[EDITORIALS]A Band-Aid for start-ups

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[EDITORIALS]A Band-Aid for start-ups

For the last half year the country has suffered through a number of scandals involving start-up firms. The government's policy on the start-up industry announced Wednesday comes as an anticlimax in the face of the outrageous charges and irregularities uncovered so far in the scandals. The policy measure, said to encourage a cleanup of the start-up industry, appears to be too little too late.

Excessive government intervention and direct financial assistance repeatedly have been cited as major problems in the recent scandals marred by influence peddling and bribery. A company officially designated as a start-up is entitled to tax breaks and inexpensive financial assistance. The attraction has lured many startup entrepreneurs to focus more on courting the powerful than on technological development. More than 6 trillion won ($4.5 billion) from the national treasury has been poured into the industry during this administration. Assistance this year alone is set at 370 billion won. With stakes running high, the scandals were the culmination of misguided connections based on bribery and power brokerage.

The biggest shortcoming in Wednesday's cleanup measures is the effective continuation of the official start-up designation program, which has been the root of much of the corruption. The statutory cornerstone of the start-up designation will be maintained until it expires in 2007, with no new certification to be given out beginning in 2005. The government boasted that this meant the program is being curtailed, but we see it as the continuation of the program.

The outline also called for the introduction of a multiple-phase review of start-up designations by nongovernmental organizations and also a review of the reviewing organization. In the review process, the danger of outside intervention is high. The only way to guarantee the future and reputation of more than 11,000 start-ups and their employees who work long hours in search of technological developments and innovations is to switch to indirect assistance made available through the markets and to establish an infrastructure that will help keep the start-ups honest.
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