Essential public disservice

PUBLISHED : Saturday, 12 February, 2011, 12:00am
UPDATED : Saturday, 12 February, 2011, 12:00am

Another day, and up pops another travel industry scandal following a predictable pattern, with aggrieved mainland visitors complaining about shabby and unethical treatment at the hands of Hong Kong tour operators.

As the scandals mount, the body regulating this trade, the Travel Industry Council, scuttles around only managing to confirm its impotence and desperate desire to protect the interests of the trade above those of its customers.

The council is a perfect example of the Hong Kong government's almost aggressive intent to preserve the interests of service providers at the expense of customers, often known as the general public.

Government officials even go so far as to proudly proclaim an ideological motive behind this neglect, claiming that they are keen to preserve self-regulation in the interests of the free market. Even those of us who like free markets understand that no market is truly free, and the freedom to operate a business cannot be accompanied by carte blanche to rip off the public.

The reality in Hong Kong is that markets are far from free; government regulation tends towards the creation of monopolistic practices which, in every case, serve to undermine the public interest. The most flagrant of the government-controlled markets, free in name but almost ludicrously un-free in the way it operates, is the property market.

As all land in Hong Kong is owned by the state, the supply of land for development is entirely in the hands of the government. It exercises this power by holding land auctions and releasing prime sites for sale in a way that ensures only the major developers can buy these big plots. This, in the main, is designed to ensure that the property oligopoly is sustained.

Some more marginal sites are thrown into the mix for smaller developers but these sales do not determine the market's direction and are of little relevance. The supply of land is the main mechanism for preserving the lack of real competition in the property market.

But, in case the public should be misguided enough to believe that they have any means of redress, they quickly learn that the property developers' so-called self-regulating body, the Real Estate Developers Association or REDA, exists primarily to preserve the interests of the real estate developers.

In a recent case, concerning The Icon apartment block, the developer was shamed into remedial action by media exposure and adroit campaigning. REDA, as ever, did nothing on behalf of aggrieved property buyers.

Meanwhile, tour operators have somehow managed to convince the public that all the problems that plague the travel industry emanate from rogue tour guides.

The truth, however, is that at the root of these problems is the way these guides are remunerated, because operators provide practically nothing as basic pay and the difference is made up by sales commissions. The industry has done absolutely zilch to tackle this fundamental issue.

But, it could be tackled by a government with the guts to do something, as it presides over something called a Travel Agents Registry, which issues the licences that enable the tour operators to ply their trade. This official body is impotent and there are no known plans to change this state of affairs.

Meanwhile in Hong Kong, and many overseas jurisdictions, the major professions are self-regulating. This means that everyone from lawyers to doctors and accountants, all of whom provide vital services to the public, operates without an independent body regulating their activities.

Some of these bodies are better than others at performing the task of oversight and helping the public but, at the end of the day, their paymasters are the very people they supervise. Only in rare cases, where laws are broken, do we see official intervention.

And yet, while the government is prepared to allow the public to be ripped off in some areas, it imposes petty rules and mind-boggling controls in the few areas it actually regulates. As an operator in the food industry I know this full well and find the burden of an overbearing bureaucracy wastes time as if it were going out of fashion.

So a balance must be struck between reasonable protection of the public interest and reasonable regulation. It is an irony that in the food trade - one of the few really competitive businesses in Hong Kong, with a healthy mix of very big and small operators - the balance is struck in the direction of an overbearing bureaucracy. Yet, in areas of business lacking in competition, where consumer protection is most required, the government steps aside and lets these companies regulate themselves.

Could this have something to do with the political clout held by some sectors of the business community and not others?

Stephen Vines is a Hong Kong-based journalist and entrepreneur