No more half-baked policies

The duty-free retail sector is facing another round of turmoil amid the government’s decision to draw up an outline to fix licensing regulations yet again. Under the proposed revision, the license life would be extended from the current five-year cap, business license fees would increase and more licenses would be made available.

The customs law was last revised last year to shorten duty-free licenses from 10 years to five years, while toughening guidelines for renewal, ousting two major players from the market and selecting five new entries. The changes resulted in various ill effects - concerns about stability in duty-free operations and massive layoffs. The closure of two shops could wipe out 2,000 jobs and cause losses amounting to 1.49 trillion won ($1.2 billion) per year.

The proposed revision would place the law back to where it was - guaranteeing duty-free shops to run their business for 10 years instead of five and allowing existing businesses to continue if there is no particular problem in operations. It would ease concerns about stability in the business, market investments and jobs. The industry, however, is questioning why the government has suddenly come up with the idea to increase licenses. It suspects authorities are trying to save the Lotte World Tower Duty Free Shop and SK Group’s shop in the Walkerhill Hotel, which must close within the first half since they failed to renew their licenses. Newcomers are strongly opposed to the move.

Three of the five shops that won licenses for the first time opened for business, but their stores have hardly been successful because they have failed to fill their shelves with luxury brands. The opening of large-scale shops in China and Japan also has made competition tougher, and Chinese tourists are spending less due to the slowdown in their economy. The duty-free shop license policy is an exemplary case that shows how half-baked policy-making can ruin an industry. A law that lacked thorough review and was rubber-stamped at the petition of an opposition lawmaker now requires fixing just four months later. The public hearing next week must put forth the best possible solution.

JoongAng Ilbo, March 11, Page 30