The government plans to allow foreigners-only duty free shops from next year, the Korea Customs Service said Friday.

The customs agency revealed the plan during a meeting of the Presidential Council on National Competitiveness presided over by President Lee Myung-bak at Cheong Wa Dae.

Under the plan, only foreign tourists will be allowed to shop tax-free at the new stores. Some countries such as the United States and Australia have a similar system.

“The new system is expected to attract more foreign travelers into the country. There have been some complaints among foreigners that duty free shops downtown are too crowded with Korean customers,” said Park Sang-deok, a customs agency official.

“Local governments and individuals have also requested to approve the operation of duty free shops as they have a growing number of foreign travelers, especially those from China,” he added.

Of the total 28 duty free shops operated in Korea, the number of “city duty free shops” is 10 nationwide ― six in Seoul, two in Busan and two on Jeju Island.

According to industry sources, foreign customers make up about 60 percent of sales at major duty free shops in Korea.

Under the current law, duty free outlet operators are required to have a 500 square meter or larger site and capital of at least 1 billion won ($924,000). The regulations could be eased for those who want to run foreign travelers-only shops, industry sources said.

The customs agency estimated that a 1,000-square-meter shop will cost an initial investment of 10 billion won and create about 100 new jobs.

The agency plans to make it mandatory for new operators to sell domestically-manufactured products at their shops to boost local economy as well.

Major duty free retailers, however, appeared lukewarm to the government’s new plan, showing doubts about marketability.

“The new plan, in principle, would offer more shopping opportunity for foreign travelers and make them spend more here. However, potential bidders should carefully gauge the profitability of the business,” an official of a local retailer said on condition of anonymity.

“The duty free business requires know-how and capability in the field and the entry barrier is still high,” he said, adding that the impact of the new plan within the industry will be very limited.

By Lee Ji-yoon (jylee@heraldcorp.com)