MR YIU SI-WING (in Cantonese): Chairman, I am going to express my views on the clauses with no amendment standing part of the Travel Industry Bill ("the Bill"). First, I support the new requirement of appointing authorized representatives ("ARs") set out in the Bill. At present, the Travel Agents Ordinance (Cap. 218) ("TAO") stipulates that, in addition to a controller, one officer who meets the requirements concerned should act as the responsible person. Whenever a travel agent is penalized, given demerit points or has its licence suspended, by the Travel Industry Council ("TIC"), for having any problems or contravening any regulations, such as engaging in coerced shopping and selling goods not matching the sale descriptions, its controller and responsible officer will shift the responsibility onto each other. Even if the complaint about the contravention is substantiated, given that no individual will incur any criminal liability, the responsible persons may simply settle the case by closing their business.

The current threshold for establishing a travel agent is relatively low, and the cost of investing in another company is not high. Since only $500,000 in registered capital is required for a business to be relocated, the deterrent effect is insignificant. To avoid heavy penalties for repeated non-compliance, some travel agencies with adequate capital will make investment to set up a number of travel agencies and engage tourist guides as the responsible persons of these companies.

To stamp out this situation, travel agents to be established in the future are required to deposit guarantee money of $500,000 with the Travel Industry Authority ("TIA") in advance, and each travel agent will also be required to appoint one AR. If a travel agent contravenes the requirements of the new Ordinance, not only may the licensee be held legally liable, its AR may also be held criminally liable. Hence, the new Ordinance will be conducive to enhancing the deterrent effect.

Under the Bill, each AR must meet the specific qualification requirement: completion of Form 5 education and possession of at least five years of management experience in the travel industry; or possession of at least 10 years of management experience in the travel industry. Since ARs are required to take more responsibilities, they will certainly operate the business carefully to ensure that their companies are operating legally under effective management and control. This will be conducive to enhancing the overall quality of Hong Kong's travel industry.

Secondly, on levy-related matters, the biggest difference between the Bill and the current TAO lies in the new requirement of levy payment. At present, TIC requires all receipts of tour groups, including tour packages, to be franked. Franking provides a proof of payment of the Travel Industry Compensation Fund levy, which will also be a proof for claiming compensation in the event of an accident. Only franked receipts can be given protection under the Travel Industry Compensation Fund. At present, a tourist who concurrently purchases travel-related products (including any two of the following three items―transportation, accommodation and itinerary arrangement) is required to pay a levy. A consumer who purchases these products separately is not required to pay the levy because separate purchase of these products will not fall under the definition of tour group.

The Government has proposed under the Bill that, upon establishment of TIA, a consumer shall pay the levy even if he/she purchases the travel products for the same trip separately at different times provided that the products include any two of the following three items―transportation, accommodation and itinerary arrangement.

The trade understands the legislative intent of the Government. With the advancement of technology, the prices of air tickets and hotel products are transparent. Due to the growing popularity of online transactions, more and more people are inclined to book such travel products as transportation before they go on a trip. Subsequently, they will book the hotels, admission tickets and tours when prices are suitable. The trade is concerned about the difficulties in implementing the new Ordinance. If a traveller purchases travel products of the same trip separately through various channels, such as online platform, phone or different branches of travel agents, it will basically be impossible to track the time of the purchases. While the records in the computer system of large-scale travel agents are accessible, a majority of travel agents, which are micro, small and medium enterprises, are not equipped with computer system capable of retrieving the transaction information of travellers in a timely manner. In addition, most products, such as land travel tickets, ferry tickets and admission tickets for tourist attractions, are not purchased by way of real name registration. In some cases, hotels only keep the record of the persons who make a reservation, without keeping the information about accompanying persons. Therefore, the arrangement under which levies are imposed in respect of products separately purchased for the same trip will create enormous operational difficulties for the trade by increasing the pressure of frontline practitioners and the risks of companies being penalized for non-compliance.

According to the advice sought, the trade is generally of the view that there are difficulties in practical operations. In this connection, the Government has proposed adding a disclaimer in response to the demands of the trade. TIA will clearly prescribe a standard sentence as an instruction. Travel agents are required to display the instruction clearly at their shops, online transaction platform and telephone system to remind customers that if they have purchased products for the same tour with the same travel agent, they should require the travel agent to frank the receipts. Provided that travel agents have displayed the instruction as required, even if they have failed to frank the receipts, the Government will absolve them of their liability. Of course, the Government also has the responsibility to step up promotion to and education of consumers. As the Government has already made the pledge, travel agents have no choice but to reluctantly accept this new arrangement.

Thirdly, on matters relating to the electronic levy system ("e-levy system"), the Government has originally planned to launch the e-levy system after TIA is established. However, I have learnt earlier that TIC has completed the development of this system, which can be rolled out anytime. Initially, the Government did not agree to put both the e-levy system and the traditional franking approach in place as a dual-track system. However, after my repeated insistence, and after seeking the advice of the Department of Justice, the Government has agreed to the dual-track approach. The e-levy system will be launched this June for voluntary use. Recently, the supplier of traditional franking machines has notified TIC that that its parent company had decided to terminate the maintenance service starting 30 June next year. In other words, from that day onwards, the 1 700-odd travel agents in Hong Kong can only use electronic franking. Fortunately, I had insisted on negotiating with the Government earlier, such that the crisis of travel agents having no franking system can be forestalled.

In addition, the closure of the Action Travel Services Limited ("Action Travel") has also shed light on the problems arising from the traditional franking practice. In the aforesaid incident, Action Travel had not franked the receipts after receiving payment from customers due to time difference. If the electronic franking system was used, immediate franking would be required, and the problem would have been resolved.

Fourthly, other levy-related issues. During the scrutiny of the Bill, the Government has clarified some concerns raised by the trade regarding the levy. The first question is: Are customers required to pay levies if they pay fares after the departure of tour groups? At present, some business tour groups require travel agents to make advance payments which will only be settled after their trips. Based on the previous understanding of some members of the trade, levies will only be imposed on fare payment made before departure, whereas no levy will be required in respect of fare payment made after the completion of tours. The Government has taken the opportunity to clarify that levy payment is required no matter outbound tour fares are paid before or after the trip. The Government has advised customers to better pay part of tour fares before departure in order to get the franking. In the event of any accident during the trip, they will be given protection from the Compensation Fund by virtue of the franking.

The second question is, is levy payment required for taking part in self-paid activities or paying tips at destinations? The Government originally responded that levy payment was required for all activities organized by Hong Kong travel agents. However, I have subsequently explained to the Government that it has been a very common practice for overseas travel agents which receive outbound tours to directly charge travellers participation fees or tips, which will not be deposited into the accounts of Hong Kong travel agents at all. The imposition of levies in respect of such fees will incur unnecessary costs and expenses to Hong Kong travel agents, which will also be operationally infeasible. Thereafter, the Government has taken my suggestion on board. Travellers are not required to pay any levy in respect of fees paid to overseas receiving agents and tourist guides during outbound tours, and no franking is required. However, a levy is required in respect of all fees paid in Hong Kong, which should be regarded as part of tour fares.

Fifthly, the regulation of unlicensed travel agents. Currently, the Travel Agents Registry ("TAR") is responsible for issuing travel agent's licences, while TIC is responsible for regulating the activities of travel agents. However, when it comes to investigation, gathering of evidence and prosecution, TAR and TIC have to refer their cases to the Police for follow-up. According to the document submitted by the Government to the Bills Committee on Travel Industry Bill, between 2013 and 2016, a total of 240 suspected cases have been referred by TAR to the Police for investigation. Prosecution has only been instituted against 11 cases, representing a conviction rate of a mere 4.2%. In a majority of the convicted cases, penalties in the form of fines have been meted out, with the maximum fines being $5,000. Obviously, the deterrent effect has been insufficient.

In the past few years, TIC, TAR and I have received a number of complaints against travel agents suspected of unlicensed operation. We have unanimously agreed that the processing of complaint cases referred to the Police has been slow and prosecution work has been ineffective. In addition, given the lack of deterrent effect of the sentence, unlicensed operations of travel agents have taken place from time to time, which is extremely unfair to travel agents operating legally. In some complaints I had received from the trade, the complainants had provided the exact arrival and departure dates of a number of tour groups, and even the hotel names, and they had agreed to assist in police investigation with their names disclosed. After the referral of those complaints by TAR to the Police for follow-up, the tour groups involved had already departed Hong Kong before the Police formally contacted the complainants. For some of the complaint cases referred by me, it had taken as long as 20 months to have the investigation findings. I believe that this has to do with the large caseload to be handled by the Police and the lack of understanding of the relevant laws. These examples illustrate the spate of problems arising from TAR's lack of law enforcement power.

Upon implementation of the Bill, TIA will be vested with law enforcement power, which will be conducive to combating unlicensed travel agents, and unlicensed tourist guides and tour escorts. Under the new Ordinance, TIA may, based on reasonable suspicion, follow up on suspected offence cases or conduct investigation into cases where public interests have been violated or the reputation of the travel trade has been tarnished. Investigators appointed by TIA may apply for a warrant from the magistrate to enter and search any suspected premises, for the purpose of conducting an investigation. The new Ordinance also empowers investigators to gather evidence from suspected vehicles and vessels at any reasonable time, or even conduct targeted investigation by means of decoy operations. TIA's inspection officers may enforce the law based on their professional judgment. Under the new Ordinance, penalties will also be increased to significantly enhance the deterrent effect.

Since the commissioning of the Hong Kong-Zhuhai-Macao Bridge more than one month ago, the problems arising from unauthorized Mainland tour groups crossing the boundary and illegal Mainland tourist guides have drawn the attention of society and the travel trade. The grey areas in the current laws have apparently made law enforcement difficult. Thankfully, the authorities have notified the Guangdong Province Culture and Tourism Unit ("the Unit") of the situation. With the Unit's support and the cooperation of various parties, the situation at the Hong Kong-Zhuhai-Macao Bridge have improved in the recent weeks. However, we cannot only rely on the help of others. The new Ordinance, when enforced in the future, will definitely help the Government stamp out or reduce unlicensed operations, and will also safeguard the reputation and image of Hong Kong's tourism industry.

Sixthly, regarding the implications of the Bill for the financial situation of the trade, there are 1 700-odd travel agents in Hong Kong, 90% of which are micro, small and medium enterprises ("MSMEs"). Facing competition from direct marketing of travel websites and airlines, these MSMEs are operating with increasing difficulty. Many employers of small and medium enterprises cannot even earn their wages, and they can barely maintain the operation of their company. Any cost-increasing approach will also put pressure on these companies. Under the new Ordinance, similar to other statutory bodies, TIA is financially independent of the Government and will run on a self-financing basis in the long run. After my repeated explanation, the Government has also understood the difficulties facing the trade and agreed to provide the newly established TIA with a one-off capital grant as seed money to cover part of TIA's daily expenses. The Government has guaranteed at the same time not to raise outbound levies and licence fees for the first five years after TIA's establishment. However, the trade has remained concerned that the Government will unexpectedly increase the levies significantly after five years due to excessive expenses. Hence, I strongly strive for an extension of the guarantee period to 10 years to relieve the pressure of the trade. As the Government upholds the principle of prudent financial management, I will continue to lobby the authorities to take my suggestions on board. As to the amount of seed money, following a study conducted by the Government and a consultant 

I have one more point to make. The Government has taken my view on board by planning to allocate $350 million as the seed money, the investment returns from which will finance the operation of TIA in future.

However, I am concerned that the government funding is insufficient for covering TIA's future operational expenses. For this reason, I hope that the Government will raise the funding to $500 million, so that increased investment returns will alleviate the pressure on TIA's expenses and costs, and will reduce the chances of increasing levies or licence fees in future. I urge the Government to consider our views. Chairman, I so submit.