XN000022-1995-03-07 — Page 11

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"To reduce cross-subsidisation, the increases for local mail and surface mail to China, Macau and Taiwan will be slightly higher than inflation while the increases for surface mail to other destinations and for all air mail are below inflation.

"We have had a growing problem with large corporations and commercial mailers sending their printed papers in a manner that cannot be processed by the Mechanised Letter Sorting System (MLSS)," he said.

The major problems are plastic covers, over-sized printed papers or unenveloped printed papers.

costs.

"This results in the Post Office having to incur substantially higher operating

"In addition there has been public concern over the rapidly increasing use of plastic envelopes.

"In order to discourage such practice, printed papers that cannot be processed by the MLSS will no longer be entitled to the printed paper discount," Mr Pagliari said.

In line with the new charging system introduced by Universal Postal Union Congress which was held last year, the pricing structure for Bulk Air Mail, which is commonly used by commercial organisations in sending airmail items overseas in bulk, will be changed to recover the additional cost.

Unlike the current system of charging postage according only to the weight of the shipment, postage for this type of mail will be charged on both the weight and the quantity of the items posted. This will result in average increases of 4.3 per cent.

"Even after these increases, Hong Kong postal charges remain among the lowest in the industrialised world.

"Given that postage constitutes only a small proportion of overall consumer expenditure and business costs, the increases are unlikely to have any significant impact on general inflation," he said.

Mr Pagliari pointed out that because increase in costs incurred was higher than inflation, the Post Office was absorbing part of the increase through productivity improvement.

"Were postage rates and postal charges maintained at existing levels, the Post Office would incur a loss of $125 million in 1995-96, which would have to be subsidised from General Revenue.