SOUTH KOREA

(i) Distribution services

1. During the period under review (2004-07), growth in the distribution services subsector
(wholesale and retail trade, restaurants, and hotels) averaged a modest 3.7% per annum, and its
contribution to GDP remained static at 6.0%. On the other hand, the share of distribution services in total
employment declined.

2. Liberalization of the subsector has been continuous since 1996; the number of stores of large
distributors has increased, and foreign participation in the sector is rising. Between 2004 and 2006, retail
outlets declined by 3.8%; on the other hand, between 2004 and 2007 foreign investment in the
distribution sector rose by 20.6%. The share of traditional family stores has been on a declining trend.1
Growth in the distribution sector has been fuelled by hypermarkets, as these are also the preferred choice
of foreign participants in the sector.2

3. The sector is subject to the competition policy and consumer protection legislation (Chapter III).
It is also subject to the Distribution Industries Development Act, enacted in April 1997 to facilitate the
development of distribution industries. Legislative changes in 2005 and 2006 have made opening and
modifying the registration of a large store (floor space of 3,000 m2) easier, by increasing the number of
streamlined services, such as authorization and licensing, from 13 to 20, as well as reducing the
processing time and documentation required.3 There are no restrictions on foreign entry in sectors where
it is not excluded, and foreign participants are accorded national treatment. Foreign entry is excluded in:
trade in pharmaceuticals, medical, and functional goods; firearms, explosives and swords; works of art
and antiques; and operation of and distribution services at public wholesale markets for agricultural,
fishery, and livestock products; in addition, there are economic needs test requirements in wholesale and
retail services related to used cars and gaseous fuels.4

1
Between 2001 and 2006, the total number of family stores decreased by 2.8% per annum and total
employment decreased by 1.6% per annum.
2
Kim et al. (2000).
3
Distribution Industry Development Act, revised as of 23 December 2005, and Enforcement Decree of the
Distribution Industry Development Act, revised as of 23 February 2006.
4
APEC (2007).