The Korean economic miracle is often attributed in part to the symbiotic nature of the relationship between business and government (E. M. Kim 1997; Moon 1995).The state cultivated and patronized the private sector under broadly defined developmental objectives, while private firms, especially chaebol, served as the agents of economic growth and transformation. Unity of purpose as well as dense, organic networks between the public and private sectors fostered economic growth by mitigating uncertainty, expediting the flow of information, and reducing transaction costs.

The 1997 economic crisis and subsequent structural reforms have radically restructured the political-economic terrain of business-government relations. Neoliberal reforms shattered the organic and symbiotic ties between the two, pitting the state against business. While the state was blamed for excessive intervention and poor monitoring, the private sector, especially the chaebol, did their part with poor corporate governance, reckless corporate expansion and high leveraging. The collusive ties between business and government were seen as the source of the rent-seeking, corruption and moral hazard that aggravated the economic downturn (Haggard and Mo 2000; Moon and Mo 2000;Yoo 1999, 2000; Jang 1999).

President Kim Dae-jung, who took office in February 1998, had a mandate to manage the economic crisis through sweeping corporate reforms. The International Monetary Fund (IMF), which had coordinated a rescue financing of $57 billion in November 1997, sought extensive corporate reforms, including transparency and accountability in corporate governance, improved corporate financial structure, and overall corporate restructuring.