Ministry proposes reduction in insurance deposits for travel firms

Ministry proposes reduction in insurance deposits for travel firms

Since the pandemic began, the amount of international tourists rapidly declined as borders were closed to prevent the spread of the coronavirus.

Although domestic travel continued, revenue dropped as social distancing regulations were implemented nationwide.

This caused financial heartache for many tour companies, forcing some to drastically reduce their staffing levels or even close for good.

Now plans are in place to ease their burden, by reducing the mandatory fees travel firms must pay each year.

Under government Decree 168, a company must provide an escrow deposit of VND500 million to operate an international travel service, or VND100 million for domestic operations.

This amount, paid through commercial banks, acts as an insurance policy if a company is liable for third-party payments as a result of guests suffering injuries or death during a trip.

In the first six months, revenue from travel activities and tourism reached VND4.5 trillion (US$195.6 million), 51.8 per cent lower than the same period of last year.

The ministry has carried out a survey on difficulties faced by the tourism industry due to the pandemic. As a result, 30 per cent of travel companies have stopped operations. The remaining enterprises are operating in moderation.

With COVID-19 still present in more than two-thirds of the total localities nationwide, the strict measures on preventing the pandemic means many tourism firms must seriously reduce planned activities.

With those difficulties, the ministry is collecting comments for the draft of new decree amending and supplementing a number of articles of the Decree No 168/2017/ND-CP detailing some articles of the Law on Tourism, including the proposal on reducing the deposit rates for all kinds of travel service business.

The reduction of deposit value is not only a supportive measure to remove the difficulties companies are facing, but also to create favourable conditions for new businesses in the tourism industry.

Regarding this proposal, a representative of the Viet Nam Chamber of Commerce and Industry (VCCI) said that the drafting team should consider adding regulations if an enterprise has to stop their travel service business or temporarily suspend operations.

They include regulations on withdrawing the deposit when the enterprises suspend their operation in the difficult period but not want to revoke their licenses.

This is to ensure the requirements of State management and also create favourable conditions for the enterprises.

The draft should also stipulate the order and procedures for the enterprises suspending temporarily their business. Specifically, the enterprises send a notice to the licensing agency about business suspension, and the licensing agency will issue a confirmation of the business suspension.

This is the basis for the businesses to withdraw deposits at commercial banks. The information on business suspension will be published on the website of the licensing agency and the enterprises.

When the business suspension period ends, the enterprises will have to pay the deposit according to existing regulations to resume business operation.

Those regulations on business suspension not only allow the enterprises to withdraw their deposits during the period of inactivity, but also do not have to implement the procedure of re-applying for a license when they resume operation.

Meanwhile, the State management agencies can also control the activities of the enterprises.

For businesses still operating in the travel service business, lowering the deposit will partly support businesses in financial matters, said Dau Anh Tuan, head of VCCI Legal Department.

However, the new draft only stipulates the new margin level but does not have specific regulations relating to this issue, being able to create difficulties in implementation of the new draft.

Therefore, the draft needs to supplement regulations on the order, procedures and grounds for businesses to withdraw deposits at banks, because the Decree 168/2017/ND-CP does not have regulations for this special case.

According to Tuan, the draft on amending the Decree 168 needs clear regulations to ensure convenience in the implementation for the businesses and also for State management agencies.

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