South Korea will allow four more duty free shops in Seoul - raising the number up to 13 - to lure back Chinese shoppers who have turned to Japan recently amid weakened yen and increased tax-free benefits, said the Korea Customs Service on Friday.

Of the new license available, three will be reserved for large companies and one for smaller ones through competitive tender. Separately, the office will auction a duty-free shop license each in Busan and Gangwon Province to add appeal to the port city’s cruise business and the latter’s winter sports facility.

The office expects the added business opportunity to spur capital investment of 1 trillion won ($876 million) and hiring of more than 5,000.

Industry watchers suspect the new license offer could be arranged to give a second opportunity to two major players Lotte Group and SK Networks Co. who would have to close down their respective outlets in Lotte World Tower and Walkerhill Hotel upon failing to renew their contract in last auction in November. The two have been campaigning hard to stay in business, citing losses from facility expansion and layoffs. Hyundai Department Store Co., the only department store retailer lacking stand-alone duty-free shop in Seoul among the top three - Lotte, Shinsegae, Hyundai - will likely bid for the third license.

Korean government last year selected HDC Shilla Duty Free, a joint venture between Hotel Shilla Co. and Hyundai Development Co., Hanwha Galleria Co., Doosan Group, Shinsegae Group, and Hanatour Service Inc. for new duty free business operators at the capital city.

If the two existing players win license to continue their business and two others are added, Seoul will have 13 duty free shops, more than doubling from six in 2014. But industry watchers are worried increased supply would only aggravate poor business. The new shops have been faring poorly as they failed to secure merchandises from traditional foreign luxury brands, and increased competition would only cost their profitability.

The government has been under fire for its inconsistent and wobbly policy on duty-free shop after it shortened license period to five from 10 years in 2013. Amid criticism for rent-seeking and concerns for weakened competitiveness from undermined investment and work force, it again lengthened the period to 10. It also will likely come under criticism for favoritism if the two outgoing shops are allowed to continue business.

By Sohn Il-seon and Lee Sang-duk

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]