Following a 30 per cent drop in duty-free sales last month and the virtual closure of more than 100 supermarkets and discount shops in China, the Lotte Group has cancelled its US$4.5 billion IPO.
Its woes are fallout from the mainland’s objection to South Korea’s new THAAD missile defence system, designed to knock out missiles from North Korea in the event of a war. China’s military claims the system can snoop on its installations as well. China is also angered that the system is on land sold by the Lotte Group to the South Korean government.
These political moves have put the brakes on Lotte Duty Free’s booming South Korean sales, which rose a record 36 per cent last year to US$5.7 billion.
Meanwhile, South Korea has protested to the World Trade Organisation (WTO) in an effort to persuade China to relax its stance.
This means the Lotte Group will now dip out on funding for its expansion programs while its key competitor, Shilla Duty Free, has continued to expand its duty-free business overseas, including Hong Kong International Airport (HKIA), as reported.