South Korea's economic success has had a profound impact on the security situation on the peninsula. The ROK's military strength has an economic basis as well as a basis in the ROK-U.S. security alliance. Following the economic crisis of 1997, South Korea is recovering more quickly than most experts ever thought possible. Foreign reserves are much higher than before the crisis. The exchange rate has firmed and stabilized.
Interest rates are low.
Financial reform has progressed well. Even unemployment, though still high by Korean standards, has moderated somewhat. Indeed, recovery from the crisis has been so rapid that some may conclude that further reform and restructuring are unnecessary. That would be a serious mistake. Even before the financial crisis, Korean industry had lost competitiveness in world markets.