Korean dot com firms at survival crossroads

SEOUL, 23 May 2000 (Asia Pulse) - The KOSDAQ index, which once soared, has plunged to the same level it was at the start of November last year. The large numbers of investors who rushed to venture companies have dwindled.

Individual investors invested about two trillion won (US$1.8 billion) into venture enterprises in the first quarter of this year, but more than half of the funds have streamed out of venture businesses since then.

Since the end of April when the venture investment boom started to shrink, some angel clubs have not attracted any investments at all.

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

There are over 6,000 registered venture firms 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. Although many Internet companies drew close to the heart of Korea's economy in a short period, many specialists and the press are currently 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 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.

Many economic specialists, however, say the recent recession in 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 mega trend," he said.

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