Doosan and other store operators welcome the move
By Lee Hyo-sik
A ruling party lawmaker is seeking to extend the licensing period for duty free stores to 10 years from the current five, saying this will strengthen the competitiveness of this growing sector in the country.
The planned dismissal of hundreds of workers at the soon-to-be closed Lotte and SK duty free stores is also prompting the move to guarantee operators a longer period of time to run the stores.
The office for Rep. Shim Jae-chul of the ruling Saenuri Party said Monday that it will submit a revised bill regarding the nation's Customs Act to permit duty free license holders to run their stores for 10 years before renewal is required.
In 2012, the law was revised to allow retailers to operate duty free stores for five-year terms. Prior to this, the period was 10 years.
"It normally takes one or two years for duty free store operators to introduce luxury brands. It takes even longer to generate profits," Rep. Shim said. "With the current five-year license, it is hard for domestic duty free shops to gain global competitiveness and compete with foreign rivals. It is necessary to extend the license period for the duty free industry here to expand."
Lotte Group, which is forced to close its Lotte World Mall duty free store in southern Seoul after losing its license on Nov. 15, continues to grapple with the aftershock. It also faces a daunting task in dealing with luxury goods and other items in stock.
SK Group, which was unable to renew its license for its sole duty free shop at the Sheraton Walkerhill Hotel in eastern Seoul, also must exit the lucrative retail sector for the first time in 23 years.
Doosan and Shinsegae, which secured the much-coveted rights to run their first duty free stores in the capital, are also worried that their licenses could be taken away in five years.
HDC-Shilla and Hanwha Galleria, which won new duty free licenses in July, are also hoping that the duty free license period will be prolonged from the current five years.
"Duty free operators which recently lost their licenses continue to grapple with the consequences because they have to dismiss hundreds of workers and dispose of inventories worth tens of billions of won," said a duty free industry official who declined to be named.
"Duty free stores have to invest large sums of money in the beginning to build warehouses and secure a store site," he said. "They also have to spend money to renovate shops and hire and train workers. Who would invest lots of money if one may have to close the store five years later?"
The official then said that duty free stores should be allowed to operate for more than five years to recoup investments and generate profits, stressing that their rivals in the United States, Singapore, Thailand and China can operate shops as long as they want. Those in Japan can run duty free stores for 10 years.
An official at Doosan Group, which will take over Lotte World Mall's license on Dec. 31, said it would be better for the company if the license period were extended to 10 years.
"We have not prepared any official comments on Rep. Shim's move. But we think when the proposed bill goes into effect, things would be better for all duty free operators," he said.
By Lee Hyo-sik
A ruling party lawmaker is seeking to extend the licensing period for duty free stores to 10 years from the current five, saying this will strengthen the competitiveness of this growing sector in the country.
The planned dismissal of hundreds of workers at the soon-to-be closed Lotte and SK duty free stores is also prompting the move to guarantee operators a longer period of time to run the stores.
The office for Rep. Shim Jae-chul of the ruling Saenuri Party said Monday that it will submit a revised bill regarding the nation's Customs Act to permit duty free license holders to run their stores for 10 years before renewal is required.
In 2012, the law was revised to allow retailers to operate duty free stores for five-year terms. Prior to this, the period was 10 years.
"It normally takes one or two years for duty free store operators to introduce luxury brands. It takes even longer to generate profits," Rep. Shim said. "With the current five-year license, it is hard for domestic duty free shops to gain global competitiveness and compete with foreign rivals. It is necessary to extend the license period for the duty free industry here to expand."
Lotte Group, which is forced to close its Lotte World Mall duty free store in southern Seoul after losing its license on Nov. 15, continues to grapple with the aftershock. It also faces a daunting task in dealing with luxury goods and other items in stock.
SK Group, which was unable to renew its license for its sole duty free shop at the Sheraton Walkerhill Hotel in eastern Seoul, also must exit the lucrative retail sector for the first time in 23 years.
Doosan and Shinsegae, which secured the much-coveted rights to run their first duty free stores in the capital, are also worried that their licenses could be taken away in five years.
HDC-Shilla and Hanwha Galleria, which won new duty free licenses in July, are also hoping that the duty free license period will be prolonged from the current five years.
"Duty free operators which recently lost their licenses continue to grapple with the consequences because they have to dismiss hundreds of workers and dispose of inventories worth tens of billions of won," said a duty free industry official who declined to be named.
"Duty free stores have to invest large sums of money in the beginning to build warehouses and secure a store site," he said. "They also have to spend money to renovate shops and hire and train workers. Who would invest lots of money if one may have to close the store five years later?"
The official then said that duty free stores should be allowed to operate for more than five years to recoup investments and generate profits, stressing that their rivals in the United States, Singapore, Thailand and China can operate shops as long as they want. Those in Japan can run duty free stores for 10 years.
An official at Doosan Group, which will take over Lotte World Mall's license on Dec. 31, said it would be better for the company if the license period were extended to 10 years.
"We have not prepared any official comments on Rep. Shim's move. But we think when the proposed bill goes into effect, things would be better for all duty free operators," he said.
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