A couple of days ago, a magazine published an article making many unfounded accusations against the TIC. As a public body responsible for regulating outbound and inbound travel agents, the TIC has always welcomed reasonable and fact-based criticism. However, since the article even fails to get some basic facts right, I feel obliged to set the record straight so that members can all grasp the truth.

Purchase of office

The why and when of the purchase of office premises by the TIC have already been detailed in an article published in the No. 1, 2005 issue of The Voice of TIC . Let me recap the whole matter here to help members understand what has happened. In 1985, the Travel Agents Ordinance was enacted, under which all outbound travel agents were required to obtain a Travel Agent's Licence from the Travel Agents Registry. Then in 1987, in view of the shortcomings of the licensing regime, the Government decided to introduce a self-regulatory system, and later in 1988 amended the Travel Agents Ordinance to make membership of the TIC a requisite for a licence (from that time onwards, the outbound industry has been subject to a two-tier regulatory system).

The TIC Reserve Fund (TICRF) was established in 1988, with 1% of outbound tour fares contributed to it in the form of a levy, in order to protect outbound travellers. And to finance the self-regulatory system, the Government decided that the TICRF would reimburse the TIC for its operating expenses, including office rents. Later, an exceptionally vibrant property market and rocketing office rents prompted the Board of Directors of the TICRF to decide, after a review, to grant a loan to the TIC so that it could acquire a permanent office, thus solving the problem of spiralling expenditure on rents.

In February 1993, the TICRF lent the TIC about HK$20 million, with interest charged, so that it could purchase its current office. In September that year, the Travel Industry Compensation Fund (TICF) was established under the Travel Agents (Amendment) Ordinance 1993 to replace the TICRF and take over all its assets and liabilities. The TICF is an independent statutory fund, managed by a body corporate, the Travel Industry Compensation Fund Management Board (TICFMB). When the Government amended the Ordinance in 1993, it also decided to allocate a proportion of the levy collected to the TIC, instead of reimbursing the amount actually spent as had been the case previously.

From the truth mentioned above, it is evident that the accusations made in the article do not hold water. First, the TICF is not managed by the TIC; second, the levy rate is specified by the Secretary for Commerce and Economic Development in accordance with the Travel Agents Ordinance; third, it is the TICFMB which decides whether outbound travellers will be compensated out of the TICF; and finally, the TICF did not, in a strict sense, grant a loan to the TIC – the TICRF did it.

Prudent investment

Let me now turn to matters concerning the TIC's Bonding Fund and investment by the TIC. To protect the interests of travellers and promote the travel and tourism industry, the TIC established a Bonding Fund as early as 1983, which is financed by the contribution of HK$2,000 made by each member when it joins the TIC (the relevant amount will be refunded when a member withdraws from the TIC). The TIC also set up a subsidiary, TICBF Limited, to manage the Bonding Fund.

Prudent investment is an inherent part of sound management of the Bonding Fund, which has protection of travellers as one of its objectives. And holding 5% of the shares of Abacus Distribution Systems (HK) Limited by TICBF Limited is precisely the kind of investment with relatively low risk and handsome profit: the rate of return is about a dozen or so times. Without these reserves, it would not have been possible for the TIC to weather unexpected crises (such as the SARS outbreak in 2003) together with members. The TIC is now studying how to make use of the reserves in order to provide more benefits for members. It is hoped that good news will be forthcoming within this year.

As for the other subsidiary of the TIC, Hong Kong International Airport Services Centre Limited, which was already liquidated, it was set up to implement the Vehicle Call Forward Scheme and later operate airport counters for members' use, and as such, losses were never a primary concern of its operation. Since it later turned out that members' demand for such kinds of services was not very high, the TIC decided to stop those services and liquidate the company.

As a matter of fact, not only does the Bonding Fund seek to invest its reserves, the TICF and even the Government's Exchange Fund also try to generate returns by investing their reserves. It is indeed quite unexpected to find that a magazine published in Hong Kong, long regarded as a financial centre in the region, would criticise the TIC for putting its reserves into prudent investment.

Since I took up the office of Chairman, I have striven to raise the transparency and credibility of the TIC. During the past few years, the Honourable Mr Howard Young and a representative from the Tourism Commission have attended meetings of the Board of Directors as observers. Apart from that, the TIC decided late last year to increase the number of Independent Directors from eight to 12, thus making over 40% of its directors come from outside the trade. The policies and measures of the TIC have always been formulated in the public interest. As for their results, I would like to let the public decide. The reason why I respond to the factually wrong article is that I do hope that members will not be misled by it and can understand the whole truth.

Ronnie Ho
21 January 2008