The World Bank has been actively supporting Korea's structural reform program through adjustment operations since Korea suffered its most serious setback in the financial crisis that erupted in 1997. This economic report-the first since Korea graduated from Bank borrowing in 1994-evaluates the reforms undertaken since the crisis against the underlying corporate, financial, and labor market weaknesses. It discusses the policy agenda needed to ensure that economic recovery takes hold and a new foundation is laid for a more competitive and resilient economy. Chapter 1 discusses the buildup to the crisis, the government's policy response to it, and macroeconomic developments since then. Chapter 2 assesses the quality and viability of the financial restructuring process required for Korea to experience sustained growth, and suggests enhancements to corporate restructuring. Chapter 3 outlines the governments attempts to minimize the social costs during and in the aftermath of the crisis, and its need to continue reducing the social impact. Chapters 4 through 9 focus on the development strategy used to restore the medium-term competitiveness of Korea's economy, the major changes that must take place in the economy's structure, and the agenda for strengthening corporate governance, fostering a climate promoting competition in product markets, enhancing labor market flexibility, and improving the efficiency and resiliency of the financial sector.