The reform in post-crisis Korean was one of the most comprehensively designed and decisively implemented reforms. Though impressed by the quick recovery, many are now raising doubts about real changes in the economy, as the result of a cost-benefits analysis: While the business climate is more stable and supportive, the economy is now suffering from weak investment and rising unemployment. This study views the Korean story as one of "visible success and invisible failure," based on the following findings. First, while some new laws were enacted and several quantifiable targets met, little progress was made in changing institutional conventions, habit and beliefs, such as enhancing transparency in the management or trust in labor relations. Second, reform process involved tension between global standard and local specificity, which accounts for the mixed results. Third, special interests politics in the implementation stage, plus the complexities caused by increasing democratization and globalization, has undermined the authorities' implementation capacity, which accounts for uneven outcomes of the reform. While globalization necessitates increasing flexibility, Korean managers are now facing much stronger labor unions. The outcome is not a fully flexible but segmented labor markets, divided between the core, unionized workers and unorganized periphery workers, and between the one over-protected and the other under-protected. Fourth, it is important to have an effective system of legislative bargaining to help resolve disputes. Only with this institutional vehicle will special interest groups reach some consensus. Korea tried to overhaul its financial system and achieve substantial financial liberalization in the early 1990s but those attempts were partly aborted and partly distorted, which paved the way for financial crisis in 1997. This was due to the lack of clear reform consensus, without which reform is more likely to be aborted or unsuccessful. Fifth, implementation problems stem from institutional complementarities and inappropriate sequencing. One logical sequence might be banking reform, corporate governance, labor relations, and then finally business restructuring. Now, an emerging question is whether the reform blueprint was right. Post-crisis Korea just tried to be more market or Anglo-Saxon model oriented without paying attention to growth potentials. While firms have now lowered their debt ratios, they are not borrowing to fund investment. The issue of wrong or right blueprint underscores the need to define the reform goal correctly. The goals of reform should not just be a move toward market-oriented economy but toward a growth-oriented one/or progrowth market-oriented one
