April 26, 2024

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[THE INVESTOR] Lotte Duty Free, Hyundai Department Store and Shinsegae DF have won new licenses to operate duty-free stores in the affluent Gangnam district in Seoul, the Korea Customs Service said on Saturday evening.

Two other big rivals SK Networks and HDC Shilla failed to get the ticket, after a six month battle to tap into the demand of growing Chinese tourists in southern Seoul.

The announcement came despite strong opposition from civic groups and lawmakers, who demanded that the government suspend the decision until the prosecution completes its investigation into the allegations that major conglomerates made donates to the Mir and K-Sports foundations in return for favors.

The KCS said it picked a total of six duty-free operators -- three conglomerates in Seoul and three small and medium enterprises in Seoul, Busan and Gangwon. Among the SMEs, Top City won the Seoul slot, Busan Duty Free for Busan, and Alpensia, for Gangwon.

The conglomerate winners get to operate their duty-free shops for five years, after spending up to one year preparing for the opening. The SME winners can renew their license once, having a maximum of 10 years of duty-free operations, the KCS said.

Apparently quelling worries over potential favors to a certain company, the KCS stressed that its license selection committee consisted of six professors, nine civil members from think tanks, civic groups and two government officials, who gathered for evaluation in a remote venue in Cheonan just three days ahead of the announcement.

The committee evaluated the companies in 12 categories, with the heaviest weights on the financial health, the optimum level of investment size and business sustainability, it said.

Hyundai Department Store marked the highest score of 801.5 out of the full 1,000, followed by Lotte Duty Free with 800.1 and Shinsegae DF with 769.6.

The bidding and selection process coincided with the influence-peddling scandal and lawmakers’ grilling over allegations that Lotte Group Chairman Shin Dong-bin and SK Group Chairman Chey Tae-won had requested in secret meetings that now-impeached president Park restore their duty-free licenses. Both companies have flatly denied the allegations.

“If the KCS had delayed or cancelled the selection of duty-free licenses without legal grounds, bidders would have suffered economic damage,” KCS said in a statement.

“If any selected company later turns out to have cheated in the selection process, the KCS will immediately cancel the license.”

With the new license, Lotte Duty Free will be able to reopen a duty-free store at Lotte World Tower in Jamsil, southeastern Seoul. Hyundai Department Store’s duty-free shop will be located at its Coex branch in Samseong-dong and Shinsegae DF’s outlet at Central City, a shopping and entertainment complex in Seocho.

All three locations are connected with mega retail facilities, seemingly in line with the government’s purpose of giving additional duty-free licenses, “to boost domestic demand by aggressively making use of the high demand of Chinese tourists and to create new jobs.”

In relation to duty-free business, Lotte vowed to invest 2.3 trillion won ($1.9 billion) for the next five years to attract foreign tourists, build tourism infrastructure in Gangnam and support SMEs. Hyundai Department Store is pouring 30 billion won over the next five years into tourism infrastructure in the Coex area and Shinsegae DF pledged 350 billion won investment for Gangnam tourism.

By Kim Yoon-mi/The Korea Herald (yoonmi@heraldcorp.com)