TERMINAL DUES Impact on financial transfers among designated postal operators of the Universal Postal Union 2018-2021 cycle agreements - Postal ...
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TERMINAL DUES Impact on financial transfers among designated postal operators of the Universal Postal Union 2018-2021 cycle agreements U.S. Postal Regulatory Commission 22 September 2017
TERMINAL DUES Impact on financial transfers among designated postal operators of the Universal Postal Union 2018-2021 cycle agreements AUTHORS Henrik Ballebye Okholm Anna Möller Boivie Jimmy Gårdebrink Martina Facino © Copenhagen Economics A/S 22 September 2017
Preface
The Universal Postal Union (UPU) system of terminal dues governs payments between designated
postal operators for the transport, sorting, and delivery of cross-border letter post items in the
destination country. UPU rates are used by many postal operators across the world, both directly and
indirectly (as a fall-back provision when negotiating bilateral agreements). In this report we show that
the UPU rates are distortive and lead to USD 3.1 billion in financial transfers between postal operators
in 2018.
In a report to the Postal Regulatory Commission In this previous study, we estimated the financial applied is identical to that applied in the previous
(PRC) in September 2014, Copenhagen Economics transfers caused by the UPU terminal dues system to report, but with the addition of refined volume and
identified three types of potential market distortions 950 million Special Drawings Right (SDR), tariff data and with new specifications for the
created by the current UPU terminal dues system: equivalent to approximately 1,4 billion USD. We also updated regulation. Due to these refinements, the
highlighted that financial transfers primarily are magnitude of financial transfers in this report is not
1. Distortion of competition for (i) last-mile created by low terminal dues for small packets, one directly comparable to that in the previous report.
handling and (ii) first-mile handling of cross- of the letter formats covered by the terminal dues
border letter post items system.
2. Distortion of demand for (i) delivery services
within and outside the terminal dues system, (ii) In September 2016, the UPU Congress agreed on a
domestic versus cross-border delivery, and (iii) number of changes to the terminal dues system,
cross-border delivery originating in transition entering into effect as of January 1, 2018. Perhaps
versus target countries most notably, the changes include separate (and
3. Financial transfers1 between designated postal higher) terminal dues for E-format items (bulky
operators letters and small packets).
In December 2015, the PRC asked Copenhagen Against this background, the PRC has asked
Economics to conduct a quantitative analysis, Copenhagen Economics to estimate the impact of
estimating the magnitude of the third type of these changes on financial transfers going forward.
distortion: the financial transfers between
designated postal operators caused by the terminal The report provides new quantifications of financial
dues system in 2014. transfers with the current system and with the
updated system respectively. The methodology ANNA MÖLLER BOIVIE
Managing Economist
Project Manager
1 Financial transfers are the net gain or loss for the postal operator, deriving from the difference between the actual terminal dues paid/received and the counterfactual
terminal dues that would be paid/received in the absence of the UPU system of terminal dues. This concept is explained in detail in chapter 1.
32. THE UPU EXECUTIVE SYSTEM FOR SUMMARY 1. INTRODUCTION TERMINAL DUES 3. FUTURE 4. IMPACT OF DEVELOPMENTS CHANGES TO IN CROSS-BORDER TERMINAL DUES LETTER POST ON FINANCIAL FLOWS TRANSFERS APPENDIX
EXECUTIVE SUMMARY
Executive summary
Terminal dues are payments between designated In this report, we quantify the financial transfers Our results suggest that the changes agreed upon in
postal operators for the transport, sorting and caused by the UPU terminal dues system with and Istanbul only have a minor impact on the total value
delivery of cross-border letter post items in the without the changes agreed in Istanbul. We do this of financial transfers created by the UPU terminal
destination country. These international tariffs are by comparing the actual terminal dues rates set out dues system. In our base case scenario, the total
governed by the Universal Postal Union (UPU). by the UPU Convention to a set of counterfactual value of net financial transfers are estimated to SDR
terminal dues rates which reflect the prices that 2.2bn (corresponding to USD 3.1bn) in 2018 with the
The compensation that designated postal operators would have been paid without the UPU Convention amended system in place. This is only 8 per cent
receive from delivering inbound cross-border letter in place. lower than what would have been the case if the
mail (i.e., the actual terminal dues) differs from the current system had remained in place (resulting in
compensation that they would require in a situation net financial transfers of SDR 2.4bn).
without the UPU terminal dues system in place (i.e.,
the counterfactual terminal dues). This gives rise to
financial transfers between designated postal
operators around the world. Financial transfers can
potentially create distortionary spill-over effects on
national markets (e.g., compensation for postal
operators’ losses funded by taxes). The financial Total value of financial transfers applying current and updated system
transfer for each bilateral flow of cross-border letters for UPU terminal dues in 2018
is determined by the difference between the actual
and the counterfactual terminal dues rate for that
SDR, Million
bilateral flow.
3.000
The UPU terminal dues rates are effective in cycles of
2.401
four years. The current rates (in place from 1 January 2.500
2.216
2014 to 31 December 2017) were established by the -8%
UPU Convention adopted in Doha in 2012. 2.000
In September 2016, the UPU Congress in Istanbul 1.500
set the path for the 2018 through 2021 cycle of UPU
terminal dues. The agreements made in Istanbul 1.000
build on the current system, but with adjustments to
some key parameters. Perhaps most notably, the 500
updated system separates terminal dues for small
and large letters (P- and G-format items) from those -
Current System, in 2018 Updated System, in 2018
of bulky letters and small packets (E-format items).
Source: Copenhagen Economics
6A determining factor for the development of financial Financial transfers 2016-2021
transfers over time is the development in cross-
border mail volumes (in particular small packets SDR, Million
containing products bought online). In order to 3.500
quantify the total value of financial transfers over 3.000
time, we therefore include in our analysis a forecast 2.500
of the development of international letter volumes.
2.000
The results of our analysis show that, although the 1.500
adjustments agreed in Istanbul may reduce the size 1.000
of transfers slightly compared to the current system, 500
they will not prevent transfers from growing with
-
time. In fact, our base case scenario suggests a 2016 2017 2018 2019 2020 2021
growth of financial transfers by 50 per cent 2018-
Current System Updated System
2021. This corresponds to an average annual
compound growth rate of 14 per cent.
Source: Copenhagen Economics
Although previous reports and literature
unequivocally point to the fact that small packets will Total financial transfers, by scenario of volume development
grow as a result of growing e-commerce, there is
uncertainty about the precise pace. In order to SDR, Million
account for this uncertainty, we have created three 4.500
scenarios for the future development in international 4.000
letter mail volumes. The scenarios provide us with a 3.500
range for the predicted total financial transfers 3.000
created by the UPU system for terminal dues. 2.500
2.000
1.500
The resulting transfers range between SDR 2.1 bn
1.000
and SDR 2.4 bn in 2018, growing to between SDR
500
2.8 bn and SDR 4 bn in 2021.
-
2018 2019 2020 2021
Base case Extensive case Conservative case
Source: Copenhagen Economics
71 INTRODUCTION 1.1 BACKGROUND 1.2 THE ASSIGNMENT AND OUR APPROACH
1.1 Background
THE UPU SYSTEM FOR TERMINAL DUES globally 2 and cross-border e-commerce trade is terminal dues to all international letter mail (i.e., no
The Universal Postal Union (UPU) is an expected to have a global compound annual growth application of bilateral or other multilateral
intergovernmental organisation and a global forum rate (CAGR) of 29 per cent between 2014 and 2020 3. agreements). This assumption is reasonable to assess
for cooperation between governments on topics the design of the current system and changes made
related to the postal sector and international postal UPU members revise the terminal dues rates every to it for purposes of measuring the maximum
services. The UPU was founded in 1874. At that time, four years in a general congress and changes to the financial transfers under the system currently and as
the organisation included 21 member countries. system must be agreed by a majority of UPU modified. However, this assumption also likely
Today, 220 countries and territories are part of the members. The last congress took place in Istanbul in overstates the actual financial transfers between
UPU. September 2016, where the members agreed on a regions and countries where bilateral and
number of changes to the current system to be multilateral agreements govern international mail
Amongst other things, the UPU sets the rules for implemented in 2018. transactions.
international mail exchanges between designated
postal operators in its member countries. An Data on global letter post flows within and between
essential part of this work concerns inter- regions demonstrates that the main flows of cross-
governmental agreements governing terminal dues. border letter post have historically been between
industrialised countries. Large volumes of cross-
Terminal dues are the payments between designated border letters multiply the impact of the regulated
postal operators for the transport, sorting, and terminal dues rates, since they apply to more letters
delivery of cross-border letter post items in the that need to be delivered. This suggests that
destination country. They apply to all products designated postal operators in these countries would
classified as letter items, which is split into three be most affected by any changes to the current level
groups: small letters (P), large letters (G) of terminal dues. However, with an increasing share
(sometimes referred to as “flats”), and bulky of citizens in Western Europe and North America
letters and small packets (E). The groups are shopping at online marketplaces in Asia, the flow of
defined by a set of minimum and maximum cross-border letter mail from Asia to Western
dimensions and weights. Europe and North America is increasing. As a result,
designated operators in these countries are also
Terminal dues affect all cross-border deliveries of significantly affected by any changes to the current
letter mail either directly or indirectly by serving as a terminal dues system.
fall-back provision in the negotiation of bilateral
agreements. As some cross-border letter post traffic Countries may agree on other terms than the UPU
grows, spurred by positive developments in e- terminal dues rates. These bilateral agreements will
commerce, these payments become increasingly in that case determine the actual compensation
important for postal operators. In 2015, a total of 3.4 between those postal operators. In this report, we
billion cross-border letter post items were sent assume that all countries in our analysis apply UPU
2 UPU (2015) Research on Postal Markets
3 Accenture (2016) Cross-Border Ecommerce 9THE CONCEPT OF FINANCIAL TRANSFERS delivery of domestic letter post items. Since most of effect, representing either a positive or negative net
Financial transfers emerge because the actual the costs for mail delivery are incurred in the last- financial transfer for the designated postal
compensation that designated postal operators mile delivery phase, the 70 per cent is an operator in question.
receive from delivering inbound cross-border letter approximation of the domestic price for last-mile
mail (i.e., the actual terminal dues) differs from the delivery of a priority, single-piece letter. QUANTIFICATION OF FINANCIAL
compensation that they would require in a situation TRANSFERS
without the UPU terminal dues system in place (i.e., The inbound effect is the difference between the In 2015, the Postal Regulatory Commission (PRC)
the counterfactual terminal dues). The distortion per actual terminal dues rate received by a designated asked Copenhagen Economics to quantify the size of
letter sent (outbound) or received (inbound) is thus postal operator and the counterfactual rate, financial transfers created by the UPU terminal dues
the difference between the actual and the aggregated for all inbound (import) letter mail system. Our analysis revealed an estimated total
counterfactual terminal dues rate. volumes. The outbound effect is the difference value of net financial transfers between 154
between the actual terminal dues rate paid and the designated postal operators in the current terminal
Our analysis is based on a counterfactual terminal counterfactual rate, aggregated for all outbound dues system of approximately 950m. special drawing
dues rate corresponding to 70 per cent of the price (export) letter mail volumes. The sum of the inbound rights4 (SDR) in 2014, corresponding to 1.4bn. USD.
charged by the postal operator for end-to-end effect and the outbound effect corresponds to the net
The concept of financial transfers explained
The figure and table to the right illustrate the concept Net
of financial transfers. It provides an example Inbound effect Outbound effect
effect
calculation of the net effect for three countries (A, B,
and C):
• A has a high cost for last-mile delivery and is a net B-A: 400*(0.1- A-B: -400*(0.1-
exporter of cross-border letters, 0.5)=-160 0.5)=160 Loss:
A
• B has a high cost for last-mile delivery and is a net C-A: 200*(0.1- A-C: -200*(0,1- 80
importer of cross-border letters, 0.5)=-80 0,1)=0
• C has a low cost for last-mile delivery and is a net
exporter of cross-border letters.
The terminal due per kg is assumed to be 0.14 for the A-B: 400*(0.1- B-A: -400*(0.1-
0.5)=-160 0.5)=160 Loss:
three countries and the counterfactual terminal dues B
C-B: 400*(0.1- B-C: -100*(0,1- 160
are assumed to be 0.1 for country C and 0.5 for country
0.5)=-160 0,1)=0
A and B. Based on the mail volumes exchanged
between the countries, the net effects are the
following:
A-C: 300*(0.1- C-A: -200*(0.1-
Country A: net loss of 80 0.1)=0 0.5)=80 Gain:
Country B: net loss of 160 C
B-C: 100*(0.1- C-B: -400*(0,1- 240
Country C: net gain of 240 0.1)=0 0,5)=160
Note that the total loss equals the total gain, proving
that the terminal dues system creates a pure transfer of
money between designated postal operators. Source: Copenhagen Economics
4 The amounts are expressed in SDR, which is also the currency that we will use in our analysis. In December 2014 1 SDR corresponded to
approximately 1.46 USD according to the IMF 101.2 The assignment and our approach
THE ASSIGNMENT OUR APPROACH
In the most recent UPU Congress in Istanbul in Our analysis is based on a seven-step approach
September 2016, a number of changes were made to where we:
the UPU terminal dues system. These changes will 1. Collect and update the existing model with new
come into effect in 2018 and may impact the data, including updates on domestic postage
financial transfers caused by the system. In fact, rates and volumes.
some changes agreed in Istanbul were de facto aimed 2. Analyse necessary changes in the terminal dues
at reducing these transfers. model based on the outcome of the Istanbul
congress.
In the study conducted on behalf of PRC in 2015, 3. Change model specifications according to
Copenhagen Economics quantified the value of the changes agreed in Istanbul.
financial transfers and analysed the patterns of the 4. Run the model with the UPU system before and
distribution of positive and negative net transfers for after Istanbul to estimate the effect of the
different countries. Against the background of the changes of the Istanbul agreement on total
recent changes to the terminal dues system, the PRC transfers and individual countries.
has asked Copenhagen Economics to update the 5. Design scenarios for future outlook.
model for calculating financial transfers from the 6. Run the model with future scenarios to estimate
UPU terminal dues. the effect on financial transfers.
7. Discuss and interpret the results of our analysis.
The updated model takes into account the outcome
of the UPU Congress in Istanbul. Furthermore, the Our approach is also depicted on the next page.
PRC has asked for a scenario analysis based on a
stylised forecast of letter volume development.
11Illustration of our approach
1 3 5
Input Scenario analysis of
New data on postal Change of model
postal volume
rates and volumes specifications
development
2 4 6
Update of data in New model:
Existing model: New model:
existing model: New system,
Model Current system, 2014 New regulatory
Current system, new Applied on future
data system, new data
data5 scenarios
Transfers 2018-2021
Transfers in 2018 Transfers in 2018
with new system,
Output with current system with new system and
including volume
and current volume current volume
forecast
7
Result Effect of new system Effect of market developments
Source: Copenhagen Economics
5 An overview of the data used in the model can be found in the appendix. 122 THE UNIVERSAL POSTAL UNION (UPU) SYSTEM FOR TERMINAL DUES 2.1 THE DESIGN OF THE UPU TERMINAL DUES SYSTEM 2.2 CHANGES AGREED AT THE ISTANBUL CONGRESS 2.3 IMPLICATIONS FOR THE ESTIMATION OF FINANCIAL TRANSFERS
2.1 The design of the UPU terminal dues system
THE TERMINAL DUES SYSTEM IS A TWO- Table 2.1: Universal Postal Union groups
TIER SYSTEM Number of countries and
The current UPU system for terminal dues is a two- Group Description
territories in the group
tiered system dating back to 19896. It consists of six
groups of countries belonging to two different systems: 1.1 41 Countries in target system prior to 2010
the target system and the transitional system. 1.2 13 Joined target system in 2010
2 24 Joined target system in 2012
The transitional system mainly applies to exchanges of
international letter mail to, from, or between 3 39 Joined target system in 2016
designated operators in countries traditionally
4 53 Apply transitional system rates
considered “developing”. The target system mainly
governs the exchange of letter post items between 5 50 Apply transitional system rates
designated operators in countries and territories
previously thought of as “industrialised”. In 2010, Note: UPU countries and territories are divided into six groups based on a postal development indicator (PDI), which comprises a
countries and territories classified as “developing” macroeconomic component (gross national income, GNI, per capita) and a postal-specific component (normal unit cost per letter
based on full-time staff). The data are from 2014.
started to join the target system. Source: UPU (2015) Statistics and Accounting Guide,
http://www.upu.int/uploads/tx_sbdownloader/guideTerminalDuesStatisticsAccountingEn.pdf
Countries in the transitional system can opt in to the
target system, but not the other way around. Table 2.2: Terminal dues rates type by origin and destination group
Depending on when they joined the target system or
when it is foreseen that they will join the target system, Paying country or territory
Receiving country (destination) Rate Paid
UPU members are currently divided into 6 groups: 1.1, (origin)
1.2, 2, 3, 4, and 5, see Table 2.1.
Target Target
TERMINAL DUES RATES DEPEND ON THE
Target
GROUP TO WHICH THE SENDER AND
RECEIVER BELONG Transition Transition
The terminal dues received by a designated postal
operator for the last-mile handling of cross-border
Target Transition
letter post depend on the terminal dues group to which
it belongs as well as on the terminal dues group to Transition
which the sending postal operator belongs. As of 2016, Transition Transition
countries or territories that are part of the target
system (groups 1.1, 1.2, 2, and 3) pay each other target Source: UPU (2015) Statistics and Accounting Guide,
rates, while terminal dues to, from, and between http://www.upu.int/uploads/tx_sbdownloader/guideTerminalDuesStatisticsAccountingEn.pdf
countries or territories in the transitional system
(groups 4 and 5) are paid at transitional rates, see Table
2.2.
6 WIK (2010) Study on the External Dimension of the EU Postal Acquis, page 218 14Actual terminal dues rates are calculated based on In practice, however, caps and floors are so close to
the UPU methodology set out in the 25th UPU each other that the terminal dues received by target
Congress for the period of 2014 through 2017. countries are often a fixed rate that is not aligned
with their domestic tariffs.
THE TRANSITIONAL SYSTEM
For the transitional system, the UPU prescribes The schedule of terminal dues rates applicable to the
rates (for delivering inbound letter mail) that have different groups is laid out in Table 2.3. In addition,
both per item and per kilogram components. These terminal dues in the target system are adjusted based
per item and per kilogram rates for the transitional on the quality of service of mail delivery.
system are equal to the minimum level (i.e. the floor
rate) of the target system for any given year.
In particular, terminal dues rates are calculated as a
fixed rate per kilogram if the total inbound flow from
a certain country is less than 75 tons per annum. This
is done by assuming an average number of items per
kilogram of mail and setting one per kilogram rate
for transition countries.
Table 2.3: Schedule of terminal dues rates
If the total inbound flow from a certain country is
Mail flow Terminal dues 2017, SDR
above 75 tons per annum, a fixed per-item rate is
applied in combination with a fixed per-kilogram
Cap: 2.507/kg + 0.321/item (CALCULATION OF THE ACTUAL Figure 2.1: Calculation of uncapped terminal dues rate
TARGET RATES
In order to calculate the current terminal dues rates SDR
for countries in the target system, the UPU makes 1,4
use of domestic prices which are later related to pre- 1,2
defined caps and floors. We need information about 1
two reference tariffs:
0,8
• The tariff for a 20 g small (P) priority letter post
item in the domestic service, converted into SDR 0,6
(DP1) 0,4
• The tariff for a 175 g large (G) priority letter-post 0,2
item in the domestic service, converted into SDR
0
(DP2)
0 20 40 60 80 100 120 140 160 180 200
According to the UPU Convention, the terminal dues Weight, gram
rate per item before caps and floors is 70 per cent
times the tariff of the 0-20g small letter (DP1) times Source: Copenhagen Economics; UPU (2015) Statistics and Accounting Guide
0.01 (10 grams assumed to be the average weight for
a small letter7). In order to calculate per-kilogram The target rate is calculated by multiplying the per where,
rates, as a first step, a linear relationship between item and per kilogram floor rates by a ratio of M = constant rate of change = (DP2-DP1) / (0.175-
weights and tariffs is assumed and calculated. These uncapped revenue and floor revenue. This means 0.01) (this is the slope in the diagram in Figure 2.1)
two rates (per item and per kilogram) are then that if domestic tariffs in one country are higher than DP1 and DP2= domestic postage rates without VAT
applied to an item of average weight (the reference the floor rates, that postal operator will get a higher for 0-20g P and 100-250g G
weight is assumed by the UPU to be 81 grams in the add-on to the floor rate (but not higher than the cap). Wavg = the average weight of a letter post item, set
current system), in order to get the uncapped at 81g
terminal dues rate for an average item, see Figure The target terminal dues rates per kilogram are thus Rwfl = floor rate per kilogram
2.1. calculated as: Rifl = floor rate per item
If the uncapped terminal dues rates for the reference × − 0.01 + For each bilateral mail flow, the effective rate will
weight are higher than the cap, the capped rates will = 70% × × depend on (i) the group to which a postal operator
× +
be used. If the uncapped terminal dues rates for the belongs, (ii) from which country the inbound mail
reference weight are lower than the floor, the floor Similarly, the target terminal dues rates per item in flow is coming, and (iii) whether or not the terminal
rates will be used. Finally, if the uncapped terminal are calculated as: dues for the bilateral flow in question is subject to a
dues rates for the reference weight are between the × − 0.01 + cap or floor.
cap and the floor, then a target rate is calculated = 70% × ×
× +
based on the uncapped terminal dues.
7 UPU (2017) Statistics and Accounting Guide, page 6 162.2 Changes agreed at the Istanbul Congress
The terminal dues rates are decided upon at the UPU letters (P and G) from bulky letters and small “flatter”. This implies a lower compensation per
Congress for inclusion in the Universal Postal packets (E). kilogram of mail but a higher compensation per
Convention. The Convention was last revised in number of items as compared to the current system.
September 2016 in Istanbul. The 2016 Congress in We have identified three key aspects of the updated This change reflects the fact that bulky letters and
Istanbul set the path for the 2018 through 2021 cycle system with implications for the financial impact of small packets, compared to letters, are more
of UPU terminal dues. The agreements made build the system from 2018: expensive to handle at lower weights.
on the current system, but with adjustments to some 1. New target system formula including a
key parameters. A comparison of key parameters separate ‘rate line’ for bulky letters and small The key parameter used to adjust this feature is the
between the current system and the updated system packets “item-to-kilo ratio”. The item-to-kilo ratio is
is provided in Table 2.4. 2. New structure and level of caps and floors for commonly expressed as a percentage, but is perhaps
bulky letters and small packets more intuitively described as a weight. It is the
One important change agreed in Istanbul was the 3. Higher annual increase in the caps for bulky weight that, if multiplied by a specific per-kilo rate,
introduction of a new classification of E-format letters and small packets adds the same amount as the corresponding per-
shipments. Currently, the E-format is defined as item rate. Mathematically, it is simply the per-item
“bulky letters” and is characterized only by its The classification of countries has been consolidated rate divided by the per-kilo rate. It therefore
physical specifications (not by the content of the into four groups instead of the current six. This establishes the rate structure for bulky letters and
shipment). After 2018, there will be a formal change reflects the fact that the rates paid by small packets in the target system. Whereas the
recognition of the fact that some E-format shipments countries in groups 1.2 and 2, and separately in 4 and item-to-kilo ratio is 0.128 for all products in the
contain documents (defined as bulky letters) 5, gradually transition towards the rates applied current system, it will be 0.445 for bulky letters and
whereas others contain goods (defined as small among industrialised countries in group 1.1 at the small packets in the new system and remain the
packets). An important reason for this change is the same level. Furthermore, the UPU Congress same for small and large letters.
growth in e-commerce which is calling for more approved an Integrated Product Plan (IPP) that may
shipments containing goods to be sent cross-border. have future implications for terminal dues, see Box NEW LEVELS OF CAPS AND FLOORS FOR
Since these shipments are usually more expensive to 2.1. SMALL PACKETS
handle in the last mile compared to shipments Going from the current system to the updated
containing documents, the terminal dues rates that SEPARATE RATE LINE FOR version in 2018 will also mean that the level of caps
postal operators receive as compensation for last- BULKY LETTERS AND SMALL PACKETS and floors that apply will shift.
mile delivery will be especially important for these The updated system still builds on a target formula
shipments. However, concerning the terminal dues that departs from domestic postage rates. Instead of For bulky letters and small packets, the cap per
charged/received for E-format shipments in the having the same formula in the target system for all kilogram will be 37 per cent lower going from 2017 to
2018-21 cycle, no distinction will be made between letter post formats, the updated system now 2018, whereas the per-item cap is 120 per cent
bulky letters and small packets. separates small letters (P-format) and large letters higher. This means that the caps also have a flatter
(G-format) on the one hand, and bulky letters and rate structure for bulky letters and small packets.
Perhaps the most important feature of the updated small packets (E-format) on the other. The new rate
system is the practical separation of small and large structure for bulky letters and small packets is
17HIGHER ANNUAL INCREASE IN CAPS FOR
BULKY LETTERS AND SMALL PACKETS
After 2018, the caps for small packets will increase at a
faster pace for two of the three groups in the target
system. For group 2, which is currently in the target
system, the annual increase in caps for bulky letters
and small packets will increase from 6 per cent to 9.6
per cent per year. For countries in group 3, which
joined the target system in 2016, the annual increase
will be 13 per cent per year. For small and large letters,
as well as for bulky letters and small packets in group
1, the annual increase remains the same as in the
current system.
Table 2.4: Key parameters, current
and new cycle
2014-2017 2018-2021
cycle cycle
Reference weight, P/G/E 81,1g 91,9g
Reference weight, P/G n/a 37,6g
Reference weight, E n/a 375g
Item-to-kilogram ratio, P/G/E 0,128 0,128
Item-to-kilogram ratio, P/G n/a 0,128
Item-to-kilogram ratio, E n/a 0,445
Caps and floors, per item, P/G same level
Caps and floors, per kilo , P/G same level
Caps and floors, per item , E increase 120% - 140%
Caps and floors, per kilo , E decrease 30% - 37%
Increase in caps, E, group 1 3% 3%
Increase in caps, E, group 2 6% 9.6%
Increase in caps, E, group 3 2.8% 13%
Source: UPU (2016) 2016 Istanbul Acts, Universal Postal
Convention
Note: The increase in caps and floors are expressed in annual
changes
18BOX 2.1: INTEGRATED PRODUCT PLAN restricted to documents while small packets (E- In 2018, the UPU will hold an extraordinary mid-
Besides the changes regarding terminal dues format) can contain only goods. Parcel-post items term Congress that aims to consider an updated
discussed above, another reform, the Integrated and Express Mail Service (EMS) will remain version of the IPP that includes proposals relating to
Product Plan (IPP), was decided upon by the unchanged. the remuneration system. These proposals will serve
Istanbul congress. Currently, the first step of the as a basis for implementation of the second step of
plan is approved and the second step still remains to The potential impact of the IPP on the financial the IPP in 2020.
be agreed on. transfers caused by the terminal dues system lies
precisely in the separation of documents and goods. The precise implications for the terminal dues
The aim of the IPP is to develop a fully integrated With the current definition of the E-format, small system and the associated financial transfers will
portfolio of products (letter post items, parcel post packets containing goods are treated identically to depend on how the IPP is implemented and
items and EMS) and a suitable remuneration system bulky letters containing documents, see illustration executed. The small packets play an important role in
that cover the costs of delivering the products in the below. As of 2018, based on the IPP, this will no the international letter post system and will be a key
last mile. longer be the case. factor also in the future.
As part of the implementation of step 1, the first The first step is aimed to have mainly conceptual
stage on the route to integration will be to introduce implications and bring only minimal operational
a documents and goods classification. Letter-post changes for designated postal operators.8
formats P and G and bulky letters (E-format) will be
Documents Goods
Letter-post items Parcels
Non-priority P G E
& Small Large Bulky Small
Priority Letters Letters Letters Packets
Express Express Mail Service
Source: UPU (2017) 26th Congress. Integrated Product Plan (IPP) 2017–2020. Congress–Doc 39.Rev 1
8 UPU (2017) 26th. Integrated Product Plan (IPP) 2017–2020. Congress. Congress–Doc 39.Rev . Page 2 192.3 Implications for the estimation of financial transfers
Figure 2.2: Transfers with current
NEW TERMINAL DUES RATES FOR BULKY
and new TD system
LETTERS AND SMALL PACKETS COULD This indicates that the financial transfers still persist
SDR
REDUCE FINANCIAL TRANSFERS since the gap between actual and counterfactual rates 5
Financial transfers emerge because the actual is not likely to be closed in the new system. Thus, the 4,5
Transfer (new)
terminal dues rates differ from (generally being financial transfers are not likely to be fully corrected
Transfer (old)
4 The difference between the cap
lower than) the counterfactual rate (i.e., the rate that for with the updated system. Figure 2.2 to the right 3,5 and the counterfactual terminal
3 dues rates will still remain
the postal operator charges for last-mile handling of illustrates with an example how the gap between large for many bilateral flows
2,5
a comparable domestic priority letter post item). regulated terminal dues rates and the counterfactual 2
rates may still persist. 1,5
Today, this difference between actual terminal dues 1
rates and counterfactual rates is especially large for FOR SOME BILATERAL FLOWS, 0,5
0
small packets and bulky letters, since they are more TRANSFERS CAN EVEN INCREASE IN THE
0 0,05 0,1 0,15 0,2 0,25 0,3 0,35 0,4
costly to deliver and, hence, often are priced higher UPDATED SYSTEM
weight, kilograms
than smaller letters. With the updated system, terminal dues rates for
New Cap Line, E Current Cap Line, E
bulky letters and small packets will increase for
If the new structure of terminal dues (flatter and bilateral flows when the average weight is low
higher rates for bulky letters and small packets) (generally below 380 gram). However, for flows with Figure 2.3: Cap for group 1 with
implies that the actual terminal dues rates move average weights above a certain point, terminal dues current and new system
closer to the counterfactual rates, this means that the rates will be lower than today. This is because the
SDR
new structure will reduce the financial transfers. new rate structure for bulky letters and small packets 2,50
is flatter, and, therefore, there will be a point where
Transfer (old)
Transfer (new)
THE NEW SYSTEM WILL NOT ELIMINATE this rate line crosses the rate line for the current
Transfer (new)
2,00
Transfer (old)
THE FINANCIAL TRANSFERS system. This will be the case for both capped and
Today many countries with high domestic prices are uncapped flows. 1,50
receiving the capped terminal dues rates. Higher
caps in the new system are therefore an important Figure 2.3 to the right illustrates with an example 1,00
parameter for reducing financial transfers. how above a threshold of 380 grams the financial
0,50
transfers are larger in the new system compared to
For some particular flows, the counterfactual rates under the current system.
0,00
based on domestic tariffs are far greater than the
regulated terminal dues rates. For this reason,
despite being higher and flatter, caps in the updated Weight, kilogram
system will still in many cases apply, making the Current Cap Line, E New Cap Line, E
actual terminal dues rate received/paid far below the
counterfactual terminal dues rate. Source: Copenhagen Economics based on UPU data and
company websites
203 FUTURE DEVELOPMENTS IN INTERNATIONAL LETTER POST FLOWS 3.1 HISTORICAL DEVELOPMENT IN CROSS-BORDER MAIL VOLUMES 3.2 METHODOLOGY FOR VOLUME PROJECTIONS 3.3 SCENARIOS FOR FUTURE DEVELOPMENT IN INTERNATIONAL LETTER VOLUMES
Introduction and main findings
In this chapter, we show how future mail volume The growth in the volumes of bulky letters and small
estimates are incorporated into our model of packets is likely to differ across geographical regions.
financial transfers. In order to assess the impact of Capturing these dynamics is important since it will
the regulatory changes in the coming terminal dues impact the financial transfers between countries
cycle (2018-2021) we have to develop different located in different regions.
scenarios for the future development of cross-border
letter volumes. Since the updated regulatory Our results demonstrate a shift in cross-border letter
framework for the terminal dues separates small and delivery patterns with a larger share of international
large letters from bulky letters and small packets, we letters being delivered from the Asia-Pacific region
need to assess the volume development for the and a smaller relative share being delivered from
different letter formats over time. We consider the industrialised countries in Western Europe and
development from 2016 (our base year for volume North America. This trend is largely driven by the
data) to 2021 (the last year of the coming terminal growth in e-commerce and is expected to continue in
dues cycle). the future.
Our forecast of letter volumes 2016-2021 consists of
two steps. First, we analyse available data on
historical mail volume development until 2016. We
find that international mail volumes have had a Figure 3.1: Development of international letter mail, base case
negative trend overall, mainly as a result of electronic
substitution. However, we also find that part of the Volume, Million
international letter mail volume, namely bulky 3500
letters and small packets, have been increasing 3000
rapidly in recent years due to increased e-commerce. 2500
Second, we incorporate projections of e-substitution
2000
and cross-border e-commerce to estimate future
volumes for use in three scenarios. Figure 3.1 shows 1500
our estimated base case development of cross-border 1000
mail volumes for the three different letter mail 500
formats between 2016 and 2021.
0
2016 2017 2018 2019 2020 2021
P G E
Source: Copenhagen Economics based on modelling data
223.1 Historical development in cross-border mail volumes
LETTER VOLUMES ARE DECLINING, Figure 3.2: Global cross-border letter volume development, 1990-2015
LARGELY DUE TO ELECTRONIC Volume, index
SUBSTITUTION
102
Between 1990 and 2015, international letter mail 100
98
volumes declined by more than 10 per cent, see
96
Figure 3.2. Although this development is driven by
94
increased substitution to electronic means of 92
communication, there is no evidence that 90
industrialised countries with more mature online 88
infrastructure have experienced higher rates of 86
decline in letters than developing countries. In fact, 84
evidence indicates that developing countries have 82
experienced a proportionally higher decline in mail 80
1990 1995 2000 2005 2010 2015
volumes, partly due to a steep increase in technology
adoption. Source: UPU (2016) Research on Postal Markets
Note: The index shows the development where 1990 is normalized to 100
Whereas the development differs across regions with
the largest relative declines in the Arab countries and Figure 3.3: Change in outbound cross-border letter volume, 2010-2015
in the Asia-Pacific region, see Figure 3.3, the average
development in letter mail volumes 2010-2015 was - Eastern Europe Industrialized
Africa Latin America Asia-Pacific and CIS Arab countries countries
2 per cent per year. We take this as a base line for our
scenarios for future volume developments for small
and large letters, assuming a similar pattern in the -1,9%
-2,9%
future.
-5,8%
-7,9%
-10,6%
-17,4%
Source: UPU (2016) Research on Postal Markets
23PARCELS ARE INCREASING RAPIDLY DUE Figure 3.4: International parcels, globally
TO E-COMMERCE
At the same time as international letter mail volumes Volume, index
have been falling, international parcel mail volumes 115
have increased substantially – a trend largely driven
by the increase in cross-border e-commerce, see 110
Figure 3.4
105
This growth is not homogenously distributed across
regions. Whereas there has been a rapid increase in 100
the international flow of parcels from countries in
the Asia-Pacific region to countries in Western 95
Europe and North America, countries in the Middle
East region and in Africa have so far not seen the 90
1990 1995 2000 2005 2010 2015
same growth of e-commerce as the rest of the world.9
Note: 1990 = 100
Source: UPU(2016) Research on Postal Markets
CROSS-BORDER E-COMMERCE GOODS
ARE OFTEN DELIVERED IN THE MAIL Figure 3.5: International letter volume by letter type
STREAM
Since many of the items bought online are small in Volume, Billion
size and of low weight, these are often not delivered 1,8
as parcel post, but instead as letter post (small 1,6
1,4
packets). In fact, the UPU estimates that 80 per cent 1,2
of “mail items” generated by e-commerce weight less 1
than 2 kg and are processed in letter post streams.10 0,8
0,6
0,4
The fact that e-commerce items are shipped in the 0,2
letter mail stream is reflected in a significant increase 0
in the international volumes of small packets Transactions Correspondence Direct Mail Printed Matters Small Packets
between 2005 and 2015. Thus, whereas the volumes P G E
of small letters (P-format) and large letters (G-
format) in the international mail flows have declined 2005 2015
over the past ten years, the volumes of small packets
(E-format) have increased, see Figure 3.5. Source: UPU(2016) Research on Postal Markets
9 UPU(2016) Research on Postal Martkets, page 21; 10 UPU (2017) About Letter Post Development
http://www.upu.int/en/activities/letter-post-development/about-letter-post-development.html 24A SHIFT FROM DEVELOPED COUNTRIES Table 3.1: International deliveries (tonnage) of goods, 2011
TO ASIA
To Developed Asia and Latin America Transition
The worldwide development of the flows of bulky From Africa World
countries Oceania and Caribbean economies
letters and small packets can be somewhat Developed
misleading as e-commerce market size and growth 46.3% 2.4% 12.1% 7.0% 2.8% 70.6%
countries
differ considerably between regions. Nevertheless,
Africa 0.7% 0.2% 0.1% 0.0% 0.0% 1.0%
international flows of small packets are following a
global trend with a higher share of small packets Asia and
21.6% 0.3% 2.7% 0.5% 0.4% 25.5%
Oceania
originating from Asia.
Latin America
1.7% 0.0% 0.1% 0.3% 0.0% 2.1%
Table 3.1 and Table 3.2 show inter- and intraregional and Caribbean
flows of goods in the postal delivery stream (small Transition
0.5% 0.0% 0.0% 0.0% 0.3% 0.8%
packets, parcels and packages) in tonnage as a economies
percentage of global cross-border postal flows in World 70.8% 2.9% 15.0% 7.8% 3.5% 100.0%
2011 and in 2016 respectively. Although this data
also includes other items than letter mail, it still Source. UPU (2017) The data was provided by the UPU
provides an indication of the development in letter Note: Goods are here defined as small packets, parcels and packages
mail flows (especially since parcel post and small
packets are expected to follow similar patterns). Table 3.2: International deliveries (tonnage) of goods, 2016
To Developed Asia and Latin America Transition
Based on this information, we observe that the From Africa World
countries Oceania and Caribbean economies
developed countries in 2011 represented over 70 per Developed -20
cent of global inbound and global outbound flows. 26.3% 0.9% 20.8% 2.7% 2.4% 53.1%
countries %pts
In 2016 however, developed countries accounted for
little over 60 per cent of the global inbound flows Africa 0.7% 0.2% 0.2% 0.0% 0.0% 1.1%
and 50 per cent of global outbound flows. At the Asia and +18
same time, intraregional flows between developed 33.2% 0.4% 4.2% 1.4% 4.0% 43.2% %pts
Oceania
countries have decreased by 20 percentage points. Latin America
Another key feature is the fact that Asia now 1.0% 0.0% 0.1% 0.2% 0.0% 1.3%
and Caribbean
accounts for over 25 per cent of global inbound flows Transition
and over 40 per cent of global outbound flows. 0.7% 0.0% 0.1% 0.0% 0.5% 1.3%
economies
This information will be used as input when we make World 61.9% 1.5% 25.4% 4.3% 6.9% 100.0%
our projections for the future development of inter- Source: UPU(2017) The data was provided by the UPU
and intra-regional letter mail volumes. Note: Goods are defined here as small packets, parcels and packages.
253.2 Methodology for volume projections
In this section, we present a scenario-based Although the development in cross-border e- Secondly, as e-commerce matures, consumers tend
approach to forecast future developments of commerce is expected to be a good approximation, it to buy heavier goods, leading to a larger share of
international letter mail flows. We base our scenarios is important to keep in mind that that there are some goods above 2kg. As a result, the growth rate for all
on the historical development presented in section important differences. The most important of these e-commerce is expected to be higher than the growth
3.1 as well as the existing research regarding the differences is that e-commerce growth often is rate for items delivered in the letter mail stream.
future outlook for global e-commerce. expressed in monetary terms. This means that
estimated growth rates of e-commerce are likely to PREVIOUS RESEARCH ON E-COMMERCE
When estimating future developments for letter mail be higher than the growth in small packets. There are GROWTH
volumes, it is important to distinguish between the two reasons for this: A number of studies have attempted to forecast the
three letter mail formats (P, G and E), which exhibit growth of e-commerce. Four of these are
different growth patterns. Whereas we assume that Firstly, as consumers become more used to buying summarised in Table 3.3. These studies all represent
the observed historical decline in mail volumes will online, they tend buy more expensive goods. This e-commerce growth in terms of cross-border online
continue for small and large letters across all leads to a higher growth in monetary value than in sales of merchandise. The comparison shows that the
geographical regions, we assume that small packets the number of items bought and delivered. growth rates are fairly similar across the studies.
will continue a positive development trend which,
however, will differ across geographical regions.
By combining information from several sources we
first design a base case with regional growth rates for Table 3.3: Growth of B2C Cross-border e-commerce sales – comparison
the three different letter post formats. We then of studies
depart from the base case to form a conservative
scenario and an extensive scenario. The conservative Author/ Company Compound annual
Forecast year
Year growth rate*
scenario assumes a slower decline for P- and G-
format items and a slower growth for E-format Accenture/
2014 2020 27%
items. Conversely, the extensive case assumes a AliResearch
steeper decline for P- and G-format items and more OC&C
2013 2020 39%
rapid growth of E-format items. (6 countries)
PayPal
E-COMMERCE AS AN IMPORTANT PROXY 2013 2018 24%
(6 countries)
FOR SMALL PACKETS
UPS/
As e-commerce is a key driver for the growth of E- Comscore
2014 2020 27%
format items globally, the available knowledge and
research on e-commerce growth forms an important
Note: * The CAGR are those reported and by comparative study made by UNCTAD (2016). In Search of Cross-border E-commerce
input to our scenario analysis. Trade Data
Source: UNCTAD (2016). In Search of Cross-border E-commerce Trade Data
26Figure 3.6 shows forecasted growth of e-commerce Figure 3.6: B2C Cross-border e-commerce (USD billion), 2014-2020
for different regions. It illustrates how more mature
e-commerce markets, such as Western Europe, see
slower growth rates going forward, while markets
starting from a low value begin to see rapid growth.
Source: Accenture (2016) Cross-Border Ecommerce
27In the following, we outline how we have determined 3. THE TOTAL OUTBOUND GROWTH Growth rate
the annual growth rates for E-format items in our RATES Export of flow % group
scenarios. We do this in five steps. Whereas emerging economies in Asia, such as China
and India, are expected to grow at a fast pace,
growth rate,
Industrialised ∑ from
Industrialised
export going
to [group]
countries to [group]
1. Organize countries into four groups Industrialised countries in North America and
2. Estimate total average growth rates for inbound Western Europe already have high outbound flows
small packets and will not growth very fast in relative terms. a b c
3. Estimate total average growth rates for outbound Symmetrically, transitional economies and
small packets developing countries do not have large outbound 5. THE GROWTH RATES BETWEEN
4. Estimate volumes of individual flows flows and are therefore expected to see significant GROUPS ARE CALCULATED FROM TOTAL
5. Derive growth rates of individual flows growth rates in relative terms. IMPORTS AND EXPORTS PER REGION AND
INDIVIDUAL WEIGHTS
1. THE COUNTRIES ARE ORGANIZED INTO 4. VOLUMES ARE USED TO DETERMINE By combining several sources we can now form our
FOUR GROUPS* THE INDIVIDUAL FLOWS’ GROWTH RATES estimates of annual growth rates from and to each
E-commerce exporters: developed economies, To determine the growth of individual flows between group. By weighting by the volumes estimated by our
primarily in Asia. These e-commerce markets are country groups we rely on information about each model, each row and column must now average the
characterized by large outbound flows. country group’s share of global mail flows, as used in total export and import flows respectively.
Industrialised countries: developed economies our model.
with mature e-commerce markets. In other words, because we know a and c in the
Transition economies: emerging economies, The individual inter-regional growth rates (inbound equation above and symmetrically for the import
largely consisting of countries within the OECD. and outbound) are multiplied by their share of global flows, we can derive the growth rates for each
Developing countries: developing countries with (inbound and outbound) mail flows. This calculation individual group-to-group flow.
less developed e-commerce sectors. is repeated across all regions and provides us with
the total growth rate of inbound and outbound mail
For an exact presentation of which countries are flows for a region.
included in each group, see appendix C.
For example, to arrive at the total growth rate of
2. THE TOTAL INBOUND GROWTH RATES Industrialised countries’ outbound volumes, the
E-commerce development is used as a proxy for the growth rates of flows going from these countries to
flow of small packets. the other regions are multiplied by the respective
shares of outbound flows that goes to each group and
Mature e-commerce markets such as North America then summed across all regions. More detailed tables
and Western Europe buy more expensive items with the results for each group-to-group flow are
online. Therefore any growth rate measured in reported in appendix C.
monetary values will be higher than if measured in
number of items shipped.
28
Note: *Details of the specific countries belonging to each group can be found in appendix C.3.3 Scenarios for future development in international letter volumes
2016-2021 ANNUAL GROWTH RATES FOR 2016-2021 ANNUAL GROWTH RATES FOR
SMALL AND LARGE LETTERS SMALL PACKETS - BASE CASE
For small and large letters (P- and G-format items), For small packets (E-format items), we start by
we assume the same decline for all inter- and outlining the base case. The annual growth rates of
intraregional flows for three scenarios: inter- and intraregional flows in the base case are
• Base case: -2 per cent per year shown in Table 3.4. The total of each column and row
• Conservative case: -1 per cent per year are an approximated average of the total export or
• Extensive case: -3 per cent per year import associated with each region.
Table 3.4: Annual growth rates for small packets, base case, 2016-2021
To Industrialised
From E-commerce exporters Transition economies Developing countries Total
countries
E-commerce exporters 35% 20% 35% 35% 24%
Industrialised
15% 10% 10% 10% 10%
countries
Transition economies 15% 10% 15% 15% 12%
Developing countries 15% 5% 15% 15% 8%
Total 23% 16% 23% 23%
Source: Copenhagen Economics based on Accenture (2016) and UPU data
292016-2021 ANNUAL GROWTH RATES FOR Table 3.5: Conservative case
SMALL PACKETS – CONSERVATIVE CASE
To E-commerce Industrialised Transition Developing
total
Table 3.5 shows the annual growth rates of inter- and From exporters countries economies countries
intraregional flows in the conservative case.
E-commerce
30% 15% 30% 30% 19%
exporters
These growth rates represent a decrease of 5
percentage points compared to the base case. Industrialised
10% 5% 5% 5% 5%
countries
2016-2021 ANNUAL GROWTH RATES FOR
Transition
SMALL PACKETS – EXTENSIVE CASE 10% 5% 10% 10% 7%
economies
Table 3.6 shows the annual growth rates of inter- and
intraregional flows in the extensive case. Developing
10% 1% 10% 10% 3%
countries
These growth rates represent an increase of 5
Total 15% 5% 10% 10%
percentage points compared to the base case.
Source: Copenhagen Economics based on Accenture (2016) and UPU data
Table 3.6: Extensive case
To E-commerce Industrialised Transition Developing total
From exporters countries economies countries
E-commerce
40% 25% 40% 40% 29%
exporters
Industrialised
20% 15% 15% 15% 15%
countries
Transition
20% 15% 20% 20% 17%
economies
Developing
20% 10% 20% 20% 13%
countries
Total 18% 11% 18% 18%
Source: Copenhagen Economics based on Accenture (2016) and UPU data
30DISTRIBUTION OF ITEMS OF DIFFERENT Figure 3.7: Distribution of mail type, base case scenario in 2016 and
FORMATS 2021
By applying the base case scenario we obtain a 2016 2021
different mix of the three letter formats in 2021,
compared to 2016. The largest differences, by design,
happen for the bulky letters and small packets, which
goes from 35 per cent of the total international letter 35% 32%
volume in 2016 to 59 per cent in 2021, see Figure
50%
3.7. In total, the volume of international mail is 59%
predicted to increase. This is because the small 9%
15%
annual decline in small and large letters is
outweighed in absolute terms by the increase for the
bulky letters and small packets.
THE SHARE OF E-FORMAT ITEMS IS P G E P G E
PREDICTED TO GROW
The difference in the share of bulky letters and small
packets out of the total mail mix for our base case
scenario is illustrated in Figure 3.8. We can see that Figure 3.8: Development of international letter mail, base case
the E-format is expected to become the format with
Volume, Million
the greatest volume after 2018.
3500
3000
2500
2000
1500
1000
500
0
2016 2017 2018 2019 2020 2021
P G E
Source: Copenhagen Economics analysis
314 IMPACT OF CHANGES TO THE TERMINAL DUES SYSTEM ON FINANCIAL TRANSFERS 4.1 TOTAL VALUE OF TRANSFERS WITH AND WITHOUT THE CHANGES AGREED IN ISTANBUL 4.2 IMPACT ON INDIVIDUAL COUNTRIES 4.3 FINANCIAL TRANSFERS TOWARDS 2030
4.1 Total value of transfers before and after the changes agreed in Istanbul
Figure 4.1: Total value of financial transfers applying current and
In order to disentangle the impact of the regulatory updated system in 2018
changes implemented in 2018 from the impact of the
development in cross-border mail flows, we start our
SDR, Million
analysis by keeping mail volumes constant at a given
level.
3.000
We quantify the global financial transfers with the
new terminal dues system in 2018 and compare them
to a situation where the current system would be
applied also in 2018. 2.500 2.401
In this analysis, we rely on three specific -8% 2.216
assumptions:
• We assume that letter volumes develop according
2.000
to our base case scenario from 2016 to 2018
• We assume that domestic prices increase by an
inflation rate of 2 per cent per year, and
• We assume that the annual increase in terminal
dues rates in the current system is applied also 1.500
from 2017 to 2018 and onwards until 2021.
REGULATORY CHANGES ARE NOT
EXPECTED TO HAVE A LARGE IMPACT ON 1.000
TRANSFERS
Our analysis suggests that the changes agreed upon
in Istanbul do not bring about large changes to the
total value of the financial transfers. 500
Our simulations show that, compared to continuing
with the current system, the updated terminal dues
system is expected result in a 8 per cent decrease in -
financial transfers for 2018, see Figure 4.1. Current System, in 2018 Updated System, in 2018
Source: Copenhagen Economics based on UPU data and company websites
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