SEOUL (Reuters) —At 92, the man who built South Korea’s biggest retail empire is finally making his mark in the Seoul skyline as the country’s tallest tower takes shape – just as public faith in corporate giants crumbles into safety fears and mistrust.
Shin Kyuk-ho first envisioned a landmark for Lotte Group 28 years ago, when family-run conglomerates, or “chaebol”, like his led the rise of South Korea’s economy. Now the plan to build the world’s sixth-tallest skyscraper by 2016 is marred by teething troubles at a newly opened mall and leisure complex at its foot: Visitor numbers have nearly halved, forcing Lotte to cut rents.
It makes no difference that Shin is one of South Korea’s most successful businessmen and that Lotte has no record of major safety blemishes. After a ferry sinking last year that killed 304 people, South Koreans were shocked into a mood of zero tolerance for safety lapses, and the scale of the 3.7 trillion won ($3.3 billion) Lotte World Tower project is matched by the level of public scrutiny.
Korea’s safety obsession comes as many also become less forgiving of the still-dominant chaebol, sensing a high-handed approach towards customers and investors. In a case that spurred resentment, the daughter of Korean Air Lines’ chairman gained widespread scorn – as well as a jail sentence – over a “nut rage” incident, after demanding a taxi-ing jet return to its gate over the way she was served nuts.
“Many people think this place is dangerous. Safety is a concern here,” said Choi Dong-joon, a 33-year-old shopper and resident of Jamsil, an affluent district near the ritzy Gangnam area where the upscale Lotte World Mall opened last October, hosting retail names from Hermes to Celine. “I only came because they have some luxury brands that you can’t find elsewhere.”
As the tower climbs towards its planned 555-meter height (about 1,821 feet), glitches have been found at the giant, six-story mall next door that would be standard in any major new construction. Still, safety concerns have been magnified over issues as minor as water seepage from an aquarium or vibrations in one multiplex movie theatre caused by speakers in another.
Local and overseas construction and aquarium experts told Reuters the issues at the 4.6 million square foot mall – an area nearly as big as the Vatican – along with the three fatalities recorded so far in the tower’s construction, wouldn’t be considered unusual elsewhere. Seoul city authorities nonetheless ordered the temporary closure of both aquarium and cinema after the minor flaws came to light last December.
Lotte is the country’s fifth-largest chaebol, guided by Shin to annual revenue of more than $70 billion nearly half a century after he founded now-listed Lotte Confectionery selling chewing gum.
“Lotte World Mall is seeing difficulties as sensitivity about safety has been heightened, and the negative perception appears partially amplified by existing anti-chaebol sentiment,” said Cho Myung-hyun, vice-dean of Korea University Business School.
The planned 123-story Lotte World Tower – construction has now reached the 99th floor – was designed by architecture firm Kohn Pedersen Fox citing inspiration from traditional Korean pottery and calligraphy brushes. It will host office space, upscale apartments, a six-star hotel and even an art gallery near its summit.
“Only a few ancient palaces are shown to foreign visitors now,” Shin once said of the tower. “We need a world-class landmark to attract them.”
While the tower is due to be completed in 2016, the adjacent mall opened close to an existing Lotte theme park last October with 100,000 visitors a day, now down to 58,000, the company said. With no immediate recovery in visitor numbers in sight, Lotte is now offering a 30 percent discount for retailers on rent due for the past five months.
“We have changed leadership, set up a safety command center and now receive instant messages from the chief executive down to take immediate measures for the smallest incidents, including when a puddle is found or a customer trips,” said Choi Kyung-in, a managing director of Lotte World Tower and Mall operator Lotte Corp told Reuters.
The aquarium and cinema glitches have been fixed, Lotte said, but both attractions remain shuttered. A Seoul city administration official said it will review Lotte’s findings but has not set a date for possible reopenings.
On the mall’s fifth floor, Sung Myung-yong, manager of a Korean restaurant, is trying to be optimistic.
“Daily sales probably hit bottom in early February, but things are looking up,” she said. “Things are not as bad as media make it seem.”