Publication: Visible Success and Invisible Failure in Post-Crisis Reform in the Republic of Korea : Interplay of the Global Standards, Agents, and Local Specificity
Loading...
Published
2005-06
ISSN
Date
2012-06-15
Author(s)
Editor(s)
Abstract
The reform package in post-crisis Korea was one of the most comprehensively designed and decisively implemented. 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 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 real progress was made in changing institutional conventions, habits, and beliefs, such as enhancing transparency in management or trust in labor relations. Second, the reform process involved tension between global standards and local specificity, which accounts for the mixed results. Third, special interest politics at the implementation stage, plus the complexities caused by increasing democratization and globalization, have 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 market, divided between the core, unionized workers and unorganized peripheral workers, and between the one overprotected and the other underprotected. 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 the financial crisis in 1997. This was due to the lack of clear consensus, without which reforms are more likely to be aborted or be 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 potential. While firms have now lowered their debt ratios, they are not borrowing to fund investments. The issue of right or wrong blueprint underscores the need to define the reform goal correctly. The goals of reform should not just be a move toward a market-oriented economy but toward a growth-oriented one or a pro-growth market-oriented one.
Link to Data Set
Citation
“Lee, Keun; Kim, Byung-Kook; Lee, Chung H.; Yee, Jaeyeol. 2005. Visible Success and Invisible Failure in Post-Crisis Reform in the Republic of Korea : Interplay of the Global Standards, Agents, and Local Specificity. Policy Research Working Paper; No. 3651. © World Bank. http://hdl.handle.net/10986/8186 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Economic Value of Weather Forecasts: A Quantitative Systematic Literature Review(Washington, DC: World Bank, 2025-09-10)This study systematically reviews the literature that quantifies the economic benefits of weather observations and forecasts in four weather-dependent economic sectors: agriculture, energy, transport, and disaster-risk management. The review covers 175 peer-reviewed journal articles and 15 policy reports. Findings show that the literature is concentrated in high-income countries and most studies use theoretical models, followed by observational and then experimental research designs. Forecast horizons studied, meteorological variables and services, and monetization techniques vary markedly by sector. Estimated benefits even within specific subsectors span several orders of magnitude and broad uncertainty ranges. An econometric meta-analysis suggests that theoretical studies and studies in richer countries tend to report significantly larger values. Barriers that hinder value realization are identified on both the provider and user sides, with inadequate relevance, weak dissemination, and limited ability to act recurring across sectors. Policy reports rely heavily on back-of-the-envelope or recursive benefit-transfer estimates, rather than on the methods and results of the peer-reviewed literature, revealing a science-to-policy gap. These findings suggest substantial socioeconomic potential of hydrometeorological services around the world, but also knowledge gaps that require more valuation studies focusing on low- and middle-income countries, addressing provider- and user-side barriers and employing rigorous empirical valuation methods to complement and validate theoretical models.Publication It’s Not (Just) the Tariffs: Rethinking Non-Tariff Measures in a Fragmented Global Economy(Washington, DC: World Bank, 2025-10-22)As tariffs have declined, non-tariff measures (NTMs) have become central to trade policy, especially in high-income countries and regulated sectors like food and green technologies. Although NTMs may serve legitimate goals, they could also sort countries and firms into or out of markets based on compliance capacity and differences in product mix. Documenting recent advances in the estimation of ad valorem equivalents (AVEs), this paper uncovers new patterns of use and exposure of NTMs. High-income countries rely more heavily on NTMs relative to tariffs, while low- and middle-income countries face steeper AVEs on their exports. Firm-level evidence shows that NTMs disproportionately affect smaller firms, leading to market exit and concentration. Poorly designed NTMs can harm productivity and welfare, while coordinated, capacity-aware use can deliver inclusive outcomes. Policy design, transparency, and diagnostics must evolve to reflect the growing role—and risks—of NTMs in a fragmented global trade landscape.Publication Monitoring Global Aid Flows: A Novel Approach Using Large Language Models(Washington, DC: World Bank, 2025-11-04)Effective monitoring of development aid is the foundation for assessing the alignment of flows with their intended development objectives. Existing reporting systems, such as the Organisation for Economic Co-operation and Development’s Creditor Reporting System, provide standardized classification of aid activities but have limitations when it comes to capturing new areas like climate change, digitalization, and other cross-cutting themes. This paper proposes a bottom-up, unsupervised machine learning framework that leverages textual descriptions of aid projects to generate highly granular activity clusters. Using the 2021 Creditor Reporting System data set of nearly 400,000 records, the model produces 841 clusters, which are then grouped into 80 subsectors. These clusters reveal 36 emerging aid areas not tracked in the current Creditor Reporting System taxonomy, allow unpacking of “multi-sectoral” and “sector not specified” classifications, and enable estimation of flows to new themes, including World Bank Global Challenge Programs, International Development Association–20 Special Themes, and Cross-Cutting Issues. Validation against both Creditor Reporting System benchmarks and International Development Association commitment data demonstrates robustness. This approach illustrates how machine learning and the new advances in large language models can enhance the monitoring of global aid flows and inform future improvements in aid classification and reporting. It offers a useful tool that can support more responsive and evidence-based decision-making, helping to better align resources with evolving development priorities.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication The State of Global Services Trade Policies: Evidence from Recent Data(Washington, DC: World Bank, 2025-10-28)The economic environment for services trade has changed dramatically over the past 15 years, driven by rapid technological progress that has expanded the possibilities for exchanging services. How has trade policy responded to these changes? How do policy stances in a wide range of service sectors compare across economies? With its unprecedented global coverage, the Services Trade Policy Database and the associated Services Trade Restrictions Index, developed jointly by the World Bank and the World Trade Organization, help address these questions. This paper makes three principal contributions. First, it offers an in-depth discussion of the current state of services trade policies and their differences across 134 economies and 34 services subsectors. Second, the paper reveals how recent (2016–22) changes in policy stances have seen progressive liberalization by lower-income economies but stabilization or even slight policy reversals in high-income economies. This dynamic differs fundamentally from the trend that unfolded after the Great Recession over 2008–16. Third, the paper shows the implications of policy changes over the past six years on services trade costs, and it showcases how the Services Trade Policy Database’s regulatory information can inform trade negotiations, regulatory analysis, and policy making. Alongside these contributions, the paper documents updates to the Services Trade Policy Database’s economy and sector coverage and explains the latest methodological improvements made to the World Bank–World Trade Organization Services Trade Restrictions Index.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Political Alternation as a Restraint on Investing in Influence : Evidence from the Post-Communist Transition(World Bank, Washington, DC, 2008-10)The authors develop and implement a method for measuring the frequency of changes in power among distinct leaders and ideologically distinct parties that is comparable across political systems. The authors find that more frequent alternation in power is associated with the emergence of better governance in post communist countries. The results are consistent with the hypothesis that firms seek durable protection from the state, which implies that expected political alternation is relevant to the decision whether to invest in influence with the governing party or, alternatively, to demand institutions that apply predictable rules, with equality of treatment, regardless of the party in power.Publication Evaluation of World Bank Programs in Afghanistan, 2002-11(Washington, DC: World Bank Group, 2013-07-26)Despite extremely difficult security conditions, which deteriorated markedly after 2006, the World Bank Group has commendably established and sustained a large program of support to the country. While World Bank Group strategy has been highly relevant to Afghanistan's situation, beginning in 2006 the strategies can have gone further in adapting ongoing programs to evolving opportunities and needs and in programming activities sufficient to achieve the objectives of the pillars in those strategies. The Bank Group's direct financial assistance has been augmented effectively by analytic and advisory activities and donor coordination through the Afghanistan reconstruction trust fund. Knowledge services have been an important part of Bank Group support and have demonstrated the value of strategic analytical work, even in areas where the Bank Group may opt out of direct project financing. To enhance program effectiveness, the evaluation recommends that the World Bank Group help the government develop a comprehensive, long-term human resources strategy for the civilian sectors; focus on strategic analytical work in sectors that are high priorities for the government; assist in the development of local government institutions and, in the interim, support the development of a viable system for service delivery at subnational levels; assist in transforming the national solidarity program into a more sustainable financial and institutional model to consolidate its gains; help strengthen the regulatory environment for private sector investment; and scale up International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) support to the private sector.Publication Economic Reforms, Growth, and Governance(World Bank, Washington, DC, 2008)Bangladesh has in recent decades achieved reasonably rapid economic growth and significant progress in social development indicators despite many impediments: the desperate initial conditions after gaining independence, lack of resources, natural disasters, widespread corruption, and a record of systemic governance failure. By identifying the sources of growth stimulus and the drivers of social transformation, the paper addresses what it calls Bangladesh's development surprise. The policy-making process is analyzed as the outcome of incentives created by patronage politics as opposed to the compulsion for the government to play an effective developmental role. The paper examines the governance-growth nexus as affecting the pace and quality of growth and its inclusiveness. If the governance environment has been barely adequate to cope with an economy breaking out of stagnation and extreme poverty, it increasingly may prove a barrier to putting the economy firmly on a path of modernization and global integration. Bangladesh's experience also shows that it is possible to make rapid initial progress in many social development indicators by creating awareness through successful social mobilization campaigns and by reaping the gains from affordable low-cost solutions. Further progress, however, will require increased public social spending and improved quality of public service delivery.Publication Assistance to the Transition Economies : Were There Alternatives?(World Bank, Washington, DC, 2002)Twelve years after the fall of the Berlin Wall, domestic and international analysts of the transition economies by and large agree that the transition from central planning to a market economy has been exceedingly difficult. There has also been a major debate about the extent to which the transition to date has succeeded or failed. This paper provides an assessment of the policies that were followed and discuss the extent to which there were known alternatives that can have resulted in superior outcomes in terms of: (a) gross domestic product (GDP) growth and other principal performance indicators, (b) building honest and competent institutions, and (c) creating a more transparent and less corrupt system of corporate and national governance. Section two provides a brief overview of performance since 1989. Section three presents the recommendations that were made and policies that were followed. The paper concludes in section four by assessing the extent to which alternative paths can have been followed and what the likely outcomes will have been.Publication Lessons from World Bank Group Responses to Past Financial Crises(World Bank, Washington, DC, 2009)A worldwide financial crisis of enormous magnitude continues to unfold rapidly. Unlike other crises in recent decades, the current episode is rooted in industrial countries' financial systems and is affecting low-income and middle-income countries (MICs) alike. Defaults on securitized sub-prime mortgages as a real estate market bubble burst led to failures or near-failures of several large financial institutions and a collapse of inter-bank and commercial paper markets. A tightening of credit, combined with declining consumer confidence, has brought on worldwide recession with growing unemployment, and many fear that the downturn will be severe and protracted. At the same time, the rapidly multiplying signs of contraction are prompting strong responses, including fiscal stimulus packages and reductions in benchmark lending rates, on the part of several of the affected developed countries. The Bank Group is well placed to help mitigate the impact of the current crisis with financing and advisory services, and its clients are already requesting increased support. A rapid, high-quality response that combines financial and advisory support can do much to ease the inevitable ramifications of the crisis. Lessons from evaluations of previous Bank Group responses to past crises can help inform the response to the current crisis in order to increase its effectiveness.
Users also downloaded
Showing related downloaded files
Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Doing Business 2014 : Understanding Regulations for Small and Medium-Size Enterprises(Washington, DC: World Bank Group, 2013-10-28)Eleventh in a series of annual reports comparing business regulation in 185 economies, Doing Business 2014 measures regulations affecting 11 areas of everyday business activity: Starting a business, Dealing with construction permits, Getting electricity, Registering property, Getting credit, Protecting investors, Paying taxes, Trading across borders, Enforcing contracts, Closing a business, Employing workers. The report updates all indicators as of June 1, 2013, ranks economies on their overall “ease of doing business”, and analyzes reforms to business regulation – identifying which economies are strengthening their business environment the most. The Doing Business reports illustrate how reforms in business regulations are being used to analyze economic outcomes for domestic entrepreneurs and for the wider economy. Doing Business is a flagship product by the World Bank and IFC that garners worldwide attention on regulatory barriers to entrepreneurship. More than 60 economies use the Doing Business indicators to shape reform agendas and monitor improvements on the ground. In addition, the Doing Business data has generated over 870 articles in peer-reviewed academic journals since its inception.Publication World Development Report 2011(World Bank, 2011)The 2011 World development report looks across disciplines and experiences drawn from around the world to offer some ideas and practical recommendations on how to move beyond conflict and fragility and secure development. The key messages are important for all countries-low, middle, and high income-as well as for regional and global institutions: first, institutional legitimacy is the key to stability. When state institutions do not adequately protect citizens, guard against corruption, or provide access to justice; when markets do not provide job opportunities; or when communities have lost social cohesion-the likelihood of violent conflict increases. Second, investing in citizen security, justice, and jobs is essential to reducing violence. But there are major structural gaps in our collective capabilities to support these areas. Third, confronting this challenge effectively means that institutions need to change. International agencies and partners from other countries must adapt procedures so they can respond with agility and speed, a longer-term perspective, and greater staying power. Fourth, need to adopt a layered approach. Some problems can be addressed at the country level, but others need to be addressed at a regional level, such as developing markets that integrate insecure areas and pooling resources for building capacity Fifth, in adopting these approaches, need to be aware that the global landscape is changing. Regional institutions and middle income countries are playing a larger role. This means should pay more attention to south-south and south-north exchanges, and to the recent transition experiences of middle income countries.Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.