Government moves to revive duty-free industry with fee cuts, higher exemption limits

The government has begun drawing up measures to revive the duty-free industry, which has been mired in a prolonged slump. A recent uptick in foreign tourist arrivals and industry restructuring have shown some signs of earnings improvement, but officials say recovery remains sluggish amid a high exchange rate environment and intensifying competition from domestic retail channels.

The Ministry of Finance and Economy held a roundtable Thursday with duty-free industry representatives at the Korea Duty Free Association office at Incheon Airport. The meeting was convened to assess current market conditions and hear the industry's requests.

According to the ministry, the duty-free sector is gradually recovering after two to three years of underperformance. Operating profit has improved thanks to the industry's own restructuring efforts, a rise in foreign tourist numbers and reduced dependence on Chinese resellers known as "daigou," and some major operators have returned to profitability.

However, operators said significant challenges remain. Despite the improving business environment, a persistently high exchange rate continues to weigh on the sector, and competition from domestic retail channels such as Olive Young and Daiso is intensifying. Participants called for ongoing change and innovation, including differentiated marketing targeting foreign tourists and the introduction of experience-based products drawing on K-content.

The roundtable was attended by major duty-free operators including Lotte Duty Free, Shilla Duty Free, Shinsegae Duty Free, Hyundai Duty Free and Gyeongbokgung Duty Free, along with officials from the Korea Duty Free Association.

The industry asked the government to lower duty-free operator patent fees, raise the duty-free allowance for travelers and ease regulations on duty-free store operations.

The ministry said it plans to actively review the requests raised at the meeting and maintain ongoing communication with the duty-free industry.