By Choi Kyong-ae
The Korea Customs Service said Thursday it will push duty-free shops to sell more products from small- and medium-sized enterprises (SMEs) from January, to boost their growth.
"We are planning to amend the law to increase the required ratio of SME-made products in the Korean-product corners of duty-free shops to 70 percent from the existing 40 percent," Park Sang-deok, deputy director of the Export and Import Cargo Division at the tariff authorities, told The Korea Times by telephone.
"The revised law will take effect in early January," said Park.
Currently, duty-free shops are required to fill 40 percent of their Korean-product corners with SME-made goods or to fill at least 825 square meters of their outlets with the products, the official explained.
Large duty-free shops such as Lotte Duty Free and Shilla Duty Free didn't welcome the move as they seek to stay profitable by increasing the sale of imported luxury brands such as Chanel and Louis Vuitton.
"The tariff laws were already strengthened early this year and an additional revision will have an impact on duty-free shops' businesses," an official at Shilla Duty Free said asking not to be named.
Shilla Duty Free has increased the ratio of SME-made products in the past years but it takes time to develop a "compelling" product, said the official. "Forcing duty-free shops to sell more SME-offered goods won't work instead of encouraging them to sell the products."
Samsung Life Insurance and other Samsung Group affiliates collectively own a 16.9 percent in the duty-free shop, followed by Fidelity Fund with 11.65 percent and the National Pension Fund with 7.4 percent.
"At a time when demand for Korean-made products is slowing particularly among local customers, such a revision may weigh on our performance," said an official from Lotte Duty Free, a wholly-owned unit of the Lotte Hotel. He also declined to be identified due to the sensitivity of the matter.
The regulator's planned move is an extended effort to prop up SMEs under the Park Geun-hye government.
In October, the customs office announced a plan to increase the number of duty-free shops run by SMEs at airports and major cities to more than 15 by 2018 from the current seven.
"Products made by SMEs currently account for only 12 percent of the total space duty-free shops in Korea. We are targeting to increase the ratio to 25 percent by 2018," said Park.
Sales at the country's duty free shops jumped to 5.09 trillion won in the January-September period from 1.78 trillion won for the whole year of 2001, according to Korea Customs Service data.
As of the end of September, 36 Korean duty-free shops account for 10.4 percent of the global market, followed by the United Kingdom with 6.8 percent and the U.S. with 6.2 percent. Nineteen out of the shops are run by large conglomerates, seven run by SMEs and the remainder by public firms, data showed.
The Korea Customs Service said Thursday it will push duty-free shops to sell more products from small- and medium-sized enterprises (SMEs) from January, to boost their growth.
"We are planning to amend the law to increase the required ratio of SME-made products in the Korean-product corners of duty-free shops to 70 percent from the existing 40 percent," Park Sang-deok, deputy director of the Export and Import Cargo Division at the tariff authorities, told The Korea Times by telephone.
"The revised law will take effect in early January," said Park.
Currently, duty-free shops are required to fill 40 percent of their Korean-product corners with SME-made goods or to fill at least 825 square meters of their outlets with the products, the official explained.
Large duty-free shops such as Lotte Duty Free and Shilla Duty Free didn't welcome the move as they seek to stay profitable by increasing the sale of imported luxury brands such as Chanel and Louis Vuitton.
"The tariff laws were already strengthened early this year and an additional revision will have an impact on duty-free shops' businesses," an official at Shilla Duty Free said asking not to be named.
Shilla Duty Free has increased the ratio of SME-made products in the past years but it takes time to develop a "compelling" product, said the official. "Forcing duty-free shops to sell more SME-offered goods won't work instead of encouraging them to sell the products."
Samsung Life Insurance and other Samsung Group affiliates collectively own a 16.9 percent in the duty-free shop, followed by Fidelity Fund with 11.65 percent and the National Pension Fund with 7.4 percent.
"At a time when demand for Korean-made products is slowing particularly among local customers, such a revision may weigh on our performance," said an official from Lotte Duty Free, a wholly-owned unit of the Lotte Hotel. He also declined to be identified due to the sensitivity of the matter.
The regulator's planned move is an extended effort to prop up SMEs under the Park Geun-hye government.
In October, the customs office announced a plan to increase the number of duty-free shops run by SMEs at airports and major cities to more than 15 by 2018 from the current seven.
"Products made by SMEs currently account for only 12 percent of the total space duty-free shops in Korea. We are targeting to increase the ratio to 25 percent by 2018," said Park.
Sales at the country's duty free shops jumped to 5.09 trillion won in the January-September period from 1.78 trillion won for the whole year of 2001, according to Korea Customs Service data.
As of the end of September, 36 Korean duty-free shops account for 10.4 percent of the global market, followed by the United Kingdom with 6.8 percent and the U.S. with 6.2 percent. Nineteen out of the shops are run by large conglomerates, seven run by SMEs and the remainder by public firms, data showed.
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