AN intergovernmental agency called on Asean member- states to make sure that state-owned enterprises (SOEs) do not have undue advantage over private companies in the small-package delivery services sector for the sake of consumer welfare and cross-border trade.
The Organization for Economic Cooperation and Development (OECD), in a recent report, said that the regional bloc should enhance the competitive neutrality in the small-package delivery services sector amid the increasing e-commerce transactions.
The United Nations Conference on Trade and Development defines competitive neutrality as “the recognition that significant government business activities which are in competition with the private sector should not have a competitive advantage or disadvantage simply by virtue of government ownership and control.”
Leveraging on extensive networks, OECD noted that SOEs comprise a big bite of the small-package delivery services market in their respective countries, particularly the business-to-consumer segments. Some are even the top 10 players in the region in 2019.
“In most instances, these SOEs are the incumbent postal operators that prior to the sector’s full or partial liberalization held monopoly rights,” the group said.
The local postal operator is the Philippine Postal Corporation.
OECD said there has been a “clear trend towards liberalization” across the region. But, it noted, that the SOEs still account for a “significant portion of small-package delivery services in several Asean member-states.”
Better competitive neutrality, OECD said, can lead to lower prices for the consumers.
A 1-percent decrease in the price of delivery services can mean a financial benefit of EUR 93 million annually for the Asean economy, it explained.
“As the market for small-package delivery services is expected to grow at a compound annual growth rate [CAGR] of 12 percent between 2020 and 2025, this benefit could increase to EUR 141 million a year for each 1-percent price decrease by 2025,” OECD said.
Meanwhile, the group explained that a 5-percent decline would result in a benefit of between EUR 464 million and EUR 699 million a year.
In addition, enhancing competitive neutrality for the sector can boost foreign direct investments, small and medium enterprises and employment, among others, OECD said.
Recommendations
OECD proposed several recommendations to the Asean bloc to improve competitive neutrality, including the separation of regulatory functions and commercial activities of SOEs.
“Where state-owned enterprises are in the form of ministerial departments, corporatization plans should be implemented by establishing separate entities subject to generally applicable corporate laws and operating small-package delivery services on a commercial basis,” the group explained.
It is also helpful if there would be limited government intervention in the daily management of SOEs, OECD noted.
OECD said the governments should implement acts specifying the compliance of SOEs to applicable competition laws. This, as it enjoined the competition authorities to have advocacy initiatives about competitive neutrality.
At the same time, the organization said the SOE’s commercial activities should be subject to the same licensing requirements for other small-package delivery players.
“Alternatively, they should consider lowering the burden on licensees by simplifying licensing procedures and introducing measures to neutralize SOE’s potential cost advantage,” it added.
Growing e-commerce
The surge in e-commerce resulted in “unprecedented increase in demand” for small-package delivery services in the region, OECD said.
In 2019, total revenues for courier, express and parcel delivery were estimated at $7.92 billion; the figure is expected to rise to $16.91 billion by 2025.
“Cross-border e-commerce transactions have introduced new dynamics to international trade, while transforming value chains and requiring logistics companies to shift their business models,” OECD said.
“This shift is even more relevant in Asean, where member-states are moving from export-oriented to consumer-driven economies,” it added.