Disputes escalated Wednesday over the government’s possible move to grant additional licenses to duty-free operators -- Lotte and SK -- which lost their bids last year.

At a public hearing held to discuss ways to ease current regulations on duty-free operations, officials proposed to issue more licenses for duty-free shops in Seoul, and to expand their operation term from the current five to 10 years. 


The government believes the new measures would make the local duty-free market more attractive than other Asian competitors and promote the tourism industry.

The plan, however, drew heated opposition from new duty-free operators that won licenses after a tough evaluation last year. Calling it unfair, they said the proposal would only instigate excessive rivalry in the already saturated market.

Under the law, the government can grant more duty-free operation licenses if the portion of foreigners and the amount of money they spent at local duty-free shops exceeds 50 percent over the previous year. The government could also do so if the number of foreign visitors increases by more than 300,000 in each municipality.

Five operators, including Shinsegae and Doosan said the government is being misled by the exaggerated number of foreign visitors. The number of tourists from abroad, particularly from China, declined last year, they said.

Quoting separate data released by the Seoul city government, the number of foreign visitors to the capital city fell to 10.64 million last year from 11.40 million in 2014, they said. The number of foreigners entering Korea via Incheon International Airport and Gimpo Airport also tumbled 5.9 percent and 11.9 percent, respectively.

“New duty-free operators are set to invest 1.07 trillion won ($897 million) and hire 14,200 workers. But if we are going to have more operators even before setting the businesses, this would kill the entire duty-free market,” an insider said.

“The plan to grant additional licenses is to give preference to companies that lost their licenses last year,” he added.

Lotte and SK Networks refuted the claim that it contradicts what they had suggested last year. The winners had urged the government to include more operators in the market, but they have changed their position after securing the licenses, an official said.

In July, the Finance Ministry issued three new licenses including HDC Shilla, a joint venture between Hyundai Development Company 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. Meanwhile, the Finance Ministry said it would finalize the plan on duty-free operations within this month.

Currently, Lotte and Hotel Shilla hold nearly 80 percent of the market share.



By Cho Chung-un
(christory@heraldcorp.com)





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