Interview with the HayPost Trust Manager and newly appointed General Manager, Mr. Hans Boon with Mediamax Agency and the Banks.am web-portal (Yerevan, 20.08.2007)

- The transfer of HayPost management – a large local company – to a trust management is a relatively new concept for the Armenian economy. Please describe the details related to this new management instrument and explain the advantages and potential risks related to this.

- The government of Armenia made a courageous decision when deciding to transfer HayPost management to a trust. The HayPost Trust Management program will be implemented within 5 years with the purpose to establish favorable conditions for a highly commercialized HayPost.

Regardless of this, we expect certain risks related to this program. First and foremost, we can anticipate that both the government and the company request a quick financial surplus and turnaround. But in reality, our objective is not to quickly gain financial profit, but to ensure that we secure a well grounded and sustainable growth and commercialization. We are largely guided by a long-term vision and define success as a sustainable result and not a quick-win.

In fact, our goal is to strengthen and commercialize an entire postal sector, and not just a company. As such, we are aiming to set up a fair and favorable environment for healthy commercial competition.

We have to ensure that HayPost will, in a relatively short period, be able to provide the public with world class postal services – something which is our basic commitment.

- More that 8 months have passed since the agreement on the transfer of HayPost CJSC to the Dutch “HayPost Trust Management”. What have been your main achievements in this period and what do you plan to accomplish by the end of the year?

- I believe that it is essential to describe the most visible achievements. The first visible achievement was the opening of the first renovated post office downtown Yerevan, which is just the tip of the iceberg. We aim to accomplish renovations to all post offices across the country. Secondly, we have succeeded in improving the quality of postal services and postal delivery. For instance, if you send a letter in Yerevan before 18:00 to a destination within Armenia, the letter should reach its destination by the following morning at the latest. This is an indication that the HayPost mail delivery process has been duly reorganized and improved.

Another HayPost service improvement is the process of electronic files. For instance, a customer may send HayPost electronic files, and HayPost will be able to print and send these to a large number of clients. This is a convenient tool for corporate customers.

Additional HayPost programs will include money transfer services. This will be the basis of launching a Postbank. We will also have services to allow clients to purchase and receive goods through HayPost catalogues.

Apart from the visible achievements, there are numerous ’non-visible’ achievements that are carried out within HayPost. The first achievement in this regard relates to the development of our human capital. We are investing time and financial means in re-establishing our company structure and human resource capacity. We are also establishing cooperation’s with important foreign partners and financial institutions.

- The general population usually distrusts the arrival of new owners or managers, being afraid of tariff increases. Are there grounds for such concern within HayPost, and if so, how do you assess the current tariffs?

- I can confidently say that HayPost’s transfer to the trust management will not entail any tariff increases on basic postal services. HayPost has a certain level of monopoly related to postal services and we are extremely careful when identifying prices and tariffs.

Our priority is to make postal services – namely basic postal services - available for all public levels, regardless of their income. I would like to emphasis that despite the economic inflation in the recent years in Armenia, the tariffs related to postal services have not changed since 2001.

The problem related to postal service tariffs is that in Armenia today, there is a very small volume of mail delivery. According to the latest statistical data, there is only one postal item sent per person in Armenia. If we increase the volume of mail, we will manage to continue working with relatively low prices. As such, we are giving more importance to increasing the volume of mail and as such increasing the quality and efficiency of HayPost as a reliable postal company, rather than fixating ourselves on the issues of tariffs.

It is important to note that we have several special postal services such as registered mail, which we provide at much lower prices than their actual costs. As such, it is possible that there be relative tariff increase in such special postal services.
In conclusion, we wish to plan a reasonable tariff policy based on accurate expenditures, and this will be done in conjunction with the Public Services Regulations Committee.

- Nevertheless, don’t you think that the tariffs for the current traditional postal services are quite high in the country? For example, it’s cheaper to send a letter to Armenia from Germany than it is to send a letter to Germany from Armenia.

- I agree. The tariffs for regular postal services in Armenia may seem higher than in the West but the tariffs for special services in Armenia are relatively much lower. As such, we should not talk bout the increase or decrease of tariffs but about the necessity of cost balance.

For instance, when you send a letter from Armenia to Germany, the tariff consists of two components. If the letter is destined for Germany from Armenia, Armenia is required to pay a sum to the German post and this costs increases when the volume of posts from Armenia is relatively low. The mail volumes in both countries are significantly different and we should work to balance the volumes in order to balance the costs as well.

The second component that influences the tariffs is the fee related to transport carriers. At this stage, we are trying to consider all cost related aspects and balance the tariffs for both basic and special postal services.

Once we reconsider all of the expense and service-related series, only then will we be able to consider decreasing the tariffs for basic postal services.

- During the HayPost Trust Management signing ceremony, the Chairman of the Central Bank of Armenia, Tigran Sarkissian, stated that the development program elaborated with the Dutch ING will implement 18 postal services in the Armenian market. What new services are already implemented and what services can we expect in the near future?

- As I previously mentioned, we aim to improve the quality of a variety of existing services. If the baker is renown to making bad bread, the customer will never consider buying cakes from this same baker.

One of the services we are working to implement is the option of money transfer services. We are currently trying to partner and sign contracts with large financial international institutions in the U.S., Europe and the Russian Federation.

We recently signed a membership agreement with the Eurogiro network. This will give us an excellent opportunity to increase the volumes of efficient money transfer services. As such, HayPost will become a ’supermarket’ for remittances and money transfers.

Work is underway to modernize our post offices in Armenia that will simultaneously provide a variety of services such as internet access, retail and a large range of other services.

- The efficiency of a postal organization in many respects depends on the development of transport infrastructures. Armenia has had a transportation blockade for 15 years. To what degree does this affect the efficiency of HayPost’s services?

- This is a very serious problem not only for HayPost but also for Armenia’s economy as a whole. The country where I’m from – Holland – is geographically comparable to Armenia in terms of land size, but it is completely open for foreign trade. On the contrary, Armenia’s direct sea and railway communications abroad is completely closed. The primary way to send or receive mail is by air and potentially automotive transportations which is obviously less frequent.

When it comes to air transportation, we face problems related to the lack of daily flights, and as such, we cannot guarantee that mail will reach their destination on time.

Currently, there is the need to develop an integrated chain of supplies. For instance the development of catalogue sales; HayPost needs to provide a number of services to the Armenian market, fulfilling the role of both mediator and transporter simultaneously.

- Recently, you opened the first renovated post office in Yerevan. How many similarly renovated offices will appear in Armenia by the end of the year?

- We are working to develop a variety of post office designs. The renovated post office on Toumanyan Street is a middle-sized city-type post office which provides a set of commercial services and a large range of postal services

We are also elaborating models for professed postal supermarkets with the aim to represent a shop within a shop. In other words, the post office will provide no only postal-related services, but a variety of commercial and retail services as well.

Work is also being carried to establish postal service points such as small post offices located in local supermarkets.

By the end of the year about 3 to 4 middle-sized post offices will be opened. We are currently working on opening 2 ’mini’ post offices in Yerevan as well. We need more time to open large supermarket post offices taking into account the large volume of work they entail.

- What role do you give to IT-technologies when modernizing postal services?

- One of the basic elements in our work is the improvement of our IT. Considering that we have 900 post offices across Armenia, we need to ensure that all of them work efficiently within one single network, in one healthy structure.

Moreover, HayPost should only play the role of a postal service provider, but also provide Internet access for all.

- During the recent meeting with the OMX Group in Yerevan, you talked about HayPost’s plans of entering the market of securities. How are your plans moving in this direction?

- HayPost plans to establish itself in the stock market in the next 1.5-2 years. We plan to place company bonds and set up mutual funds – an alternative to the traditional savings account. This will be a great basic tool to help in the pension reform program in Armenia.

-To what degree will HayPost’s role change with the arrival of the Postbank? In other terms, when will HayPost’s function end, and when will the Postbank’s function begin?

- HayPost will never become a branch or a department of the bank. But in more specific terms, a client will always be able to conduct their standard banking needs within post offices. As it stands now, people are already able to make certain kinds of payment within HayPost postal offices. We can say that this is already a Postbank service.

The launch of Postbank services will ensure that all financial services will be effective, transparent and insured from any potential financial risks.

HayPost and Postbank will be integrated structures. For instance, the postal offices will be THE location where HayPost and Postbank clients will go to address their needs. If you present yourself to a post office and wish to open a bank account, the postal operator in the post office will provide you with the necessary forms to complete and help you process the initial applications. The decision to open the account, however, will be made by Postbank operators who will work with the bank customers thereafter.

The Postbank will be responsible to manage all financial services, and HayPost will be the Postbank mediator or a type of an agent.

More clearly, the post office is not a bank branch. The post offices will only fulfill the role of initial financial points. Moreover, the post office will not provide such services as mortgages or business credit loans. These services will be completed at the Postbank headquarters.

-When will PostBank” begin operating in Armenia?

-We hope to announce more specific dates to open the Postbank this fall. We are currently carrying out the work with the Central Bank of Armenia to obtain the required licenses and bank registration.

Additionally, we are thoroughly testing all the Postbank related components and services and will continue to do so until we are completely reassured that our operations are flawless.