic and a 3.2% increase in operating revenue in 2012/13 over the previous year. However, due to unabated escalation of operating costs, Hongkong Post recorded an overall operating loss of $114 million for the year.

While Hongkong Post remains a Government department, it is required to be self-financing under the trading fund operation mode. Over the years, we have made full use of the flexibility afforded us under this mode of operation to offset cost increases through development of new business and services. This effort has enabled us to keep postage rates and postal charges unchanged for a record duration, much to the benefit of customers.

Hongkong Post`s less-than-upbeat financial performance in 2012/13 highlights the need to keep postage rates and charges for postal services at levels that properly reflect the underlying costs. Most of the principal postage rates in Hong Kong have not been revised for over 10 years. Under the universal service obligation to charge a flat rate for all delivery addresses in Hong Kong and to maintain an extensive mail collection and mail delivery network, our local mail service has continued to rely on cross-subsidies from other revenue streams. Charges for miscellaneous postal services such as registration fee, postal box rental and mail redirection fees were set before the Post Office Trading Fund was established in 1995 and are now well below cost-recovery levels.

As customers` communications needs and posting behaviour evolve in the digital age, the market for postal and courier services has become more diverse and competitive. There is a need for Hongkong Post to make continuous investment in technology as well as staff development so as to keep pace with the changes in service demands and to stay relevant to the community. In order to secure Hongkong Post`s long-term sustainability, restoration of its financial health becomes a priority task. As this report goes to print, we have announced the revision of principal postage rates with effect from 1 October 2013, broadly in line with the cumulative inflation, and the revision of miscellaneous postal charges, subject to the approval of the Legislative Council, with effect from 1 December 2013. Although these adjustments will not immediately bring Hongkong Post back in the black, they will help ease its financial pressure.

Hongkong Post is firmly committed to the delivery of good value for money services to our customers. To this end, we will continue to uphold our dual strategy of rigorous cost management and revenue generation through business development.

Hongkong Post boasts a comprehensive local delivery coverage that embraces 2.99 million residential and commercial addresses as well as a territory-wide network of 128 branch offices. To make better use of this unrivalled postal infrastructure, we have introduced a new counter collection service at our branch offices for internet-traded items. Customised logistics service leveraging on the unparalleled reach of our dispatch network is also on offer for high-end consumer products.

Our cost management initiatives include the amalgamation of the International Mail Centre and the sorting office at the General Post Office into a single facility at the Central Mail Centre which is progressing on schedule. Mail processing will become more efficient when the consolidated facility is fully commissioned in December 2014. The new Integrated Postal Services System to automate counter operations and improve integration of front-end operations with the back-end workflow will be rolled out in stages from mid-2014 onwards. In addition, we are working on new arrangements to better match the capacity of our mail processing and delivery facilities as well as retail outlets with service demand in order to optimise resource allocation and utilisation.

To generate revenue, Hongkong Post has placed emphasis on product innovation with a customer focus. In response to the changing customer needs arising from the growth of e-commerce and the prevalence of electronic communication, Hongkong Post has introduced a variety of new services, including a tracked delivery solution called e-Express to the US, Smart Post for local mail with a counter collection option, and a new, one-stop web-based Direct Mail platform to assist SMEs to extend their market reach through multi-channels at affordable costs. We will ensure that the product range offered by Hongkong Post stays in tune with customer aspirations.

In an increasingly competitive market driven more and more by customer preferences, Hongkong Post will not only strive to provide affordable services of good quality. We will also enhance customer experience by improving access to our service provision through the installation of barrier free access facilities at all branch offices, provision of postal information and mail tracking information on demand and the provision of an online facility to assist posting preparation by both bulk mailers and casual customers.

To ensure that Hongkong Post is fully capable of coping with the challenges posed by an ever-changing business environment, we have plans to expand our Air Mail Centre which is reaching its handling capacity and to upgrade our mail processing capabilities. In reflection of Hongkong Post`s status as a "Manpower Developer", we will also enhance the level of professionalism of our workforce through continuous training and development.

To take forward these strategic plans and programmes for corporate development, Hongkong Post needs to have the assurance of solid finances in the years ahead. In addition to efforts in cost management and revenue generation, we will reinstate the discipline of keeping postage rates and various postal fees and charges under regular review and adjust them, as required, from time to time.

Despite temporary setbacks, we remain optimistic about Hongkong Post`s future. Hongkong Post is a well-regarded institution in the community, and our entire workforce is constantly encouraged by the positive feedback we receive from our customers. As a trusted intermediary, Hongkong Post has new roles to play in the digital age. We will seize the opportunity to better equip ourselves to serve our present and future customers.

Mrs. Jessie TING
Postmaster General and
General Manager of the Post Office Trading Fund