Korean duty free licensing scandal prompts new regime

SOUTH KOREA. A new duty free licensing plan is to be announced in South Korea by the end of September as part of efforts to clean up a sector mired in scandal over the last 18 months.

The duty free licensing process, reported on extensively by The Moodie Davitt Report, has been suspended since new President Moon Jae-in’s administration took office in May.

A Shilla Duty Free spokesman confirmed Korean Finance Minister Kim Dong-yeon’s plans to revamp the bidding process, which was under fire owing to its links to the corruption scandal known as ‘Choi-gate involving former President Park Geun-hye and her close friend Choi Soon-sil.

The Korea Herald reported on Finance Minister Kim Dong-yeon’s plans to announce a new licensing structure by the end of this month

During a meeting (confirmed by The Moodie Davitt Report )with senior executives from Lotte Duty Free and Shilla Duty Free at Incheon International Airport this morning, the Finance Minister pledged a task force to map out the new licensing plan after calls for a more transparent and fair system.

Investigations by a state audit agency (Board of Audit and Inspection) alleged the Korea Customs Service (KCS), which is tasked with granting licences, was influenced to select preferred bidders by high-ranking officials related to Choi.

Lotte Duty Free was one of the victims of unfair “interference and discrimination” by the KCS, the Board of Audit and Inspection alleged in July, losing its cornerstone World Tower licence to Doosan Group (now trading as Doosan Duty Free). The Korean powerhouse regained the key licence in December last year after a new round of bids.

Last month, Lotte Duty Free posted its first quarterly loss, amounting to US$26.1 million, since 2003. This resulted from numerous challenges to the Korean travel retail sector: a combination of the THAAD anti-missile system dispute between South Korea and China, onerous airport concessions fees, and intense competition.

The retailer has threatened to exit its operations at Incheon and recently called for a “rational” adjustment to its rent burden in light of the current crisis.

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