SOUTH KOREA. In a major overhaul of South Korea’s duty free licensing procedures, the evaluation process for awarding contracts will now be led by non-government experts, The Finance Ministry announced today.
Calls for greater transparency in the duty free licence evaluation process, which has been criticised as biased and unfair, prompted the Strategy and Finance Ministry to revise the process and release the first round of changes.
A Shilla Duty Free spokesman confirmed the change to The Moodie Davitt Report. The decision-making process for awarding licences will switch from government officials to public sector experts, he said.
Under the new rules, the government will form a neutral private panel comprising 100 experts in four different groups, with 25 members picked at random, according to Yonhap News Agency. The public will have access to names of all panel members, unlike the current situation where a 15-member panel, formed just three days before evaluation, is formed of government officials plus other non-disclosed members.
According to The Korea Herald, the final revisions are expected to be announced in mid-2018, and will be fully enforced in 2019.
The announcement of the first round of changes is just in time for the bidding process for the Coex, Seoul duty free licence, for which the new rules will apply.
Lotte Duty Free has held the licence for the Coex store since 2010. That licence expires on 31 December; the bidding deadline is set for 20 November.
A Lotte Duty Free spokesman confirmed the retailer intends to re-bid for the licence.
The duty free licensing process has been 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 system has been suspended since new President Moon Jae-in’s administration took office in May.
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.
