MR YIU SI-WING (in Cantonese): President, in my capacity as Chairman of the Bills Committee on Travel Industry Bill, I would like to report on the deliberations of the Bills Committee.

The major objective of the Travel Industry Bill ("the Bill") is to establish an independent statutory regulatory body, i.e. the Travel Industry Authority ("TIA"); to provide for the licensing and regulation of travel agents, tourist guides and tour escorts. The Bills Committee has held 19 meetings including one meeting to receive oral representations from deputations and members of the public. The Bills Committee generally supports the proposals in the Bill to enhance the professionalism of the travel trade, foster the healthy long-term development of the travel industry and safeguard consumer interests.

The new regulatory regime under the Bill has made reference to the Travel Agents Ordinance ("TAO") and the existing regulatory requirements imposed by the Travel Industry Council of Hong Kong ("TIC"). Under the new regulatory regime, unscrupulous practices in the travel trade such as cooperating with unapproved travel agents in the Mainland and coerced shopping will be combated through legislative means and administrative measures. Certain criminal offences targeted against major unscrupulous acts in the travel trade will be set out in the primary and subsidiary legislation. If offenders are licensees, they will also be subject to TIA's disciplinary proceedings. Licensees that only contravene administrative measures issued by TIA will be subject to TIA's disciplinary proceedings.

There are concerns that local travel agents are also providing services to tour groups organized by Mainland organizations that are not carrying on travel business. The Administration explains that clause 6(3) seeks to prohibit local travel agents from cooperating with unapproved travel agents in the Mainland only. Local travel agents' cooperation with persons in the Mainland who do not carry on the business of organizing tour groups to Hong Kong from the Mainland is not subject to the said provision. Moreover, it is a defence if the local travel agent has taken all practicable steps to reasonably determine that the Mainland travel agent is an approved travel agent. TIA will issue guidelines on the practicable steps that can be taken by travel agents to make reasonable determination.

Concerns have been expressed about the delineation of the legal responsibilities between the travel agent and frontline practitioner when a suspected offence case arises, particularly in the case of a tourist having been coerced into shopping in Hong Kong. The Administration explains that a tourist guide must not coerce any member of the tour group into shopping under any circumstances. If a travel agent has instructed the tourist guide to coerce members of a tour group into shopping, the travel agent may also be held liable. If the travel agent has taken all reasonable steps to prevent its tourist guide from committing the act of coerced shopping but the tourist guide still coerces the inbound tour group member into shopping, only the tourist guide may be held liable. When formulating the relevant subsidiary legislation, TIA will clearly delineate the legal responsibilities between travel agents and frontline practitioners. TIA can also issue a directive to require a travel agent to provide a job sheet to delineate the tasks and duties for its tourist guides and tour escorts in future.

Members of TIA comprise non-trade members and trade members, and a majority of members of TIA will be non-trade members to ensure TIA's independence. The Bills Committee considers that the proportion of representatives in TIA will have a bearing on the decision-making of TIA and interests of stakeholders. The Bill should specify the exact number of representatives from each travel trade sector and formulate suitable selection criteria to ensure proper representation of the travel trade in TIA and fairness of the appointment process. The Administration agrees to make amendments to set out the composition of TIA members in a more detailed manner. The trade members include not more than three individuals who are engaged in the outbound travel agent business, and not more than three individuals who are engaged in the inbound travel agent business; not more than three representatives of TIC and not more than four individuals who work as tourist guides or tour escorts. Some members consider that the number of tourist guides and tour escorts in TIA should be increased but the Administration considers that the composition of TIA's members can already ensure balanced representation in the composition of TIA's trade members.

On licensing, the Bill specifies that persons who carry on any outbound travel business activities at a place outside Hong Kong and actively market, whether in Hong Kong or from a place outside Hong Kong, to the public of Hong Kong any of such business activities will be required to obtain travel agent licences. This seeks to bring those online travel agents that carry on increasingly popular outbound travel business activities under the regulation of the Bill. Some members are concerned about the enforcement issues. The Administration explains that notwithstanding the fact that the business location of some online travel agents is outside Hong Kong, the Bill provides a solid legal basis for TIA to follow up suspected offence cases involving those travel agents through complaints received or based on reasonable suspicion, and exercise the powers of investigation provided for in the Bill. TIA will also publish up-to-date lists of licensed travel agents from time to time and assist local consumers in identifying and choosing licensed travel agents through public education.

Considering that it is increasingly common for consumers to enter into transactions with travel agents online, the Bills Committee has urged the Administration to re-examine the requirements related to the issue and renewal of travel agent licences in the Bill, with a view to ensuring that travel agents' different modes of operation can be reasonably catered for. A series of amendments and consequential amendments to the Bill will be proposed by the Administration to remove the premises, branch capital and staffing requirements imposed on travel agent licence applicants in the Bill. Under the revised arrangement, a travel agent licence applicant can choose to carry on travel agent business at a physical place of business or on an online platform.

Some members consider that the licensing mechanism to regulate the activities of travel agents under the new regulatory regime should not be too stringent so as to facilitate the entrance of new market players and promote healthy competition. Some members worry that the new requirement of depositing guarantee money of $500,000 with TIA by bank guarantee may constitute a high entry threshold to the travel industry and undermine the development of tourism products by local start-ups or business entrepreneurs with little start-up fund. The Administration advises that, to strengthen travel agents' commitment to carrying on business, the Government has adopted the general consensus reached in the public consultation to require licence applicants to deposit guarantee money with TIA and appoint authorized representatives. As a basic entry threshold, such requirements will apply to all licence applicants regardless of their modes of business operation.

As carrying on travel agent business without licence will be criminalized under the Bill, the Bills Committee has examined different types of travel business activities, including companies cooperating with travel agents to provide services with tourism elements, online platforms that provide information about different travel products or guide-matching services, etc. The Administration explains that under clause 4(2), if a person's principal business is not the carrying on of the business activities described in clause 4(1), and the relevant business activity carried on by the person is ancillary to the person's principal business, the person is not considered "carrying on travel agent business". In determining whether a business activity is ancillary to a person's principal business, TIA must consider the totality of facts in each case. In order to address the concern raised by the trade that people engaging in business with tourism elements may be easily caught by the new legislation, the Administration advises that TIA can explain in the form of guidelines the various considerations under the new Ordinance, with reference made to past court cases, for the trade's reference.

The Bills Committee has divergent views on whether the employer-employee cooperation relationship between travel agents and tourist guides and tour escorts should be regulated through the Bill. The Administration does not support the amendments proposed by Mr LUK Chung-hung to mandate the collaboration between travel agents and tourist guides/tour escorts to be an employer-employee one across the board because Hong Kong is a free market. To safeguard the rights and benefits of tourist guides and tour escorts, TIA will require, through administrative measures, that a travel agent must sign a service agreement with its tourist guide or tour escort before entering into collaboration.

A member has indicated that TIA should stipulate that a licensed travel agent must take out insurance for a person who is working as a tourist guide or a tour escort. According to the Administration, to ensure that self-employed tourist guides and tour escorts are appropriately protected during their service period, TIA can require, through administrative measures, that the travel agents must ensure that the self-employed tourist guides or tour escorts have taken out the relevant work insurance that meets the requirement before entering into collaboration with them, and that the travel agent will bear the relevant premium. To ensure the timely implementation of the arrangement, TIC will discuss with relevant parties such that the arrangement can be implemented by the trade voluntarily as a pilot before the formulation of the administrative measures by TIA. The Administration undertakes to provide further information on the proposed arrangement during the resumption of the Second Reading debate on the Bill.

Some members have expressed grave concern about the impact brought by the operation of inbound tour group business on the local neighbourhood. The Administration advises that it has all along worked closely with the travel trade to minimize such impact through various targeted measures. The Administration expects that TIA, upon its full operation, can strengthen regulation on various fronts. TIA may also conduct on-site inspections and formulate suitable administrative measures to address this problem.

Some members note that some short-haul outbound tours travelling from Hong Kong to the Mainland are currently not accompanied by tour escorts. In this connection, Mr LUK Chung-hung will propose an amendment to the effect that if a licensed travel agent has not arranged a tour escort to accompany an outbound tour group, it must clearly informed the consumers. The Administration agrees in principle with the regulatory requirement but considers that such a regulatory requirement should be formulated by TIA by administrative measure, instead of being stated in the primary and subsidiary legislation.

The Bills Committee has examined in-depth TIA's power of investigation and disciplinary mechanism, as well as the establishment and functions of the disciplinary committee, inquiry committee and appeal panel. Some members have expressed concern about the wide power granted to TIA under the Bill and urged the Administration to ensure suitable checks and balances are in place to prevent the licensees involved from being unfairly treated or unreasonably disciplined. The Administration advises that, as the Bill covers more regulatory targets and has a wider scope than the existing TAO, coupled with the fact that the nature and complexity of each case of investigation differ, TIA needs to be accorded with necessary power to address unforeseeable circumstances. When designing the whole schemes of disciplinary and appeal proceedings under the Bill, the Administration has observed the principle of ensuring that each and every case be appropriately handled and suitable channels for appeal be provided. The Administration agrees to propose certain amendments to improve the operation of the relevant committees and appeal panel and clearly reflect its policy intent.

TIA will run on a self-financing basis in the long run. The Bills Committee is concerned whether the new regulatory regime will increase the financial burden of the travel trade, and has examined the funding arrangements for TIA as well as the mechanism for monitoring TIA's charge increase. To reduce the impact brought about by the new regulatory regime on the trade, the Administration proposes maintaining TIA levies and licence fees for five years at the prevailing levels upon the full implementation of the new Ordinance and increasing the level of the registration fees on inbound tour groups from the Mainland under an incremental approach. The Government will apply for funding to provide TIA with a one-off capital grant as seed money in due course. With the investment income generated from the seed money and upward adjustments of registration fees of inbound tour groups from the Mainland, TIA is expected to have stable income sources to cope with its operating expenditure. If TIA adjusts the level of fees in future, the subsidiary legislation concerned will be subject to the Legislative Council's approval.

The Bill will empower TIA to continue to run the current Travel Industry Compensation Fund ("TICF"). In recent years, apart from joining outbound tours and buying free independent tour packages, many consumers would like to mix and match different outbound travel services and arrangements relating to the same tour from travel agents. To provide better protection to outbound travellers, under the regulatory regime, outbound travellers buying a combination of outbound travel services and arrangements relating to the same tour from the same travel agent, no matter whether such outbound travel services and arrangements are bought at the same time or at different times, will be protected by TICF. The Bills Committee notes that travel agents may have difficulties in ascertaining whether the outbound travel services and arrangements that outbound travellers buy at different times relate to the same tour. In this connection, TIA should, through administrative measures, assist travel agents in informing customers of the relevant arrangements. If a travel agent has not paid a levy in respect of the outbound travel services relating to the same tour that are bought at different times by a customer, but there is proof showing that the travel agent has complied with the aforementioned measure, the travel agent will not be subject to disciplinary action. TIA will step up consumer education with respect to this arrangement.

The Bills Committee has examined protection by TICF to travellers under different situations, including paying outbound fares after the tours, levy payments involving cruise trips, self-paid activities and tips for tourist guides or tour escorts. The Administration advises that, under TAO and the Bill, a travel agent must pay TICF levy in respect of every outbound fare received. The Administration will recommend that TIC and TIA in future should, through administrative measures, require travel agents to clearly inform consumers of the scope of protection by TICF and to remind consumers of the importance of taking out travel insurance.

To reduce the impact on the existing players in the travel trade, upon the full commencement of the new regulatory regime, all existing travel agent licences issued by Travel Agents Registry ("TAR"), as well as existing tourist guide passes and tour escort passes issued by TIC, by then will be taken to be licences issued under the new Ordinance until they expire, or three months after the commencement date of the new regulatory regime, whichever is the later. Upon applying for licence renewal, the travel agents, tourist guides and tour escorts concerned will be required to comply with the new requirements under the new Ordinance. Before the full commencement of the new regime, travel agents, tourist guides and tour escorts must continue to comply with TIC's regulatory requirements. The Administration expects that TIA will need about two years to complete all necessary preparations for the full implementation of the new regulatory regime. In the preparatory process, the Administration will closely cooperate with TIA and maintain liaison with the travel trade to ensure that the new regulatory regime can be implemented as soon as possible.

The discussions of the Bills Committee have been detailed in the report. Apart from the above amendments proposed by the Administration and Mr LUK Chung-hung, the Bills Committee also noted that the Administration will also propose certain amendments to improve the operation of the new regulatory regime and the drafting of the Bill. The Bills Committee has no objection to the amendments proposed by the Administration and will not propose any amendments to the Bill. The Bills Committee supports the resumption of the Second Reading debate on the Bill, subject to the moving of amendments by the Administration.

Deputy President, my views on the Bill are as follows:

The purpose of the Bill is to change the current dual-track mode of regulation of the travel industry to statutory regulation, i.e. to merge the supervisory functions of TAR and TIC, and establish a statutory body, i.e. TIA. Currently, TAR is responsible for issuing travel agents' licences while TIC is responsible for approving the qualifications of tourist guides and tour escorts as well as licensing. It regulates, through administrative means, member travel agents, outbound tourist guides, tour escorts and inspects registered shops of travel agents. However, this mode of regulation is unsatisfactory. Therefore, I would like to take this opportunity to express my views on abolishing the regulatory functions of TIC and establishing TIA.

TIC was established in 1978 and it was originally a non-profit-making organization voluntarily established by the travel industry. TAR was established in 1985 and is responsible for issuing licences to travel agents. Given that some unlawful travel agents chose to close down after collecting tour fees, disregarding the interests of travellers and creating very negative impacts, in order to better and more effectively regulate the operation of outbound travel agents, TIC has, since 1988, started to perform the function of self-regulation with the authorization of the Government. The Government has also required that travel agents must become TIC members before the issuance of licences by TAR. Hence TIC can formulate different administrative measures to achieve the objective of regulating members. Since 2002, TIC has, with the authorization of the Government, taken up the additional function of regulating inbound travel agents.

For decades, TIC has formulated various codes of conduct and guidelines from the perspective of self-regulation to regulate the acts of member travel agents, tourist guides and tour escorts. It has also, from time to time, enhanced its functions and updated various codes and guidelines to adapt to market changes, so that when regulating the trade, it can also meet the aspirations of consumers.

In respect of handling crises and disseminating information, whenever there are emergencies or natural/man-made disasters in overseas countries, TIC can more accurately grasp the latest situation of the trade and disseminate timely information and solutions to the public and travellers. TIC also maintains close contacts with travel agents, airlines, hotels and tourism authorities to explore solutions together. For example, in November 2008, hundreds of Hong Kong travellers were stranded in Bangkok as its major international airport was occupied by demonstrators. When TIC learnt that a military airport in Pattaya would be opened for use, it immediately contacted a number of airlines and arranged more than 500 Hong Kong tour group travellers to return to Hong Kong in batches. In case of other natural and man-made disasters, such as the snowstorm in Sichuan, the earthquake in Japan and the unrest in Egypt, etc., TIC also maintained close communications with the travel agents concerned and provided appropriate assistance to stranded travellers so that they would not feel helpless.

TIC has a mechanism to deal with disputes between consumers and the trade. TIC staff will try to mediate in handling complaints from travellers; if the two parties cannot reconcile, the cases will be referred to the Consumer Relations Committee for arbitration; if irregularities are suspected, the cases will be referred to the Compliance Committee; and if the members are dissatisfied, the cases may be referred to the Appeal Board for arbitration. At present, the Consumer Council, the Hong Kong Tourism Board and other organizations will refer the complaints received from travellers to TIC for handling, which proves that TIC has credibility in society.

Moreover, TIC will also formulate various targeted regulatory regimes. At present, TIC has 16 committees that study and formulate various rules and regulations and guidelines in accordance with the operational characteristics of the trade in respect of outbound tours, inbound tours and individual visit schemes, with a view to regulating the acts of the trade and protecting the interests of consumers. Therefore, for all committees under TIC that are related to consumer interests, the convenors are independent directors and half of the members must be non-trade members. Case meetings must be attended by more than half of the non-trade members to avoid the suspicion of helping peers.

TIC also serves as a platform for the Government to communicate with the trade and provide support to the trade. As TIC plays the role of a trade association, it certainly has the responsibility to assist the trade and provide support. The Government also needs a representative body to specifically implement the Government's support measures and disseminate information in a timely manner. In recent years, with efforts made by the trade and me, the Government and the Airport Authority Hong Kong have respectively provided funding to enhance the competitiveness of the trade. The Information Technology Development Matching Fund has been set up through TIC and training and promotional activities under the Fund have been specifically implemented. TIC renders assistance to different government departments in providing support to travel agents and releasing important travel information to overseas and Mainland travel organizations. Nevertheless, in light of the current development of the travel industry, our system cannot meet the needs of the current travel market.

Deputy President, changes are constant and we have to keep abreast of the times. Although TIC has played a very important role in the social and travel sectors for quite a long time in the past and has gained recognition by many overseas and Mainland organizations, the current mode of regulation can no longer meet the needs of the prevailing travel development in the light of the development of society and advancement in information. After extending regulation to cover inbound travel agents in 2002, the problems with TIC began to emerge, highlighting the loopholes in the regulatory regime.

Initially, when designing the codes and guidelines, TIC mainly targeted the operational problems of outbound travel agents in Hong Kong. Members of the outbound travel trade understand that Hong Kong consumers are their bread and butter, so it is necessary to properly maintain the companies' brand and image so that business will grow and sustain. Therefore, outbound travel agents can better tally with the regulatory requirements of TIC, no major conflicts have arisen and effective regulation is obviously attained. However, following the implementation of the Individual Visit Scheme as a liberalization measure in 2003, a large number of Mainland visitors have come to Hong Kong; problems such as zero-fare tours, negative-fare tours, coerced shopping and goods not matching the descriptions have arisen, arousing the concerns of the community and Mainland regulatory authorities. Although TIC has introduced a series of targeted guidelines, the regulation of inbound tour groups and travel agents from the Mainland is more difficult and complicated than the regulation of outbound travel agents, and the stakeholders involved include Mainland tour organizers and shops in Hong Kong. For this reason, the deterrent effect of relying on rules and penalties is limited. The problems of coerced shopping and goods not matching the descriptions have occurred frequently. Worse still, stakeholders operating inbound tour on the Mainland initiated a non-cooperation movement in 2015, advocating that the trade should boycott the guidelines of TIC, including not registering tour group information with TIC, refusing to wear tourist guide passes and not displaying tour information on the front part of coaches, etc. Even though TIC had taken immediate inspection actions and requested to inspect the relevant documents, the fact that it did not have law enforcement powers had rendered it to be a "toothless tiger".

After the commissioning of the Hong Kong-Zhuhai-Macao Bridge, unauthorized tour groups have recently appeared in Tung Chung and it was suspected that some Mainland tour escorts were unlicensed tourist guides. In this regard, TIC staff can only collect information or provide information to the Police and they do not have law enforcement powers. As TAR also lacks law enforcement powers, it can only report irregularities to the Police for enforcement. Thus, the current mode of regulation must be changed.

In addition, the dual role of TIC has attracted criticism. As TIC plays the role of a trade association, the trade will certainly expect that it will safeguard the interests of the trade. Yet, TIC is also a regulatory body, and members of the public certainly expect that it will safeguard the interests of consumers. Such views are very normal. Hence, in case of a controversial complaint, no matter how fair TIC is, the affected party will be dissatisfied: while the travel agent considers that TIC tilts towards consumers for getting a good reputation, consumer considers that TIC, being a trade association, will definitely tilt towards the trade. It can be said that TIC is in a dilemma, attracting criticisms from both sides.

Furthermore, the licensing system under the current dual-track regulation regime has quite a lot of shortcomings and needs further changes. These shortcomings include the legacy that travel agent licences are issued by TAR while tourist guide passes and tour escort passes are issued by TIC, resulting in incomprehensive coverage. As regards how the regulatory authorities exercise enforcement powers and institute prosecution, including how to increase the criminal liability of the responsible persons of companies engaging in unscrupulous business practices, and the need to adjust the definition of premises for business in the light of the robust development of online transactions, etc., I believe these problems can be addressed one by one after the establishment of TIA.

In terms of enhancing credibility, in future the majority of TIA members will be non-trade members. The Chairperson and Vice-chairperson will not be trade members and the maximum number of trade members will only be 13, including two tourist guide representatives and two tour escort representatives. This can ensure a better representation in TIA with regard to its regulatory functions.

Deputy President, it is undeniable that TIC has played a very important role in the course of development of the travel industry in Hong Kong. We should positively evaluate the contributions made by TIC to our society and the trade in the past. After TIC has completed the historical task of regulating the trade, it can focus on playing its role as a trade association, and has no scruples about safeguarding the interests of the trade. It can solicit views from the trade and reflect them to the Government, so as to strive for more support measures and continue to play its role as a bridge between the trade in Hong Kong and the travel organizations in various places.

I hope that TIC will continue to maintain the functions of managing crisis for outbound tour groups and timely disseminating information to the community. The mechanism of the trade coordinating directly and promptly proposing solutions has worked well in the past and has been generally accepted by the public. TIC may also consider retaining the function of mediation to balance the interests of the trade and consumers, so as to enhance the community's positive impression. Furthermore, TIC can make good use of its financial resources to enhance the standards of the trade through training, and continues to seek government funding to facilitate the sustainable development of the trade. I believe that, by strengthening its functions, TIC and TIA can play a complementary role.

As regards the details of the deliberation on the Bill, I will speak again when the Council is in committee of the whole Council.

Deputy President, I so submit.