The swearing-in of Kim Dae-jung as the eighth president of South Korea on 25 February 1998 marked the first time in Korean history that the ruling party peacefully transferred power to a democratically elected opposition candidate. In his inaugural address, Kim characterized his administration as a "government of the people".
Kim was elected when the 1997 Asian financial crisis hit South Korea hard, and he was "appointed in a time of crisis". In December 1997, shortly after being elected president, Kim Dae-jung consulted with Kim Young-sam to pardon Chun Doo-hwan and Roh Tae-woo, two old enemies who were imprisoned for corruption, and affirmed their contributions to the economic development of South Korea. Kim Dae-jung hoped to use this move to unite all parties in South Korea to deal with the financial crisis together. He advocated reforming the laws and systems that lead to corruption. Kim adhered to the national view of "unity of the people" and opposed narrow party and regional concepts. Under the IMF system, Kim Dae-jung coordinated the departments of all parties in South Korea to carry out sweeping reforms in the four areas of enterprises, finance, public utilities and labor employment. In order to overcome the foreign exchange crisis, Kim and his wife responded to the "gold donation campaign" launched by the Korean people and donated their treasured gold jewelry.
Kim also personally advertised Korean tourism with the HOT group. This was not only the first time in Korean history that a head of state personally filmed an advertisement for the tourism industry, but it was also an unprecedented situation in the international community. Under Kim's leadership, after the Korean economy shrank by 7% in 1998, it grew rapidly by 9.5% in 1999. His reforms not only enabled Korea to get out of the financial crisis in a relatively short period of time, but also transformed the Korean economy from a low-end product export-oriented economy to an information high-tech economy. The reforms also laid a good foundation for Korea's future economic development and enhanced Korea's ability to resist global financial crises such as the 2008 global financial crisis. Kim was therefore recognized by the international community as an "excellent student" in overcoming the financial crisis.
Kim's "Great Unity" national view is also reflected in his advocacy of national and ethnic unity. After taking office, Kim actively promoted reconciliation between the North and South and successfully held the first inter-Korean summit with North Korean leader Kim Jong Il, "bringing sunshine and warmth to the last Cold War region in the global village". In terms of foreign policy with the United States, Japan, China and Russia, Kim implemented "four-power coordination diplomacy", which promoted peace and stability on the Korean Peninsula and enhanced South Korea's international status and influence by strengthening the South Korea-US alliance, improving relations with Japan, China and Russia.
Kim's governing philosophy is the coordinated development of democratic system, market economy and social welfare. To this end, he abandoned the bureaucratic authoritarian system, reformed the chaebol economy and supported the development of small and medium-sized enterprises. He believed that cultivating a strong middle class and civil society is the prerequisite for the modernization of Korean politics. In June 1999, Kim was selected as one of the "50 Leaders Leading Reforms in Asia" by BusinessWeek.
Economic reforms and recovery The first task of the Kim administration was restoring investor confidence. The administration held a series of intensive meetings with foreign creditors and quickly succeeded in rescheduling one-quarter of Korea's short-term liabilities. He vigorously pushed economic reform and restructuring recommended by the International Monetary Fund, in the process significantly altering the landscape of South Korean economy. He commenced the gold-collecting campaign in South Korea to overcome the debt to the International Monetary Fund.
As a presidential candidate, Kim briefly questioned the conditions attached to the IMF loans and suggested that he might renegotiate it. However, upon his election, Kim quickly recognized the importance of the IMF agreement in restoring South Korea's economic health. Since then, he has implemented the most neoliberal policy among the major presidents of South Korea, leading to his nickname of "Neoliberal Revolutionist" ().
Immediately after taking office, the Kim Dae-jung government pushed for revision of the Outside Auditor Law to facilitate the adoption of consolidated financial statements in accordance with international standards, beginning in 1999. Furthermore, as cross-guarantees allowed loss-making affiliates and subsidiaries with chaebol groups to continue to borrow from banks and drain financial resources from healthier firms, on 1 April 1998, the government prohibited any new intra-chaebol mutual payment guarantees and ordered the phasing-out of the existing guarantees by March 2000. Banks were directed to negotiate financial restructuring agreements with chaebol groups to reduce any outstanding debts, including closing insolvent firms. With the government's commitment to introduce internationally accepted accounting practices, including independent external audits, full disclosure, and consolidated statements by conglomerates, the Kim administration helped to improve the transparency of chaebol corporate balance-sheets and governance and bring Korea's economy to greater integration with the global economy.
In the last year of Kim Young-sam's term, the Asian financial crisis swept through South Korea, and the highly indebted South Korean chaebols suffered a devastating blow, with nine chaebols declaring bankruptcy one after another. The domino-like collapse of the chaebols caused a large amount of international capital to withdraw from South Korea, South Korea's foreign exchange reserves plummeted, and the Korean won depreciated rapidly. Economic reform to revitalize the South Korean economy became an urgent issue for Kim Dae-jung, who had just taken office. The main contents of Kim Dae-jung's reform of the chaebols included improving the transparency of corporate operations, prohibiting mutual debt guarantees, avoiding excessive debt operations, implementing specialized operations to avoid the "octopus claw" development model, strengthening the responsibility of controlling shareholders and operators, governing the non-bank financial institutions owned by the chaebols, stopping mutual investment within the chaebols and illegal internal transactions, and preventing improper wealth accumulation. After discussing with the heads of the five major chaebols in South Korea at the time, namely Hyundai, Daewoo, Samsung, LG, and SK, Kim Daejung introduced the "Five Tasks for Corporate Reform" and "Three Supplementary Tasks" for chaebol reform after taking office. Under the framework of the "5+3 Tasks", the Kim Daejung government adopted three approaches to deal with the chaebols: "closure, assistance, and exchange". For companies with no hope of survival, the government closed them down through bankruptcy, sale, merger, and court takeover.
The government also adopted a proactive foreign investment policy. Scores of banks were closed, merged or taken over by the government, and surviving banks were recapitalized. The chaebol were pressured to lower their perilously high debt-equity ratios and establish greater corporate transparency and accountability. Foreign direct investment, under Kim, was viewed as vital to the financial and corporate reform process as a form of secure, stable and long-term form of investment, and also able to acquire new technologies and managerial practices.
By June 1998, a total of 55 large companies, including Daewoo Group, the second largest chaebol in South Korea at the time, had been closed. The myth of "Daewoo never dies" was also broken with the collapse of Daewoo Group. For companies with heavy debts but hope of survival, the Kim Dae-jung government required creditor banks to provide financial assistance. By June 1998, a total of 83 companies benefited from this and embarked on the road to restructuring. Hyundai Group, the largest conglomerate in South Korea at the time, was also dissolved and reorganized during Kim Dae-jung's economic reforms. Kim's administration did not shy away from using strong-arm tactics to bring about desired results. For example, when LG Group objected to Hyundai taking the controlling share and decided to pull out in the midst of merger negotiations, the newly created Financial Supervisory Commission (FSC) immediately called in LG Group's creditors to discuss punitive measures, including immediate suspension of credit and recall of existing loans and threatened to conduct a tax probe. In the end, LG Group agreed to the merger, relinquishing management control and selling its semiconductor business to Hyundai. Similarly, Samsung was encouraged to sell its automotive operations to Daewoo. Despite worries of a second economic crisis in the wake of Daewoo's bankruptcy in July 1999 (after its chairman, Kim Woo-choong continued to raise the company's indebtedness and aggressively expand in spite of government restructuring and aid), the economic recovery remained on track. By also deciding not to bail out Daewoo, Kim's government conveyed a message to chaebols that no company was too big to fail.
In addition, the Kim Dae-jung government implemented a "large-scale business exchange" policy, which involved merging and reorganizing companies in the same industry under different conglomerates to allow the conglomerates to exchange businesses. This move was intended to solve the problems of redundant investment and excessive business scope of enterprises. However, due to the lobbying of the conglomerates and the government's lack of resolve, many transactions eventually became simple mergers or acquisitions of two companies, thus failing to achieve the goal of business exchange. This foreshadowed the incompleteness of the reforms. While reforming the conglomerate system, the Kim Dae-jung government fully supported small and medium-sized enterprises and venture enterprises to reduce the weight of conglomerates in South Korea's GDP.
In order to cope with the trend of world development, Kim Dae-jung proposed a development path of building a nation based on science and technology and elevated the development of information technology to a national strategy. He often said, "I hope to be the president who revitalizes the IT industry." Kim Dae-jung's support for the information technology industry has injected vitality and competitiveness into the development of the Korean economy. The Kim Dae-jung administration built up country-wide high-speed ICT infrastructure and fostered IT and venture businesses as the future source of growth. In his inaugural address, he expressed a vision for South Korea to advance "from the ranks of industrial societies...into the ranks of the knowledge and information-based societies where intangible knowledge and information will be the driving power for economic development". Today, South Korea is one of the most technologically developed countries in the world and has a well-connected cyberinfrastructure which began to be built and fostered under President Kim. In addition, Kim Dae-jung also advocated the development of the cultural industry, making important contributions to the rise of Korean culture on the global stage. In 1999, Kim Dae-jung increased the budget of the cultural sector by 40%, making the cultural budget account for 1% of the total budget for the first time. The Korean cultural industry benefited greatly during Kim Dae-jung's administration. The Korean Wave also emerged in Asia during this period.