[Square] Duty-Free Industry on the Brink, Government Support Must Not Be Abandoned

Park Cheol-gu, Chairman of the Korea Duty Free Shop Association

Having successfully overcome Middle East Respiratory Syndrome (MERS) and the earlier Severe Acute Respiratory Syndrome (SARS), we believed that the novel coronavirus disease (COVID-19) could also be easily overcome. However, COVID-19 proved to be far more persistent than expected, and the third wave during the winter season has become a reality. COVID-19 has deeply penetrated our economy, causing negative ripple effects. Tourism-related industries such as duty-free shops, airlines, and travel, which had already suffered significant damage, are now pushed to their limits.

According to the World Tourism Organization, the recovery of international tourism, including aviation and travel, is expected only after the second half of 2021. The duty-free industry is no exception; from January to September, the number of inbound and outbound travelers, both domestic and foreign, decreased by more than 90% compared to the previous year, resulting in a cumulative deficit exceeding 370 billion KRW since the spread of COVID-19. To support the duty-free industry at the national level, various measures have been implemented, such as rent reductions for commercial facilities within airports, allowing customs clearance and third-party returns of inventory items, and introducing provisions for deferral and reduction of license fees. However, as the severity of the management crisis deepens, these measures have shown their limits. Additional government support measures are urgently needed.

With restrictions on the entry of foreign tourists, who account for more than 70% of sales, and the recent tightening of entry requirements by the Chinese government for travelers arriving from Korea, the so-called Chinese daigou (personal shoppers) who used to purchase Korean duty-free goods even amid the COVID-19 situation are expected to be further constrained. This has heightened a sense of crisis that the duty-free industry will face a real crisis next year.

China, the biggest competitor to Korea’s duty-free industry, is growing its domestic duty-free sector through state-led development and bold regulatory reforms. In the first half of this year, Hainan’s CDFG duty-free shop, backed by government support, rose to become the world’s number one duty-free operator, the first Asian company to do so. Therefore, for Korea’s duty-free industry to overcome the impact of the COVID-19 crisis and maintain its existing competitiveness, diverse and proactive national support measures that have not been attempted before are required.

One such measure is allowing passengers on non-landing international tourist flights to use duty-free shops. Although the government is currently promoting this initiative based on suggestions from the duty-free industry and others, and considering the number of flights, the immediate economic effect may not be significant. However, it is expected to be a new attempt to overcome the crisis faced by the domestic aviation, tourism, and duty-free industries. Moreover, this should not be the only effort; ways to expand the inflow of foreign tourists into Korea should also be explored. One option is to allow airport transit for foreign tourists without permitting their entry into Korea, provided thorough quarantine measures are implemented for all airport workers and movement paths. During transit waiting times, tourists could be given opportunities to shop at duty-free shops in the departure area. This approach would help airports, airlines, travel agencies, and duty-free shops overcome the crisis regardless of the scale of inbound and outbound travelers.

The government must not hesitate to support the industry during this critical time of preparing for the post-COVID era, avoiding the mistake of locking the barn after the horse has bolted. Various support policies should be established to ensure that workers and businesses survive together. If the government neglects the prolonged impact of COVID-19 and withdraws support, it should be reminded that the resilience of the duty-free industry will be seriously damaged, leading to a loss of international competitiveness.

Park Cheol-gu, Chairman of the Korea Duty Free Shop Association

This content was produced with the assistance of AI translation services.