Duty free shops will open in nine cities for the first time this year after the government approved the plan at the end of 2012.

The Korea Customs Service licensed nine small and medium companies to run duty free shops in major cities ― Daegu, Incheon, Daejeon, Ulsan, Suwon, Cheongju, Suncheon, Gyeongju and Changwon ― to help local cities attract more foreign shoppers and boost their local economies. Currently, duty free shops only exist in Seoul, Busan and Jeju.

The licensees, ranging from local hotels to construction firms, were singled out among 27 applicants, based upon their viability, financial soundness, stock management capacity, and employment creating potential, according to KCS officials.

The KCS will hold a training session to educate the licensees on basic logistics systems, as most of them are new in the duty free sales business, said Park Sang-duk, a KCS official.

The selected firms are Grand Tourist Hotel (Daegu), Hotel Encore (Suwon), Daedong Department Store (Changwon), as well as Rocket Electric (Suncheon) and Seohee Construction (Gyeongju). They are all small-and mid-sized companies that have contributed to their local economies. KCS restricted the entry of big business groups to the duty free business in provincial cities.

The largest among the nine is to be the Incheon Songdo Duty Free Shop, run by a joint company founded by the Incheon Development and Tourism Corporation and two private retail firms.

“Our store will be located near the Economic Free Zone, with a clear view of the Green Climate Fund building,” said Choi Young-ho from the Songdo shop. In a move to attract tourist customers and to vie with conglomerate-run duty free shops in Seoul, the Songdo shop plans to offer a competitive price level and a variety of special goods.

“Based on the KCS regulations that 40 percent of the space is to be allocated to domestic goods, we will focus on the sale of local specialties, such as dried laver from Ganghwado,” Choi said.

Seohee Construction, which is to open its store in Gyeongju’s Bomun Tourist Complex, also has plans to develop the characteristics of the city, which is full of historic sites from the ancient Silla Dynasty.

“Our focus is in construction but we are also involved in the distribution business and saw the duty free shop project as having good potential,” said Kim Jong-ho from the construction company.

“Though we were late in joining the bid, we see no problem in opening the store within the given three months.”

The initial plan of the KCS was to establish exclusive duty free shops for foreigners within Seoul. This, however, was rejected by the government’s regulatory commission and was altered to the provincial store project.

“The new stores may not be as profitable as the ones in Seoul, but will play a crucial role in achieving balanced growth and boosting local industries,” KCS official Park said.

By Bae Hyun-jung (tellme@heraldcorp.com)