[Editorial] Korea Needs More Spending and Less Restrictions

Many Koreans are flying out for shopping sprees to Japan and Hong Kong. Upscale department stores in Tokyo offering sales at a special reduction this month are crowded with Korean visitors ready to open their wallets. Hong Kong is also luring Korean shoppers with various promotions celebrating the 10th anniversary of its handover to China.

In stark contrast, the domestic market is quiet. Although exports are high despite a strong won and the stock market is booming, many Korean consumers today opt to spend money overseas. In the first quarter of this year, the total amount of consumer spending abroad (4.7 trillion won) surpassed the total sales of all Korean department stores combined (4.5 trillion won) for the first time.

When the price of luxury goods is much cheaper in other countries, there is little to blame on shoppers. The annual sales volume of luxury goods in Japan amounts to 30 trillion won, ten times larger than that of Korea’s. Consequently, the market enjoys economy of scale, and parallel imports are much cheaper. With a cheaper yen, shoppers can get a good deal out of their travel expenses, which are considered as modest since their shopping is more than worth it.

If overseas consumer expenditure is spent in Korea, our economy will pick up faster and more jobs will be created. At a time when more companies are willing to invest overseas, our economy cannot be sustained if consumers also turn their eyes abroad. Unfortunately, the government is keen on slapping taxes on shopping lovers, but much less keen on directing their spending back to Korea. Perhaps the government’s inaction is unsurprising given its past behavior.

Meanwhile, our travel deficit rose to 12.9 billion dollars last year from 4.7 billion dollars in 2003. The worrisome trend is attributable to our service sector’s inability to fulfill consumer needs for quality and reasonable prices, restrained by various tax regulations and restrictions. For instance, Korean golf courses are much less competitive than those not only in China and Southeast Asia but also in Japan because of heavy taxes and restrictions. When Korean golfers finish their rounds in those countries, they are also likely to go shopping afterwards.

Kwon O-kyu, deputy prime minister and the minister of finance and economy, said, “Our plans to strengthen the service sector only need the finishing touch.” However, no immediate action can be seen. The current government talked about boosting service sector competitiveness from the outset. So far, its words ring hollow in the empty Korean service market.