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New duty-free licenses await decision amid controversy

Korea’s customs regulator is set to announce the winners of six new duty-free licenses Saturday evening, despite continued opposition from lawmakers and civic groups.

Three of the licenses will be granted to large companies in the Seoul area. Five companies have bid for the licenses -- Lotte, SK Networks, Shinsegae, HDC Shilla and Hyundai Department Store. The rest of the licenses will go to small and medium enterprises and duty-free outlets outside of Seoul.

The bidding and evaluation process ran into some trouble with the outbreak of the Choi Soon-sil scandal, which opened up suspicions about large conglomerates in Korea using their contributions to foundations run by Choi in exchange for favors in business policies. 

In particular, the Lotte and SK Networks have been accused of using their contributions to sway policy toward being awarded additional duty-free licenses, allowing them to reopen their Lotte World Tower and Sheraton Grande Walkerhill branches.

These two stores were closed earlier this year when the two companies failed to renew their licenses in a round of bidding last November.

Opposition and independent lawmakers exit after a press conference calling for a stop to the evaluation for new duty-free licenses Tuesday. (Yonhap)
Opposition and independent lawmakers exit after a press conference calling for a stop to the evaluation for new duty-free licenses Tuesday. (Yonhap)

Potential corruption connected to additional duty-free licenses was explicitly mentioned by lawmakers as grounds for a bribery charge in their impeachment motion against President Park Geun-hye.

The National Assembly’s Strategy and Finance Committee decided Thursday to ask the Board of Audit and Inspection of Korea to look into the selection process for duty-free licenses and related accusations of corruption.

Lawmakers such as Woo Sang-ho of the main opposition Democratic Party of Korea have publicly called for the Korea Customs Service to suspend evaluations of new duty-free licenses until the investigation is complete.

“If the investigation finds evidence of corruption committed by some companies who are given licenses, it would be difficult to reverse the decision,” Woo said Friday.

However, the Korea Customs Service stands by its decision to announce the recipients of new licenses Saturday. The audit board has no binding power to halt the evaluation. 

Meanwhile, the five companies who will be giving presentations tomorrow for evaluation are on edge. 

“As of right now, we have to move forward with the evaluations,” said an official of one bidder. “There’s too much at stake. The resources spent to prepare for these evaluations, from real estate renovations to the public pledges made for contributions to the community, are immense.”

The pressure is on the Korea Customs Service to conduct fair evaluations to avoid any accusations of impropriety. Unlike previous rounds of evaluations, the KCS has promised to release not only the names of the winning companies but also each company’s evaluation score broken down by criteria.

Once the new licenses are issued, a new battleground for duty-free competition will open up in southern Seoul’s Gangnam shopping district. Currently, Seoul’s largest and most competitive duty-free stores are located in the Myeong-dong shopping district. All five bidding companies have proposed to open their new duty-free stores in Gangnam, hoping to capture tourist demand in that area.

By Won Ho-jung (hjwon@heraldcorp.com)

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