3 First, it is worth emphasizing that smaller (poorer) economies see lower mail volumes (letters per capita). Countries with a GDP per capita (PPP) of below $1,000 see mail volumes of below 1 per person per year—compared with closer to 100 per person in countries with a GDP per capita of above $5,000 (Table 1).

# **<u>Table 1:  Postal Structure and Development</u>**

|**Indicator**|**Average fo**<br>_<$1,000_|**r GDP Per Capita (PP**<br>_$1,000-_<br>|**P) Band**<br>_>$5,000_|
|---|---|---|---|
|||_$5,000_||
|Letters/Capita|0.9|4.6|98.4|
|Total letter|10m|634m|2,468m|
|volume||||
|KM2 per post<br>office|4,702|1,738|458|

_Source: Calculated from UPU and World Bank data, 2001_ The _average_ consumer in poorer countries sends perhaps one letter per year—and we know that the great majority will neither send nor receive a single letter (at least not through the network captured by Universal Postal Union (UPU) statistics). In particular, there is little demand from businesses (which account for as much as 80 percent of letters sent) to deliver mail to the poorest in developing countries. This is because most do not have services that require billing (telephony or electricity, as it might be), and they are hardly an attractive target for companies in terms of marketing purposes. Demand from individuals is also likely to be lower –the majority of people in developing countries do not use the postal service for delivery of goods and many – the majority of those living on a dollar a day—are illiterate.

Many people in poor countries do not even live within usable distance of a post office, as is suggested by the fact that, for countries with a GDP per capita of under $1,000, there is only one post office for each 4,700 square kilometers of territory as compared to one office per 458 square kilometers for countries with a GDP per capita of above $5,000. However, it appears that only a very small percentage of the population that does live within walking distance of a post office currently use it even in reformed developing country markets. In Tanzania, for example, an average of about 0.4 percent of the population within the catchment area of a post office visit that office each week (PWC, 2004).<sup>4</sup> It should be noted that demand for poorly performing incumbent postal services may well be considerably lower than demand for postal content –as suggested by considerable bypass of the incumbent operator, as we shall see. Constraints on demand for services due to inadequate or absent service delivery will be one factor behind low levels of use, then. Nonetheless, the dominant cause for low volumes does not appear to be a mismatch between service and content demand. The primary reason for low volume is that demand for content delivery is strongly related to income—as suggested by the results of both postal reform and extending access.

Under reform, service quality improves, and this tends to increase use of the postal sector. But the usage increase, while impressive, is in the region of perhaps 100 percent, rather than the 10,000 percent differences between low income and high income country usage rates. For 4 In Malawi, the figure is closer to 0.2 percent.