Flip-flopping duty-free shop policy

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Flip-flopping duty-free shop policy

The flip-flopping on public policy for the duty-free retail business could be cited as the best example of how heedless lawmaking and shortsighted policy-making can wreak havoc on an industry.

The case began when the National Assembly hastily revised the customs law to shorten the licensing period for duty-free shops from 10 years to five in an effort to correct chaebol domination of the lucrative sector. During the first tender last November under the new law, the government handed out four licenses to new operators and withdrew licenses from two existing players in Seoul.

The repercussions were huge. A fire sale by the two outgoing shops forced their rivals to cut prices. The newcomers meanwhile were confronted with empty shelves and thin customers, as foreign luxury brands refused to sell merchandise in shops with an assured lifespan of just five years. Over 2,000 workers are in danger of being out of a job when the two shops’ licenses expire in June.
For damage control, the government late last month announced it would extend the licensing period back to 10 years and designate six more duty-free shops. It is right for the government to fix a flawed policy that is ruining the industry.

But it is fair to question whether the new measure was drawn up based on comprehensive and farsighted consideration of the global environment and tourism conditions. The government has maintained that it cannot increase the number of new entries for an already saturated sector. But it hastily moved to increase the number after President Park Geun-hye raised concerns about the fallout from layoffs due to the previous duty-free shop policy.

After the six new players join, there will be a total of 13 in the capital alone. They can make money only when foreign tourists continue to increase 10 percent annually. But the number of foreign visitors fell 7.3 percent year on year in 2015. While the local industry was marred by flip-flopping policy, China and Japan invested heavily to expand their local duty-free retail presence.

Duty-free shops here lost competitiveness for the sake of weakening the chaebol hold over the industry, but another shift in policy based on an order from the president may also bring about other side effects.

JoongAng Ilbo, May 2, Page 30
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