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(LEAD) Seoul to issue four more duty-free licenses

All News 16:46 April 29, 2016

(ATTN: ADDS more details from 2nd para)

SEJONG, April 29 (Yonhap) -- The South Korean government said Friday that it will issue four additional licenses to operate duty-free shops in Seoul in a bid to meet rising demand from Chinese tourists for non-taxable goods.

The Korea Customs Service (KCS) said it will pick four local retailers to let them open new duty-free shops in Seoul, adding to the current nine.

It will also permit two more duty-free stores outside Seoul -- one in Busan, the country's second-largest city on the southeast coast, and the other in Gangwon Province, where PyeongChang, the host city of the 2018 Winter Olympics, is located -- in an effort to support the two regions' tourism sector.

"We decided to open new duty-free shops in three regions to invigorate the local tourism industry and increase investment and employment," Lee Myung-ku, head of the clearance facilitation bureau at the KCS, said at a press conference.

"It is aimed at building shopping infrastructure for foreign visitors in advance amid a steady rise in the number of foreign tourists."

Out of the four berths earmarked for Seoul, three will be given to large conglomerates, with the fourth to be awarded to a small or mid-sized firm, he added.

Despite a sharp decline in the number of foreign tourists in 2015 due to the outbreak of the Middle East Respiratory Syndrome, South Korea saw the figure make a rebound this year, jumping 12 percent on-year to reach 3.6 million as of end-March.

An estimated 16.5 million foreigners will come to South Korea at the end of this year and a projected 20 million in 2017, up from 14 million in 2014. Chinese people accounted for more than a quarter of the total foreign visitors.

On the back of such robust overseas demand, duty-free stores, mostly run by retail giants, such as Lotte Group, posted a combined 9.2 trillion won (US$8 billion) in sales last year, with an average 15.1-percent growth over the past decade.

As a result, the KCS expected that new duty-free businesses in Seoul and other areas will create a fresh 5,000 jobs and 1 trillion won in investment.

The KCS said it will announce the detailed competition schedule next month and complete the process before the end of this year to help the selected operators start business next year.

"It takes some time as we have to go through due decision-making procedures like public announcement and panel reviewing and so on," said Lee. "All candidates will have a fair chance in the competition."

Two former duty-free shops at Lotte World Tower and SK Walkerhill, which lost their licenses last year, are the strongest hopefuls for two of the four new tickets.

The South Korean government has been under fire for wavering too frequently between a soft and hard approach in customs policies as the duty-free market has become one of the most prosperous businesses in tandem with a sharp influx of deep-pocketed shoppers from China.

Last year, it adopted a policy to hold an open competition for duty-free licenses every five years as a way to reduce monopolies in the market and improve the climate for newcomers.

HDC Shilla Duty Free, Hanwha Galleria and SM Duty Free won new licenses to open outlets in Seoul, while Lotte World Tower and SK Walkerhill lost their bids to renew their licenses to Doosan and Shinsegae.

The two losers have strongly asked the authorities to give them one more chance, citing a waste of their facilities and workforce.

Last month, however, the government changed its stance and extended the operational licenses of local duty-free stores to 10 years from the current five. Also, the licenses will be automatically renewed to help the companies run their businesses in a more sustainable way.


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