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Lotte's land offer for THAAD may become nightmare for business

People's Daily Online

(Xinhua) 10:50, February 28, 2017

SEOUL -- Lotte Group, South Korea's biggest operator of department stores and duty free shops, decided Monday to offer land for the US missile shield deployment, endangering its operation both in China and South Korea.

The decision could turn into a nightmare for Lotte, which depends heavily on Chinese tourists to South Korea for revenue from duty free stores. The South Korea's fifth-biggest conglomerate is struggling with businesses in China after entering the world's biggest consumer market in 1994.

Lotte International, a Lotte unit possessing a golf course where the Terminal High Altitude Area Defense (THAAD) battery is set to be sited, held a board of directors meeting to approve the deal, under which the golf course will be exchanged for military land near the capital Seoul.

Seoul and Washington agreed in July last year to deploy one THAAD battery in southeast South Korea by the end of this year. The site was changed in September into the golf course amid strong oppositions from residents, who have yet to be appeased by the alteration.

Seoul's defense ministry said the contract can be formally signed as early as Tuesday. The THAAD deployment will gain speed as the land swap deal was the last remaining obstacle to the launch of the installation process.

In response to the THAAD deployment, Chinese Foreign Ministry spokesperson Geng Shuang said on Monday at a regular news briefing that "China expresses firm opposition and strong dissatisfaction."

The THAAD deployment seriously undermines regional strategic balance and the strategic security interests of regional countries including China, and is not favorable to safeguarding peace and stability in the Korean Peninsula, said Geng.

China will take necessary measures to safeguard its security interests, and the US and South Korea will have to bear all the resulting consequences, he said.

The deployment may not be totally responsible for Lotte, but the conglomerate may have to take a large portion of responsibility as the land swap deal was announced amid suspicions over Lotte Group Chairman Shin Dong-bin for corruption.

An arrest warrant for Shin was rejected in late September, just before the announcement to alter the THAAD site into the Lotte property. Shin was accused of embezzlement and breach of trust worth hundreds of millions of US dollars.

Lotte also regained its duty free shop license in December despite its alleged involvement in a corruption scandal that led to President Park Geun-hye's impeachment. The retail giant is suspected of donating millions of dollars to nonprofit foundations controlled by Choi Soon-sil, Park's longtime confidante who is at the center of the scandal.

In addition to the donations, Lotte may have agreed to the land swap contract with the defense ministry in return for the rejection of Shin's detention and the restoration of the license to operate downtown duty free shops.

The allegations would enrage Chinese consumers and tourists to South Korea, who Lotte heavily depends on for revenue. Exasperated Chinese people may boycott Lotte products and services in their country.

Lotte generated nearly 70 percent of duty free shop revenue in 2016 from Chinese travelers visiting South Korea. Last year's revenue amounted to some 6 trillion won (5.3 billion US dollars).

Over 20 Lotte affiliates are doing businesses in China. Possible boycott campaign among Chinese consumers would hit hardest Lotte, which is already struggling with deficits there.

Lotte and the South Korean military initially planned to sign the deal in January, but it was postponed on growing objections at home and abroad. Lotte's board meeting on Feb 3 also delayed the signing amid lingering worries about possible negative ramifications.



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