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Parcel-locker network: private or government-owned?

Parcel-locker network: private or government-owned?

Source: Business Times
Article Date: 08 Apr 2021
Author: Sharanya Pillai

This is pertinent because parcel lockers are much more complex than traditional mailboxes and come with steeper costs due to tech elements and security requirements to ensure public safety.

Singapore's nationwide parcel locker network is set to be owned and operated by the government entity Pick Network, with 1,000 locker stations expected in HDB estates, transport nodes and community centres by end-2021.

Ahead of this, some questions are worth asking: Should the parcel locker network necessarily be run by a government entity, or would it be better left to private market forces? What would Pick's endgame be?

This is pertinent because parcel lockers are much more complex than traditional mailboxes. They come with steeper costs due to tech elements and security requirements to ensure public safety.

On Monday, Parliament passed amendments to the Postal Services Act that paves the way for the Infocomm Media Development Authority (IMDA) to establish, install, operate and maintain the parcel locker network. The amendments also provide for IMDA to appoint a network operator, namely Pick, for these duties.

Why did IMDA not tender for a private-sector operator to run the network, but instead decide to form its own subsidiary?

Senior Minister of State for Communications and Information Sim Ann cited two key reasons. The first is the need to deploy the network expeditiously to realise productivity gains. The second is the importance of having a neutral operator to "ensure open and non-discriminatory access". That second point had come up during consultations with the industry.

Ms Sim said: "We believe that these twin objectives that are outlined would be best served by a network operated by the government."

But it is worth considering if other models could address these concerns. For instance, could the network have been contracted to a private player, with conditions mandated for the deployment timeframe and non-discriminatory access?

One private-sector player, speaking on condition of anonymity, was surprised by the government's involvement in the network. The executive said Pick would be "essentially competing" with private operators and placing them at a disadvantage.

To be sure, Ms Sim emphasised in Parliament that the "intention is not to put Pick in a favoured position" and that the network "will serve to complement, but not compete with, existing locker offerings".

But given that Pick will have much more scale and access to prime locations, the impact on private-sector locker operators could be something to watch.

The importance of maintaining market competitiveness was likewise highlighted by several Members of Parliament on Monday.

As PAP MP Ng Ling Ling raised, there is a need to ensure that "such an arrangement will not stifle innovation, or worse, create an unintended monopoly by the network operator, which may increase the cost of operations for delivery-service providers".

There are of course merits to having the government's muscle behind the parcel locker network.

Associate Professor Lawrence Loh of the National University of Singapore Business School said: "It gives the industry a jumpstart to have nationwide interoperable provisions, for the benefit of the consumer."

Likewise, Roshan Raj, a partner at consultancy RedSeer, said that there is a "good point for government intervention" as some areas may not be well-served by private parcel locker operators at the moment.

But he acknowledged the importance of maintaining market competitiveness. Adjustments could be made later to promote competition, he suggested.

"Once the targets are achieved, perhaps there could be a way to sort of roll back the government intervention, or minimise intervention to ensure that there's good, healthy competition," he said.

This prospect feeds into the bigger question of what Pick's endgame will be. In Monday's Parliament session, Workers' Party MP Gerald Giam asked: "In the long-term, will Pick be profit-oriented or will it be subsidised by IMDA? Or will it be eventually spun off like SingPost was?"

While replying that the network is still in its early stages, Ms Sim said that it is intended "to become a well-functioning part of the ecosystem".

"We do believe that there are certain gaps in the market that we need to plug, so that the previous inefficiencies ... are eliminated, but we do not intend for this to be done at the expense of long-term subsidies."

Some industry watchers suggest that Pick could eventually be privatised. But this may not necessarily create more competition. There is the question of whether other companies will be able to match up to an entity that started off with the advantage of being government-owned.

Dr Seyed Mehdi Zahraei, a lecturer in logistics and supply-chain management at the Singapore University of Social Sciences, notes that there are other possible models to explore.

"With price of the service and the locations of lockers as the two major factors for consumers to utilise parcel lockers, for sure government investment in scaling the network to HDB towns and providing subsidised rates will help to substantially increase the adoption rate," he said.

"However, instead of having a network fully-owned and operated by a government entity, it might be more beneficial to have a public-private partnership to develop and maintain such a network."

Whichever way Pick evolves, it will be closely watched by the rest of the world as a case study in the government's role in providing parcel-locker infrastructure.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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