Korean Presidential crisis deepens as duty free retailers and Customs Service are raided

SOUTH KOREA. The extraordinary political crisis surrounding President Park Geun-hye escalated today, following raids by investigators on the offices of Lotte Group and SK Group – widely considered to be the front-runners for new Seoul downtown duty free licences due to be awarded next month. [For the very latest on this story, including reaction from Lotte Duty Free, click here.]

The authorities are reportedly investigating whether the two businesses – in their efforts to win back licences lost in the 2015 round of bidding – funded two foundations controlled by the woman at the heart of the scandal, Choi Soon-sil, a close friend and unofficial aide of Park.

Prosecutors indicted Choi and a former presidential aide at the weekend on charges of colluding with President Park to pressure Korean businesses to make donations to the foundations. They also announced that the President will be investigated “as a suspect”, though the law gives her immunity from prosecution. Park is the first South Korean President to face a criminal investigation while in office.

No duty free retailer, or parent company, has been found guilty of any wrongdoing, The Moodie Davitt Report emphasises. Lotte Duty Free insists, for example, that it is an innocent party and hopes the licensing timetable will move ahead as planned (more reaction to come shortly). It should also be pointed out that Lotte nor SK were hardly the recipients of any government favours in the last round of licence bidding, both losing their permits to widespread industry astonishment.

The scandal has shaken the country to the roots. Hundreds of thousands took to the streets in Seoul last Saturday, marking the fourth consecutive weekend of mass protests against Park.


The President, whose five-year term ends in February 2018, has apologised twice but resisted calls to resign. However South Korea’s main opposition Democratic Party announced today that it will seek a vote on an impeachment motion no later than early December.

Lotte Duty Free and SK Networks (WalkerHill Duty Free) have both been  optimistic of securing one of the additional three downtown duty free licences in Seoul that have been set aside for major players. They are up against intense competition in the form of Shinsegae Duty Free, Hyundai Department Store and HDC Shilla Duty Free.

How Yonhap News Agency reported today’s announcement by the main opposition party of a planned impeachment vote next month. Against such a backdrop, and combined with the Korea Customs Service and travel retailers’ raids, the issuing of new duty free licences next month is now in mounting jeopardy.

Korea Customs Service, which awards the licences, has insisted until now that it will proceed with granting the licences despite the controversy.  However, that intention has been thrown into doubt by news (reported by Korean news agency Yonhap and other mainstream media) that the Finance Ministry and Customs Service offices were also raided today.  The previous day, investigators searched the offices of Samsung Group, parent company of HDC Shilla Duty Free co-shareholder Hotel Shilla.

A leading Korean duty free retailer, speaking on the grounds of anonymity, told The Moodie Davitt Report today: “Due to this unprecedented big scandal, the bidding might be postponed or cancelled.”

The scandal could have further repercussions for the travel retail sector than the current round of licence decisions, he said. Local media have repeatedly suggested links between last year’s hugely controversial duty free licence awards and Choi Soon-sil. Two of the industry newcomers, Doosan Group (Doota Duty Free) and Hanwha Galleria (Galleria 63 Duty Free) have come under the microscope as the fall-out intensifies.

“I am also worried that the prosecutors might discover evidence that the President and her friend manipulated the result of last year’s downtown licence bidding,” said the retail source. “The presidential scandal is now snowballing.”

Note: For a detailed timeline on the political scandal click here



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