Duty free licenses to be extended to 10 years
Conglomerates operating duty free shops may be able to have their operational duration guaranteed for 10 years after obtaining licenses. The government will also issue more licenses when the number of tourists and sales at duty free stores surge.
A taskforce to improve the country’s duty free licensing system submitted this and other recommendations to the finance ministry Wednesday, which includes the license extension.
The taskforce was formed following the ruling by the Board of Audit and Inspection (BAI) that the former Park Geun-hye administration gave special favors to certain bidders in 2015 while selecting duty free shop operators in Seoul.
Those wishing to operate a duty free shop must apply for a license from the government. Following adoption of a new policy in 2013, duty free operators are selected every five years through open competition. While it aimed at preventing a monopoly of the market by a few conglomerates, the industry fell into chaos as some operators failed to get their licenses renewed. Duty free operators complained of losses when they failed to remain in business after making huge investments.
The taskforce thus recommended allowing license renewal once for conglomerates and twice for SMEs. This means conglomerates will have an operational duration guaranteed for 10 years, and SMEs 15 years. Currently, only SMEs can renew their licenses, and only once.
Dongguk University professor Yoo Chang-jo, who headed the taskforce, said 10 years’ guarantee is enough.
“If a certain company gets a 20-year guarantee for the license, for instance, it could cause controversy since it is getting a special favor.”
The duty free industry was regarded as a golden goose over the past few years thanks to Chinese tourists.
He acknowledged the operators that fail to renew licenses will suffer losses.
“If the operator is competitive, however, it is highly likely to be selected again after 10 years.”
A committee will be evaluating the operator’s performance, future plans and efforts for job creation in deter- mining whether to extend their licenses or not.
The taskforce also gave recommendations on when the government can issue licenses to new operators. It will issue new licenses if the number of tourists in a particular province increases by over 300,000 compared with the previous year and the average annual sales surge over 10 percent.
Based on the taskforce recommendations, the government will prepare final plans by July to revise related laws.