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While world attention is focused on the brinksmanship of North Korea's "Dear Leader" Kim Jong Il, across the demilitarized zone South Koreans are closely watching the imminent departure of a different Kim. On Feb. 25, Kim Dae Jung is to step down from the presidency, with Roh Moo Hyun taking his place. Kim Dae Jung has earned well-deserved plaudits for overseeing South Korea's dramatic recovery from the 1998 economic crisis--and helping Korea Inc. sell more chips, cell phones, and cars than ever. But he left many important reforms half-done.
So once Roh gets beyond the nuclear threats spewing from Pyong-yang, he'll need to focus on the South's problems, not the North's. The good news for Roh is that he won't have to spend much time devising an economic plan: The path laid out by Kim is just fine. Roh simply needs to finish the job Kim abandoned two years into his presidency, when he shifted his focus to growth rather than strengthening the foundations of Korea's economy. "Roh just has to take the prescribed medicine," says Kim Sang Jo, a Hansung University economist.
The bad news is that the medicine is sometimes hard to swallow. Take the task of cleaning up South Korea's rotten politics. It should be the new president's first order of business, but it's a deeply embedded problem. Even after Kim established a commission to investigate corruption and required top civil servants to disclose their income more fully, many bureaucrats still line their pockets with payoffs for business favors. "Unless you get rid of the deep-rooted culture of corruption in the public sector, you can't expect a genuinely significant overhaul of the private sector," says Lee Dong Gull, a research fellow at the Korea Institute of Finance and an adviser to the president-elect.
Next up: financial reform. In 1998 and 1999, Kim nationalized five major banks to bail them out after the Asian financial crisis. His administration reprivatized two of them, but the others remain in state hands. Now that those three have their loan books in order, Roh needs to sell them off to reduce the chances of bureaucratic interference and recover taxpayer funds used on the bailouts.
At the same time, the chaebol--the expansive conglomerates that built Korea Inc. in the 1970s and '80s--still need to be tamed. Kim forced the chaebol to lower their debts and improve transparency. And in 1999, he sent a strong signal by letting Daewoo Group, the second largest chaebol, collapse. But in 2000, Kim shifted gears and pressured creditors to rescue ailing Hyundai Group companies Hynix Semiconductor Inc. and Hyundai Engineering & Construction Co. Despite laws banning the chaebol from controlling banks and using their money for financial manipulation, the groups can still own insurers and brokerages. The chaebol can tap the capital of these firms to take control of nominally independent affiliates.
Then there's labor. Although Kim set up a program of unemployment insurance--which cushions the blow of layoffs--and made it easier for companies to hire temporary workers, he was unable to curb the country's powerful unions. At many chaebol and government agencies, the unions have blocked restructuring with strikes or by occupying plants to paralyze production, even when such action is illegal. Kim confused the issue by mediating industrial disputes, but refusing to punish many illegal strikers. To ensure that restructuring continues, Roh must enforce the existing strike laws and allow workers and management to settle their differences on their own.
Roh has a chance to create a new-model Korean presidency. Since World War II, every Korean president has been toppled by a popular uprising, assassinated, jailed, or tarnished by corruption among close associates. Even Kim, Korea's only Nobel laureate (he won the 2000 Peace Prize for efforts to engage the North), has seen his reputation sullied by a bribery scandal that earned two of his sons jail terms. If Roh can clean up the Blue House--and complete the task that Kim started in reforming the economy--he could well be remembered as Korea's first truly successful president. By Moon Ihlwan