The government said Thursday it will extend license terms for duty-free operators from the current five to 10 years, as part of efforts to strengthen global competitiveness of the nation’s tax-free business and to create more jobs.
Licenses of duty-free operators will be renewed automatically, unless they are disqualified for violating laws, such as smuggling.
“The operational rights will be extended to 10 years from five to create a stable business environment in a long-term perspective,” the Finance Ministry said in a statement.
According to a set of comprehensive plans rolled out at a minister-level meeting, the government will also consider issuing more licenses for duty-free shops -- a possible move that could save Lotte and SK, which lost their bids last year.
(Yonhap)
The Korea Customs Service will make an announcement as to whether they plan to issue new licenses or not by the end of this month.
“The government will comprehensively review whether it is feasible to issue additional licenses to duty-free operators in the city (Seoul) by studying its impact to tourism industry and market condition,” the ministry said.
“We will pursue a fair and transparent review process to secure credibility and to get rid of unnecessary disputes.”
To promote the nation’s tourism industry, the government will levy more license fees for operators and reinvest them into projects designed to attract more tourists. The government will be applying different rates for tax-free operators according to the size of their annual sales.
With the new system, the amount of license fees will jump ninefold from 4.3 billion won ($3.75 million) to 39.4 billion won, the ministry forecast, calling it a way to improve duty-free operators’ corporate responsibility.
The government believes the new measures would make the local duty-free market more attractive than other Asian competitors and promote the tourism industry.
Korea is the No. 1 duty-free market in the world with annual sales of 9.2 trillion won last year. In the last 10 years, the tax-free market grew an average of 15.1 percent.
The government appears to be delaying its plan on having more duty-free stores as it faces fierce opposition from new duty-free operators that won licenses after a tough evaluation last year. Calling it unfair, they said accepting the reentry of Lotte and SK would only instigate excessive rivalry in the already saturated market.
In July, the Finance Ministry issued three new licenses including HDC Shilla, a joint venture between Hyundai Development Co. and Shilla Duty Free, the duty-free sales unit under Samsung Group, and Hanwha Galleria under chemical giant Hanwha Group.
In a separate contest for three expiring business licenses, Shinsegae and Doosan won the right to open their first tax-free outlets in Seoul.
Lotte Group, the nation’s top duty-free operator, retained the operating rights to its main store in Sogong-dong, central Seoul, but failed to keep another outlet in Lotte World Tower in southern Seoul.
With Lotte and SK Networks closing down their businesses, they have been raising concerns over thousands of their employees losing their jobs.
By Cho Chung-un (christory@heraldcorp.com)