The Korea Customs Service’s plan to allow duty-free shops to open in major cities reached a deadlock recently as some the participating companies have abandoned the project, citing low profitability.

Even those which are sticking to the blueprint are faced with difficulties of finding a sufficient range of business partners, as prestigious global brands tend to avoid being involved in the provincial shops.

Late last year, the KCS licensed several small and medium-sized companies to run duty-free shops in major cities to help local communities attract foreign shoppers. The cities were Daegu, Incheon, Daejeon, Ulsan, Suwon, Cheongju, Suncheon, Gyeongju, Changwon and others.

Rocket Electric, however, recently gave up on its plan to open a franchise store in Suncheon, South Jeolla Province, saying that the business would not make up for the initial investment of 15 billion won ($13 million).

Seohee Construction, too, let go of its plan back in January to open up in Hyundai Hotel, Gyeongju, without offering any notice or explanation to the city, according to the city’s officials.

The company, upon being selected as administrator, had pledged to develop the characteristics of Gyeongju City, which is full of historic sites from the ancient Silla Kingdom.

In the case of North Jeolla Province and Gwangju, the entire plan is about to be scrapped due to the lack of franchise applicants.

Even the stores which are to open as scheduled are faced with difficulty securing suitable business partners, especially among global luxury brands.

Considering these hurdles, the KCS has held two business orientation sessions this year and also extended the business timeline by two months. The selected companies were originally obligated to open stores within three months of receiving government approval.

Despite this assistance, most of them have so far failed to finalize their business portfolios, with less than two months left until the project is due to start.

The KCS’ initial plan was to establish exclusive duty-free shops for foreigners within Seoul. This, however, was rejected by the government’s regulatory commission and was altered to the provincial store project, aiming to achieve balanced growth and to help local industries.

The KCS administers 32 duty-free shops nationwide ― 10 in downtown Seoul and Busan, 17 in airport and harbor departure lounges, four in Jeju and one diplomat-only shop in Seocho-gu.

By Bae Hyun-jung (tellme@heraldcorp.com)