JAPAN WILL LIKELY be the first country in Asia to deregulate its postal services, according to Klaus Knappik, Chairman of Deutsche Post Global Mail GmbH, the world's second-largest global mail company. Knappik, who was in Australia to attend a board meeting in July, says the issue is a big discussion point in Japan today.

"The fate of Prime Minister Junichiro) Koizumi is said to hang on the fate of the liberalisation of the postal market," he says, adding that this could be an exaggeration because the Japanese understanding of liberalisation is different from that in western countries (Knappik spent some years working in Japan).

Singapore has also made 'overtures" to float its postal services. (In May, Singapore Telecom (Singtel) said it had invited investment bankers to submit proposals to float its subsidiary, Singapore Post. But Singtel said it was considering other options.)

Hong Kong, however, is a totally closed market,"It is amazing," Knappik told ASIA TODAY INTERNATIONAL "Hong Kong is supposed to be a free enterprise place." Deutsche Post has a good relationship with Hong Kong Post. "We feed mail through them, but we cannot collect mail in Hong Kong and send it out without involving Hong Kong Post," says Knappik.

"Asia is not easy. It needs an Asian identity, and it you go into some of these countries and you say that you are Deutsche Post, they say: `We don't have letters for Germany', or `we don't do business with Germany'."

Deutsche Post Global Mail is one of four companies operating under the Deutsche Post World Net (DPWN) banner - the others are DHL Worldwide Express, Danzas and Germany's Postbank. Knappik says Deutsche Post Global Mail will leverage its operations in Asia-Pacific off the profile of DHL, which, he says, is present in every territory and country in the region - second only to the ubiquitous presence of Coca Cola. Knappik says Deutsche Post is developing a strategy, to be unveiled in about three months, that will involve co-branding its products with DHL, co-operating with DHL and using the DHL network and services. Associate company Danzas, the world's leading seafreight forwarder company, is also present in most Asian countries.

"Compared with these two, we are relatively small," says Knappik. DHL and Danzas can do business freely; we cannot. We either have to work with a local post operator or we have to follow the rules and regulations of the postal sector."

Although the world trend is to eventually privatise postal services, Knappik expects that, as with the airline industry, Asia "will come in pretty much last" in this area of deregulation. The Dutch Post Office is a public company, with the Dutch government holding a minority interest. Deutsche Post itself is a public company with the German government holding a majority stake, but Knappik says the government intends to sell down its interest and to maybe "one day not even be a shareholder".

"Australia is a relatively free market in terms of international mail delivery," he says. In 2000, Deutsche Post bought what was then Australia's largest private mail company, Letterbox, and its subsidiary, Skymail.

With the arrival of electronic mail, there has been a fundamental challenge to the mail business, says Knappik. "Consumer-to-consumer mail is indeed flat, maybe even declining," he says, adding: -But. amazingly. not to the degree that one would think".

"If you take email hype into consideration and so on, in some countries the decline is less than one per cent per year. Of course, that in itself is bad news. But business-to-business letters still have potential to grow."
The annual market for international mail is growing at 3.8 per cent, representing US$12 billion in turnover. Of that, Deutsche Post has 13 per cent market share, the second-largest in the world. Knappik says half of the business is still controlled by national post offices, but in future there will be a concentration in the hands of a smaller group of operators. "There is not enough room for 150 players," he says.

Operators like Deutsche Post are diversifying to value-added services, like direct marketing - a sector he hopes to develop and grow in Australia.

"The world marketplace is getting bigger... and companies in Australia which never thought they would ever handle foreign markets may have the opportunity to do so now through operators like us. We can organise mail shots in countries far away.

"In the past, Australian companies needed to open an office offshore in the target market, gather intelligence and slowly try to penetrate. Today they can come to us and use our direct marketing capability."

Deutsche Post has databases of potential clients. So instead of printing and sending marketing brochures from Australia, he suggests Australian exporters use companies like Deutsche Post. It is cheaper, he says, and they can modify marketing material to suit the taste and culture of the foreign market, whether it is Germany, Belgium or Italy. A successful campaign used in Australia may not necessary have the same impact in another country. "Tourism is one of the largest growth areas - it is on industry that now lives on mail shots. In the past it was unthinkable for a hotel to promote directly. It would have to go through travel offices. Today, they can pick a market and target a select group of potential guests in any one country.