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It appears that Prime Minister Junichiro Koizumi has come a step closer to his cherished goal of privatizing postal services — a showcase for his structural reform plans. However, last week’s Lower House vote on a postal reform package — which effectively ensures its Diet passage by the end of this month — marks only a small step forward, a modest milestone on the tortuous road to privatization.

The package has two broad aims: creating a public corporation to replace the Postal Services Agency and ending the government monopoly on mail service, beginning next April. This means, in principle, that private firms will be able to collect and deliver mail throughout the nation. Under the circumstances, though, that is unlikely to happen. Thus far, all major commercial couriers have chosen to stay out.

The reason for this is obvious: The bills in question are riddled with so many restrictions that nationwide competition is virtually ruled out. In this sense, the Lower House vote can be seen, for now at least, as a victory for old-guard legislators who want to keep the mail system essentially intact.

The postal corporation, which will handle not only mail delivery but also postal savings and life insurance, will be managed like a private company. It will operate as an independent for-profit entity, although it will remain under government oversight. It will keep its books according to corporate accounting rules. All of this will likely increase its freedom of operation.

The immediate question is how much the mail service will be liberalized. In the case of “general mail,” which is collected and delivered nationwide, private couriers will have to meet certain requirements, such as accepting mail (not exceeding 250 grams apiece) every day and delivering it in two days. In contrast, “special mail” will be delivered in selected regions in three hours at 1,000 yen or more for each item.

The sticking point is the definition of “postal mail,” which is handled exclusively by the post office. Private couriers can handle other types of mail. Postal mail currently includes not only letters and cards but also vouchers, direct mail, credit cards and community coupons. Beginning next April, however, certain types of direct mail (such as fliers that do not require confidentiality), credit cards and coupons will be excluded.

This move, initiated by Mr. Koizumi, is aimed at luring private firms into the lucrative direct-mail market, estimated at 500 billion yen a year. Meanwhile, “motorbike couriers” in Tokyo and other big cities — express couriers that shuttle mostly between corporate customers — are prospective candidates for special-post delivery. But high hurdles must be cleared to enter the nationwide postal-mail service.

Among the vocal critics of the mail reform package is Yamato Transport, the leading parcel courier. The company has refused to enter the national market, saying too many strings are attached to access. It has denounced the legislation for “putting private companies under public control” by limiting the freedom of newcomers.

Prime Minister Koizumi, who is seeking full privatization of all three services, says the mail service can be liberalized in stages. The statement amounts to a tacit admission that his initiative is being severely restricted by objections from the “postal tribe,” legislators backed by post offices and other vested interests.

The government is reportedly planning to set guidelines to ensure compliance with the principle of universal service. Such rules, however, should be sufficiently flexible to encourage the entry of private firms into the national market. Otherwise, the primary objective of postal reform — efficient management through competition — will not be achieved.

The prime minister rightly sees the legislation as a “milestone” on the road to full privatization — a word that has provoked strong reactions from antireform forces in his Liberal Democratic Party. He should keep pushing ahead with his campaign. A word of caution is in order, however: Privatization should not sacrifice the interests of residents in remote or depopulated regions where the post office, with its mail, savings and insurance services, plays an indispensable role in their lives.

The postal system is likely to follow essentially the same course as government enterprises before it — the national railways and the telecommunications and tobacco monopolies. The going will be rough, given the stubborn resistance from the postal lobbies. But privatization is part and parcel of structural reform. For those who have been fighting for it for the past four years, now should be the time for rethinking their strategy in order to meet the challenges ahead.

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