Youngsters quickly find own quagmire

A few short months ago, South Korea's dotcom entrepreneurs were vaunted as heroes. Now their reputation has sunk.
Written by B. J. Lee in Seoul, Contributor
A few short months ago, South Korea's dotcom entrepreneurs were vaunted as heroes. Now their reputation has sunk.

KOREA (SCMP.com) - The young and vigorous breed leading the country's high-technology push were supposed to be heralding a new era, pulling the economy out of the quagmire left by the ways of the older generation of debt-sodden conglomerates and their leaders.

But fame has turned to infamy and the fortunes of the new economy pin-ups have evaporated.

Hi-tech shares have plunged by two-thirds to their lowest levels in more than two years and financial and bribery scandals have engulfed leading lights of the Internet field.

Last month, dotcom businessman Chung Hyun-joon, 32, was arrested for illegally borrowing money from financial institutions in which he owned large shares. He then used the money to buy up numerous online start-ups.

Under Korean law, major shareholders of financial firms cannot borrow money above limits set by authorities.

Following Chung's arrest, a senior official at the Financial Supervisory Service, the main financial regulator, killed himself after being accused of taking bribes from Chung. A presidential aide was also arrested for allegedly taking bribes from Chung. Then came the scandal of Jin Seong-hyun The 27-year-old head of MCI Korea, a fast-rising online holding company, is accused of similar charges - illegally borrowing money from financial firms he owned for a spree of corporate buyouts.

In addition, Jin is accused of manipulating the stock price of Regent Securities, a subsidiary owned by Hong Kong-based Regent Pacific.

Jin argues that Regent Pacific chairman Jim Mellon coaxed him into the stock scam - a charge the British businessman denies.

Whatever the truth is, the two cases have led the people to question the integrity of dotcom business people. Instead of trying to develop technology, seen as key to success in any dotcom business, the young entrepreneurs indulged in irregular financial transactions to finance their corporate takeovers and expansion as well as to allegedly pay bribes.

"The dotcom business in Korea has become a financial gambling and a greedy money game for many people," Korea University economics professor Lee Pil-sang said.

He added that young dotcom business people were fast emulating the mistakes of their older counterparts. In a reflection of their troubled image, young dotcom entrepreneurs have seen them slip in the list of the most desirable occupations for eligible bachelors.

Many analysts worry that the scandals will aggravate financial problems at dotcom companies, by prompting investors to turn their backs on the stock exchange in Korea and other areas that are fund sources for he companies.

Charges against Mr Mellon are also expected to discourage foreign investors from investing in Korean dotcom companies.

The Financial Supervisory Service has charged Mr Mellon with stock price manipulation but prosecutors have not taken any action because of the lack of evidence.

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