Public_Sector_Reform_of_Hong_Kong_Post

 Introduction Management problems which deteriorating the service performance of the public sector existed in Hong Kong for a long time. With the purpose of tackling those weaknesses, the Hong Kong Government started to import a series of reform among the public services provision in the late 1980s. Efficiency enhancement of the public sector became one of the Hong Kong government’s top priorities. Trading Fund was one of the executive agencies which designed originally for improving the efficiency and quality of service of government departments. Hong Kong Post has been adopted this executive agency since 1 August 1995. After operating with Trading Fund for more than ten years, the expected result has been achieved but conversely it has emerged another new problem too. This paper will investigate the backgrounds of public sector reform, the details of Post Office Trading Fund in Hong Kong and also evaluation of this change.  Causes of reform The public sector existed several managerial problems which seriously affecting the public services’ quality and standard at all times. Firstly, the traditional public services cannot effectively improve their quality. As there was lack of formal evaluation programmes for public sector to review their performance, it is difficult for them to have a comprehension of whether the services provided have produce effective outcomes. Secondly, the traditional public sector cannot effectively meet the service standard expected by citizens. The role of public sector in the pass was just a reactive service provider. The comments from service users were not took into account seriously. Consequently, dissatisfied service users congregated. Besides, the size of government expanded too much that leaded to difficulty for sustaining a centralized controlled system. Thirdly, the conventional public services cannot effectively control the cost. Since there is absence of any business annual planning or tactics in the public sector, usage of cost did not need cautious consideration and therefore superfluous substantial increase in cost resulted in. Due to those weaknesses in public service provision, the Hong Kong government tried to establish a public sector reform in late 1980s with the purpose of improving the efficiency, effectiveness of service and also money saving. In 1992, the Efficiency Unit was established to develop the reform programme. One of the focuses of reform programme is to find out the most suitable agency to deliver the services. Trading Fund, public cooperation and privatization are three different types of executive agency for public sector reform. The Post Office in Hong Kong has undergone the reform in 1995 and Trading Fund was established by a resolution passed by the Council on 19 July 1995. The arrangement of trading fund is considered appropriate for: (a) Core services carried out by the Government as a matter of policy on a partial or full cost recovery basis; (b) Government support services normally provided to other government departments where a charge can be raised; and (c) Commercial services provided for the general public at a charge. Since the service of Hong Kong Post can be recognized as a commercial service provided for the general public at a charge, Trading Fund is the most appropriate type of agency for Hong Kong Post. The Post Office Trading Fund was set up under the Trading Funds Ordinance and the Post Office has operated with this agency since 1 August 1995.  Details of Reform  The Post Office The obligation of the Post Office is to provide a local and overseas postal service in Hong Kong with reliability and efficiency at a reasonable and affordable price. The core services provided by the Post Office are: (a) Receiving, collecting, sending, dispatching and delivering postal articles as specified in the Post Office Ordinance (Cap. 98); (b) Providing Speedpost and local courier services; (c) Retailing stamps and postal related products through counter outlets and appointed agents; (d) Philatelic services and issue of stamp products; (e) Agency services of government departments, public bodies and public utilities, which are compatible with postal related services; (f) Certification Authority services; and (g) Remittance services  The Post Office Trading Fund To fulfill the duty of the Post Office, it is necessary for the Post Office to response quickly and be synchronized with the shifting needs in the market sector. Therefore, the Post Office should introduce new service and improve the quality of existing services periodically instead of just keep it up. Based on this idea, the Post Office has changed its operation in the form of Trading Fund by 1 August 1995. The Post Office Trading Fund operated in a self-financing basis after paid a trading fund capital from the government for its establishment. It is an accounting unit which is monitored by the law of the Trading Fund Ordinance (Chapter 430). The principal criterion for operating a trading fund is that the Post Office should be able to cover the full cost of its operations from the revenue raised from the sale of its services. It should be generate sufficient income to: (a) cope with expenses and the debt incurred by providing services; and (b) provide a reasonable return to the sole shareholder (the Government). Under the Trading Fund Ordinance, staffs from the Post Office remain part of civil service. However, there are nine managers with commercial sector experiences employed on contract-basis by the Business Development Branch since 1997-1998 in order to stimulating the improvement of services. Besides, under the Ordinance, the Postmaster General is the General Manager to control and manage the Post Office Trading Fund. He/ She cannot amend the service without the resolution from the Legislative Council.  Framework Agreement In order to protect the interests of customers and give autonomies to the Post Office, the Framework Agreement is set up with definition of the role and responsibility of the Secretary for Economic Services and the Postmaster General, the functions and goals of the Post Office, the business planning and control agreements, staffing and salary matters and the linkage between other departments and service users.  Services Improvement With the aim of improving service quality and efficiency, the Post Office has adopted several programmes to achieve this objective. (a) Performance Pledges: it is used to fulfill the customers’ needs and exceed their expectations. The Post Office pledge to provide professional services which are: On time, Reliable, Convenient and Value to money. (b) Customer Feedback: a series of channels are used for collecting customer feedback, including customer liaison group, collection of customer suggestions, market research and public perception survey. (c) New and enhanced services: in addition to the traditional postal services, the Post Office carried out a variety of new services to improve financial performance. For example, the Postshop service which sales the souvenirs, the E-post service which transfers the e-mail into traditional paper mail and the Remittance service. With the implement of Trading Fund, the financial flexibility provided has enabled the Post Office to provide better services with quality and efficiency.  Evaluation on reform Even though the Post Office Trading Fund can provide more financial flexibility, there are some operational constraints that affecting the chance for the Post Office to achieve the break-even revenue and sustain the operation. The return rate on fixed assets has decreased from 47.8% in 1996-1997 to 1.8% in 2000-2001(Appendix 1b). There are several reasons that can explain the poor financial performance in the Post Office. With the increasing globalization of telecommunication markets, the electronic communication devices such as e-mail and SMS have gradually replaced the traditional postal services. There are totally 2.1% of decline in mail volume from 2007 to 2009(Appendix 1a). Besides, the multinational courier private companies such as DHL, Fedex and UPS and the local small-scale courier companies appeared in a large extent. While facing to these competitors, the Hong Kong Post Office is at a disadvantage position both in price and flexibility. In addition, there are some operational constraints among the Trading Fund. The discretion over fees and charges in the Hong Kong Post is limited and less than the private operators since these is a restriction from the Post Office Ordinance. The Governor in Council may at any time by order revise any rates of postage determined by the Postmaster General. Thus, the Postmaster General does not have a completed control on the determination of rate of postage. Moreover, international mail service actually is a profitable service as it can subsidize the local mail service. However, an oversea postal administration and some oversea senders always deliver their mail through their own arrangement to Hong Kong’s recipient so as to bypass the international service system. As a result, the Hong Kong Post Office needs to confront with the loss of profit from international mail service. The principal criterion for operating a trading fund is that the Post Office should be able to cover the full cost of its operations from the revenue raised from the sale of its services. Nevertheless, the above constraints cause decline of profit in the Hong Kong Post that affecting the substantial operation in the future.  Conclusion The implement of Post Office Trading Fund can really achieve the aims for improving service standards and efficiency, and having greater flexibility in management too. However, at the same time, it causes another operational problem too since actually it does not have complete freedom to act commercially like other private operators.