Selangor Journal
Postman Amirun Mohammed Hussein (right) dan Syafiq Shamsuddin seen here packing the parcel belonging to customers into the delivery box of their bikes at the Pos Laju Centre in Petaling Jaya on May 15, 2021. — Picture by BERNAMA

OECD make recommendations to improve Malaysia’s small-package delivery services sector

KUALA LUMPUR, Oct 5 — The Organisation for Economic Cooperation and Development (OECD) has made several recommendations, including establishing a universal service obligations (USO) fund, to improve the level playing field in Malaysia’s small-package delivery services (SPDS) sector.

In its Competitive Neutrality Reviews: Small-Package Delivery Services in Malaysia report, which was released today, OECD said notwithstanding partial divestment and privatisation initiatives, state-owned enterprises (SOEs) continue to constitute a significant part of Malaysia’s economic structure, remaining as the main providers in key strategic utilities and services.

This includes the SPDS sector where Pos Malaysia, a state-owned enterprise, is in charge of USO, said OECD.

“Preventing the existence of a level playing field in the Malaysian SPDS sector are several obstacles that may harm competition, hinder the Malaysian economy, and stop consumers from benefitting fully from a rapidly developing e-commerce market,” it said.

In addition, OECD said some of these obstacles are linked to or affected by Pos Malaysia’s dual role of fulfilling its public service obligation (PSO) or USO and competing in the highly competitive SPDS market.

“As observed in many countries around the world, electronic communications are leading to drastic falls in the volume of traditional letters and postcards in Malaysia, increasing the commercial importance of the SPDS market to the incumbent postal operator, Pos Malaysia,” it said.

While there are different options to improve the level playing field in the SPDS sector, OECD said it is important to note that the rights, privileges and duties (or advantages and disadvantages) of Pos Malaysia are often interrelated and should, therefore, be looked at as a whole.

“Consequently, addressing the obstacles to competition in the SPDS sector in Malaysia requires a holistic approach.

“For instance, reversing or decreasing the rights and privileges of Pos Malaysia should be accompanied by a clear reassessment of the impact of possible disadvantages that result from Pos Malaysia’s PSO, including the compensation mechanism,” it said.

OECD said assessing the impact of SOEs on competition is important because competitive neutrality — state-owned and private businesses competing on a level playing field — ensures that all enterprises, public or private, domestic or foreign, face the same sets of rules.

“In order to ensure optimal economic outcomes, SOEs should compete against private entities on fair terms, while recognising and taking into account their contribution to socio-economic and policy objectives.

“A level playing field between public and private market participants leads to more choices, higher quality and lower prices for consumers, ultimately benefiting economic growth and development,” it said.

The report identifies 15 recommendations that are aimed to improve the level playing field in the Malaysian SPDS sector. Among the main recommendations are:

– The establishment of a USO fund, to which other licensees can partially contribute, is a valid alternative, although measures should then be introduced to ensure proportionate contributions, to avoid such a compensation fund leading licensees to exit the market.

– Ensure that regulated rates for universal service reflect Pos Malaysia’s actual costs and take into account any other cross-subsidisation or other public funds, grants, or subsidies accessible to Pos Malaysia.

– Require revenue and costs related to the universal service obligations to be clearly separated in Pos Malaysia’s accounts. Accounting separation is required to ensure that compensation is adequate irrespective of the mechanism adopted.

– Clarify who has jurisdiction over competition-law issues in the small-package delivery services sector. Consider conferring to the Malaysia Competition Commission’s (MyCC) sole jurisdiction. Alternatively, should continue to opt for MyCC and Malaysian Communications and Multimedia Commission (MCMC) having concurrent competition powers, make explicit reference in the Postal Services Act 2012 to the Competition Act 2010 as the relevant competition law applicable to the sector.

Moreover, implementing regulation should be passed to address cooperation and any competence issues between MyCC and MCMC.

– Except for land and facilities strictly related to Pos Malaysia’s USO, use competitive processes to assign the leasehold of government land and buildings with the aim of maximising their value. Rents should reflect market value.

“If fully implemented, these recommendations can be expected to generate significant benefits for the Malaysian economy and, more broadly, to Asean.

“Full implementation of the recommendations set out in this report can be expected to deliver positive long-term effects on employment, productivity and growth, and improve the ability of businesses to compete,” OECD said.

In the report, it said with regard to compensation, Pos Malaysia does not receive any direct funding for its USO. Pos Malaysia noted that Pos Laju’s commercial services revenue cross-subsidises Pos Malaysia’s USO.

“To maintain a level playing field with private competitors, SOEs need to be adequately compensated for the fulfilment of public policy objectives,” OECD said, adding that governments should avoid both overcompensation and under-compensation.

Additionally, OECD said if SOEs are overcompensated for their public policy activities, this would result in a subsidy for their competitive activities, distorting the level playing field, while under-compensation can jeopardise SOEs’ viability.

“Adequate compensation can be achieved through different mechanisms including specific legal or contractual provisions.

“Moreover, to assess whether the compensation is adequate, it is crucial to ensure any costs related to the fulfilment of public policy objectives be clearly identified and disclosed,” it added.

— Bernama

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