South Korea grew to become the 11th largest economy in the world.

Both business and politics were dominated by five giant conglomerates. They made up one-quarter of the economy, and half of all exports. In the 1980s and 1990s, they grew in influence on politicians - who happily accepted payments and encouraged their grandiose schemes in a classic case of "crony capitalism."

High unemployment caused unrest last year

As the family-owned conglomerates - known as chaebol - grew in size, they accumulated more and more business interests, became sprawling giants, without worrying too much about making profits.

Their debts also spiralled, but they had no incentive to curb them. The government continued to favour them with cheap loans. The chaebol were left vulnerable but it did not seem to matter - until the economic crisis, which hit Asia in 1997.

Their huge expansion had led to them owning many factories making things that people didn't want to buy. Indeed, they are still heavily dependent on exports.

As the Asian flu eased, the chaebol survived, thanks to the International Monetary Fund, which organised emergency loans to the government, in return for promises of free market reforms.

The new government, which took office last year at the height of the crisis, has tried to oblige.

The tiger recovers

The five - Hyundai, Daewoo, Samsung, LG and SK groups - were told to close or merge their debt-laden subsidiaries, reduce their diversity and to become more like slim-line, fit, Western business enterprises.

Daewoo is fighting to survive despite crippling debts

They also came under pressure to cut back on investment - and knock-on effects, particularly in the UK, saw the mothballing of Hyundai's planned electronics plant at Dunfermline in Fife, along with at least 800 jobs, and the LG semi-conductor plant in South Wales.

The new government believes the chaebol debts are starving small and medium-sized companies and stagnating development.

Some reforms have taken effect. Interest rates tumbled and chaebol scaled back their borrowing, helping the economy recover. The Seoul stockmarket has risen more than 25% this year.

Civil unrest

Last year, Korea faced civil unrest because of unemployment, but now the jobless rate is falling. Some economists, though, doubt how durable the recovery will be and there are worries the chaebols dislike reform.

The Federation of Korean Industries says attempts to force companies to swap overlapping subsidiaries have had limited success. The companies themselves have been reluctant to sell redundant parts of their sprawling empires.

South Korea's economy is dependent on exports

For example, the government-backed plan for Samsung to sell its car unit to Daewoo in return for acquiring Daewoo's electronics business (the so-called "Big Deal") recently collapsed. But Hyundai signed a £1.3bn buy-out deal with the LG Group, for its semi-conductor unit. And Daewoo announced in April a restructuring involving selling a range of its businesses.

So far, transforming the economy has focused on repairing, not replacing the conglomerates.

The government's planned answer is an information-driven, hi-tech economy, modelled on America.

Officials say that with deregulation, wider use of the Internet and co-operation with foreign multinational firms, the nation's economy can radically change.

Some observers say the country needs to get away from manufacturing and move towards services.

There is plenty of scope for improvement in the areas of retailing, dining, health care and tourism, it is generally agreed.