Korean dot-com companies at survival crossroads

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Korean dot-com companies at survival crossroads

Once-booming venture companies in Korea are going through a bitter trial in less than a year since they started to receive the market's spotlight.

The Kosdaq index, which once soared, has plunged to the same level it was at in the beginning of November last year.

The large numbers of investors who rushed to venture companies have dwindled.

Individual investors poured around 2 trillion won ($1.8 billion) into venture enterprises in the first quarter of this year, but since then more than half of the funds have streamed out of venture businesses. Since the end of April when the venture investment boom started shrinking, some angel clubs have not attracted any investments.

Koreans are estimated to have some 1 million Web domain names, which is the second largest number next to the United States.

There are presently over 6,000 registered venture companies in Korea and 30 to 40 percent of them are information technology venture companies, or so-called "dot coms."

Internet venture companies which are not officially registered as such are also estimated to be over 3,000.

Though many Internet companies drew close to the heart of Korea's economy in a short period, many specialists and the press are presently calling the dot com boom a "bubble".

Trade Professor Lee Jong-yun of Hankuk University of Foreign Studies said most of the existing Internet companies will go bankrupt.

"Too large a portion of limited resources is biased toward the Internet business, blocking development of manufacturing," Lee said.

Kim Dong-hoon, vice president of Korea CALS/EC Association, predicted that online-only companies will not survive if offline companies expand into the sector.

However, many economic specialists say the recent recession in the Internet business does not mean the end of the dot com economy.

"Recent disputes over dot com companies will contribute to sorting gems from stones," Yoon Jong-eun of the Samsung Economic Research Institute said.

"Dot coms cannot but keep going forward in the future since they are a megatrend," he said.


-- Carl Jenkins (Somewherepress@aol.com), May 23, 2000

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