End the duty-free fiasco

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End the duty-free fiasco

The country’s duty-free shop policy went back to its original framework even before the revised version enacted two years ago actually took off. The Ministry of Strategy and Finance on Thursday announced the license to operate duty-free shops would be extended to 10 years, reversing the earlier law to shorten the business period to five years.

It deferred the decision on whether to apply the extensions to the Lotte World Tower and Walkerhill Hotel shops that are due to close in the next couple of months when their tenure expires in late April.

The newcomers who won licenses have been opposing preferential grandfathering for the outgoing businesses. The policy fiasco is a typical example of a short-sighted administrative mess and incompetence.

The revised law that capped the license period to five years had been criticized from the beginning. Restricting the business period hurt the competitiveness of the retail sector that is pivotal to the tourism industry, and could bring about job insecurity as capital and human resource losses are inevitable if the business is capped at five years.

It was dubbed as the biggest business policy flop of the incumbent government. Even the president was critical of the regulation, sending the government to come up with a revision fast.

But the re-revised version is no better. Duty-free shops do not serve domestic demand. It is an export industry targeting foreign-currency revenue. Global competition has gotten more intense. China is establishing duty-free shops in 19 areas. Japan is also expanding tax-free retail shops across the nation. The only measure the local government comes up with to sustain the industry amid heated competition with neighboring countries is moderating the number of businesses and the license period.

The fiasco should be a lesson to both the government and legislature. The entire industry can be jeopardized if the government slaps regulations without any regard to market principles. Hundreds of people could lose their jobs. It also showed how powerful lawmaking activity could be.

The government made itself incompetent because it was engrossed in rent-seeking by relying on legislative authority. Both the government and legislature must make amends by coming up with a lasting and innovative outline to raise the competitiveness of the duty-free shopping industry.

JoongAng Ilbo, April 1, Page 30
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