Global investors are smiling again on Asia as a land of economic promise. But they remain wary that root causes for the region's crisis - collusion and corruption - have only begun to be curbed.
As a reminder, they point to a petty thief in South Korea named Kim Kang Ryong.
After his recent capture, Mr. Kim said he had pilfered pearl rings, gold ingots, and wads of cash from the homes of Cabinet ministers and other prominent Koreans (who deny they were robbed or say he's exaggerating).
The case revived concern that official collusion between government and business elites runs deep in Asian societies.
Still, observers say the Korean debate about Kim's heists points to a new openness that can be seen across the region as Western business standards and practices become more widely adopted. Their advice: Invest with caution.
Nearly two years since Thailand triggered a capital flight from Asia, the region seems on its way back. From Japan to Indonesia, governments are cleaning financial house and instituting reforms. Stock markets are climbing and international watchdog groups offer cautiously optimistic report cards.
"Most Asian countries have done something to reconfigure their systems," says Miron Mushkat, global head of economics and investment strategy at Indocam Asset Management in Hong Kong. "The overall architecture still leaves something to be desired, but there's tangible progress. Asia has demonstrated its ability to change."
Emergency lending by the International Monetary Fund (IMF) has helped restore stability, even as millions of people were bumped off the middle-class rung. But the more than $100 billion in IMF funds came with strings attached: Asian governments had to act on reform measures, such as making government information more transparent and regulating banks better and more fairly.
Progress so far is mixed.
Indonesia's economy is in limbo until a June 7 election is over. And the Indonesian Bank Restructuring Agency has yet to restructure many failing banks - some of which have ties to cronies of former President Suharto. Thailand has improved, but its coalition government is weak. The Philippines, less hit by the crisis, has made steady headway. Malaysia's economy and stock market are rebounding. But the corruption conviction of Anwar Ibrahim, former deputy prime minister, has left foreign businessmen wary about whether the rule of law or the rule of Prime Minister Mahathir Mohamad is paramount there.
South Korea is doing well, but firms there are still foggy on the concept of corporate transparency. A Seoul-based securities firm recently used international accounting standards on some large companies' 1998 financial statements. They estimated the top 30 firms hid losses by reporting profits falsely high and debts artificially low.
"Without solving the corruption problem, it is almost impossible for Korea [to recover]," says Park Ki Jung, an official in the prime minister's office working on anticorruption measures that will be announced in June. They include deregulation, new codes of conduct, and whistleblower protection laws.
Despite worries about persistent corruption, Korea has won kudos for its progress. President Kim Dae Jung has removed import barriers, pushed to restructure conglomerates, and shaken up the banking system. The reforms have drawn investor capital, sending the Seoul stock market soaring. But analysts warn there's still work to be done. "Banking has changed fundamentally, credit no longer flows indiscriminately, but there's a long way to go in the corporate structure," says Mr. Mushkat. "Large corporations still don't operate with the accountability, or profit motive of Western firms. Shareholder value still isn't there."
Europe and the US had hoped Japan could pull Asia out of its slump by providing a market for Asian goods. But for most of the 1990s, Japan has been burdened with economic woes that resemble others in Asia, including collusive business practices that fueled careless lending and a lack of transparency. The Organization for Economic Cooperation and Development sees no immediate end to Japan's recession, predicting the economy will contract this year. But as in other parts of Asia, the Tokyo stock exchange has been rising.
"Stocks have rallied just on the basis of the Western-style restructuring plans being announced," explains Tokyo-based economist Andrew Shipley. Japan's banks are still bogged down in debt, but finance officials are restructuring that sector. Companies have announced massive workforce cuts and began implementing international accounting practices this April. As in South Korea, traditional accounting practices allowed firms to keep losses hidden. And struggling firms like Nissan Motors are tying up with foreign companies like French automaker Renault.
Still, some analysts here warn foreigners against rushing back too eagerly to invest in Japan. "Those investors are still reading too far ahead," says Susumu Takahashi, chief economist at The Japan Research Institute Ltd., an affiliate of Sumitomo Bank. "Things are still shaky. And as far as the transparency of corporate balance sheets and consideration for shareholders are concerned, there's still a long way to go."
*Michael Baker in Seoul, South Korea, contributed to this report.