Jeoung Park stares out of the window of a Starbucks in downtown Seoul, nursing her caffe latte.
Outside, fashionably dressed South Koreans saunter from boutique to boutique. Twenty-something men and women step into pricey whiskey bars where a shot costs US$10. High schoolers jabber away on hypermodern cellular phones.
The scenes before Park's eyes are the kind one might expect in New York, Paris or Tokyo -- not in a city that just four years ago lay coughing and wheezing amid Asia's financial crisis.
"In many ways, 1997 and 1998 -- the crisis years -- seem like a lifetime ago," says Park, a 32-year-old computer consultant.
Welcome to the affluent South Korea of 2002. As others in the region -- including Hong Kong, Singapore and Taiwan -- sank into recession last year, South Korea grew an estimated 2.8 percent. Its growth is projected to hit 5 percent in the second half of this year. And its stock market, which surged 37 percent last year, remains one of the prides of Asia.
The future may be even brighter for this country of 47 million. "Korea is simply better positioned than its competitors in Asia to handle the global slowdown," says Eric Berthelemy, an analyst in Seoul. "And it's not completely reliant on high-tech exports either."
Thanks to its large domestic economy, US$5.1 billion of government spending and four interest rate cuts last year kept South Korea on sound footing. This year, if global growth worsens, there's plenty of room to loosen fiscal and monetary policy. The banking system, which nearly collapsed in 1997, is profitable again, while credit markets are functioning smoothly.
South Korea also boasts a more diversified economy than its neighbors. Those reliant on global demand for computers and semiconductors have been devastated by the worldwide slump in technology spending. On top of those industries, South Korea has many large, old economy ones like automobiles and ships. The economy also should get a short-term boost from this year's World Cup tournament, which South Korea is hosting with Japan.
"Investors have learned to look at Korea differently than the rest of Asia," says Jin Nyum, Korea's finance minister.
Yet not all global investors are rushing into South Korea's markets. South Korea's macro economy may be booming, but things look very different at the micro level. President Kim Dae-jung's government has done much to stabilize the economy in the four years since the Asian crisis, but unsteady progress in the financial and corporate sectors continues to spook markets and hinder investment.
To investors, South Korea's failure to sell off such marquee assets as Daewoo Motor Co, Hynix Semiconductor Inc and parts of Hyundai Group smacks of business as usual here -- a reminder that those shadowy business groups known as chaebol and militant labor unions remain powerful forces in Asia's third-largest economy.
Korea Inc may be changing, but not fast enough for some investors. Corporate governance is another concern. While many large, publicly traded South Korean companies enjoy healthy profits, they have smaller market capitalizations than similar companies in other countries. Transparency in how businesses are run is improving, but not fast enough.
Yet the notion that nothing is changing is simply wrong. Reinventing an economic model -- and indeed a nation -- is never pretty and doesn't happen overnight. Think of Japan, South Korea's economic mentor, which is in an 11-plus-year slump. While Japan stood still, South Korea strengthened its banking system, reduced the influence of the chaebol, kept government debt reasonable and boosted competition -- everything Japan needs to do but hasn't.
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