South Korea’s Sarkozy

The congregation at Somang Presbyterian, a Seoul megachurch, has very fond memories of the parishioner who became South Korea's president on Monday. Lee Myung-bak, now 66, joined the church back in 1977, when he was the young head of Hyundai's construction company, and he didn't take long to leave his mark. Shortly after he arrived, Lee took charge of a project to build a massive new sanctuary for the fast-growing congregation. Within a year it was completed, and Somang's 70,000 members haven't forgotten.

Many are now pulling for Lee as he takes the country's helm this week and tries to steer its once mighty, now faltering, economy back on track. "We think he can get it done," says church manager Chung Jung Mook. "We'll be praying for him." [Read a Q&A with Lee.]

That's good news for Lee, who will need all the help he can get—divine intervention included. A cosmopolitan, business-friendly ex-CEO who's an unabashed friend of Washington, Lee will face formidable challenges as he tries to return South Korea to the upper ranks of the world economy. In an exclusive interview with NEWSWEEK last week, Lee emphasized his determination to strengthen South Korea's business fundamentals and external ties. After 10 years of leftist rule marked by skyrocketing social spending, weak economic growth and strained relations with the United States, Lee thinks he has the solution: to court foreign investment, make nice with old allies and step up English-language education—a plan he bills as "Global Korea"—while dramatically cutting taxes, spending and regulation.

But is South Korea really ready for a Sarkozy-style pragmatist who embraces Washington, the English language and big business while opposing what Park Myung Ho, a political scientist at Seoul's Dongguk University, calls the "liberal idealism" of his predecessors? For one thing, the country has a profoundly ambivalent attitude toward the rest of the world. Its export-driven economic miracle ensured the country's fate was inextricably linked to other nations'. Koreans, moreover, think nothing of sending their kids to summer camp in the U.S. or college in France. But there's also a deeply ingrained historical sense of humiliation by the foreign powers that repeatedly invaded and colonized Korea throughout its history. Small wonder, then, that the national psyche tends to swing violently between cosmopolitanism and xenophobia.

Sure enough, Lee's agenda ran into trouble before he was even inaugurated. Environmentalists and the powerful Korea Confederation of Trade Unions have blasted his pro-globalization proposals, which they see as a threat to national pride and an attempt to push a U.S.-style neoliberalism that emphasizes development over all else. To underscore his commitment to Global Korea, Lee has gone so far as to offer to bring foreigners into his cabinet—but this move, too, has drawn fire from nationalists. Recent turbulence in world financial markets hasn't helped, either, forcing Lee to back off campaign pledges to deliver growth levels not seen here for years. Still, in the interview last week, the then president-elect stressed that he hasn't lost the faith. "We achieved [economic] development through globalization," he said, and further internationalizing remains the country's best shot at recovery.

On the surface, South Korea seems primed for such an approach. Lee, a former Hyundai president and Seoul mayor, won the election by a landslide in December. Many Koreans blamed the country's recent economic stagnation on the policies of his predecessors, Roh Moo Hyun and Kim Dae Jung, who emulated the Northern European social model, raising the welfare budget by an average of 18 percent a year. The public sector mushroomed, taxes soared and private enterprise struggled under increased regulations. Roh in particular emphasized redistributing wealth to Korea's have-nots, and his pro-labor, anticonglomerate stance discouraged investment. Last year, an Organization for Economic Cooperation and Development report warned that South Korea's economy remains "relatively isolated" and noted that foreign direct investment had been falling steadily since 2005. Economic growth slowed from 7 percent in 2002 to 5 percent last year— a rate that feels like a recession in South Korea—and youth unemployment hit the double digits (having doubled in five years). Economically speaking, the Kim-Roh era represented "10 lost years," says Gong Sung Jin, a lawmaker in Lee's Grand National Party.

Lee hopes to fix this by closing or merging overgrown government agencies, cutting corporate and property taxes and slashing regulation. He's dreamed up a huge nationwide canal project linking rivers in the north and south that would facilitate cargo transport, spur tourism in the hinterlands and create new jobs. He's also courted investment from local and foreign business leaders. In January, Lee wowed an assembly of U.S. and European investors in Seoul by treating them to a slick PowerPoint overview of his reform plans—accompanied by a commentary in fluent English. (Roh, whose formal education didn't extend beyond high school, spoke only Korean—and a notoriously coarse version of it at that.) Lee has surrounded himself with foreign-educated scholars and globetrotting business executives and even named a British banker co-chair of a special committee on national competitiveness. Sagong Il, the committee's other co-chair and a former Finance minister, says Lee wants to make the sort of changes that reformers aspire to in the United States, Germany and France.