More pressure on chaebol to pull out from sectors for small businesses


Conglomerates will be refused business licenses for new duty-free shops catering to foreign tourists, the government said Wednesday.

The duty-free shop license policy and other related measures were decided at the government’s crisis management meeting to protect small businesses.

Under the plan, the Korea Customs Service will no longer grant duty-free shop rights to big businesses, favoring instead small and medium-sized companies.

Korea has 28 duty-free stores, 16 of which are run by conglomerates. The revenue generated by big businesses in the sector accounts for 85 percent, reflecting their dominant market position.

For balanced regional growth, the government said it would encourage companies to set up duty-free stores in provincial areas. Existing shops in the metropolitan area will be forced to expand the space given to Korean products and items manufactured by small Korean companies.

Duty-free shops were originally required to set aside 20 percent for Korean products, but the actual space allocated by big stores is about 12 percent.

The government has mapped out a plan to increase the proportion of local products to 40 percent in the long-term. Starting from January next year, local duty-free shops will have to increase the proportion to at least 30 percent, and expand it further later.

In a related step to minimize the dominance of conglomerates, public institutions will assign the operation of their cafeterias to small and medium-sized firms.

Samsung, LG, CJ and other conglomerates have been running 41 percent of all the in-house restaurants at 86 public agencies.

The Fair Trade Commission is also planning to push big retailer chains to lower their commissions imposed on small contractors and partner firms.

The trade watchdog is also tracking market practices and membership fees involving coffee shop chains in Korea, a sector that is growing at a breakneck pace, to protect those that sign up for franchises. A preliminary survey will be conducted from April through June, followed by field investigations to discover irregularities and unfair practices.

The Korean government is ratcheting up its pressure on local conglomerates to stay away from certain sectors that small business owners have long favored.

The rapid expansion of the chaebol groups into various sectors beyond their strategic turf sparked protests from small enterprises.

Bowing to the mounting pressure from the Lee Myung-bak administration, major conglomerates earlier announced they would pull out from certain sectors reserved for small business owners, but critics said they are yet to make good on their promises.

By Yang Sung-jin (insight@heraldcorp.com)