Ruining an industryWe are shocked at the results of the Board of Audit and Inspection (BAI)’s audit of the procedure for selecting duty-free shops under the Park Geun-hye administration. According to a government watchdog, the Korea Customs Service (KCS) eliminated Lotte Duty Free Shop in the first and second rounds of bidding. If the customs service had taken the proper action, Lotte would have qualified for the license that it was denied. We wonder why the government wanted to give favors to other duty-free shop operators by distorting its assessments.
In some cases, the president’s order was enough to change the whole shape of the industry. In the beginning, the Ministry of Strategy and Finance and the KCS planned to give license to three new duty-free shops in 2015 and then determine the need for additional shops every two years later. But as soon as Park ordered additional licenses for duty-free shops at the end of 2015, that all changed. A commissioned study upped the optimum number of additional shops to four from one. A fabricated report gave an overly optimistic forecast of shoppers despite the steep decline in Chinese tourists after the Middle East respiratory syndrome outbreak.
As a result, the number of duty-free shops in Seoul alone has doubled to ten in three years. But all of them have been suffering severe losses due to a drastic decrease in Chinese tourists since the government’s decision to deploy the Terminal High Altitude Area Defense (Thaad) system. With Chinese tourists accounting for 70 percent of sales, none of the 22 duty-free shops across the country is expected to be profitable anytime soon.
Hanwha Duty Free Shop last month returned its license to the KCS. Duty-free shops, once dubbed “golden gooses,” are now money pits. The customs office ruined the industry due to fiddling from the Blue House.
The government provides administrative services for the public good. Licensing duty-free shops is no exception. But the BAI’s findings show a critical lack of transparency, sustainability and consistency. Government officials blindly followed a corrupt president’s instructions.
We wonder why the government needs to control the duty-free industry any more. It is time to introduce a system that allows applicants to run duty-free shops freely. Korea’s duty-free market accounts for a whopping 17 percent of the world’s total. The time for the government to exploit the system for political purposes has ended. The new government must not forget that market principles count more than ever.
JoongAng Ilbo, July 12, Page 30