The system discriminated against people with the wrong degree, or, worse still, no degree. At a university graduation ceremony last month, President Kim said Korea has to cure itself of what he called the "elite university disease." Kim himself is a rarity in Korean politics: he didn't earn an undergraduate degree, although he later picked up a handful of honorary doctorates. The chaebol may be getting the message. This year, the top five say they are looking beyond the big universities when they recruit this spring (although the slump has forced them to slash hiring to just 2,000 students, a fifth of their usual quota). As Korea's economy restructures and opens up to foreign competition, big companies are starting to look at what prospective employees bring to the table besides a fancy diploma.
Nowhere is the difference more evident than at Housing & Commercial Bank. A clunky state-run institution until two years ago, it was the only bank in Korea allowed to make mortgage loans to home buyers. Lending money used be a relaxed affair. Loan officers decided what a property was worth after a quick look at the house and a chat with the owner or a local real-estate agent. Assessments were so rough, the bank could count only 30% of the assessed value as collateral. The system was also open to bribery--slipping an envelope of cash to a bank official was a good way to boost your property value, according to Kim Jun Tae, head of the now-privatized bank. "The culture was very bureaucratic," says Kim. "I told people we have to be doing business, we have to sell things."
Since Kim became chief executive last year, that's exactly what bank employees have been doing. With property assessments now computerized, thanks to help from U.S. consulting firm McKinsey & Co., they spend their time drumming up new business. They had better: 30% of their paycheck is now tied to performance. Improved efficiency means home owners today get 70% of the assessed value of their homes as collateral. Kim wants his employees to think like entrepreneurs and sends frequent e-mails to hammer home the message. He even brings in guest speakers from outside the world of banking, then broadcasts the talks to every bank branch before opening hours. A Chinese chef recently shared his views on survival in the new global economy, reminding the bankers: "If you don't make the best Chinese food, you won't survive."
Meanwhile, the government is prodding less reform-minded banks and companies to get with the program. It has pushed through tough new regulations to curb the excessive lending that helped to push the economy to the edge of collapse. It has shut down deadbeat banks and companies. And it has opened a long-closed market to overseas ownership (foreigners now own more than 55% of Housing & Commercial). The dramatic reforms have forced everybody to become more competitive. And they've helped spark recovery much sooner than most experts expected. The government predicts growth will bounce back to an annual rate of 2% by the second half of this year--the economy shrank 5.9% in 1998. "There is no country in the OECD that has made such rapid changes in 14 months," said Donald Johnston, secretary-general of the Organization for Economic Cooperation and Development, at a recent press conference in Seoul. "Historians may look back and say this crisis has left a healthy legacy."
Yet it also promises to be a painful one. President Kim's policies are pushing up unemployment, at least for the short term. The government prediction of 9% unemployment this year is stunning in a country used to levels closer to 2%. At a televised town hall-style meeting two weeks ago, Kim seemed to be preparing the nation for more adversity: "It is too early to open the champagne bottles," he said. Labor Minister Lee Ki Ho has warned that more layoffs are inevitable. Europe's cumbersome job-protection laws have left millions unemployed on the Continent, while the tough-love system in the U.S. has brought unemployment down to low levels, he noted. Korea has chosen the U.S. model. "We have to be prepared for massive layoffs," says Kim. "There is no other way."
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