Oct. 17 (Bloomberg) -- Distant drum beats that sound vaguely tribal creep into Kim Yong Duk's office overlooking Seoul's national assembly building.

``I hear them almost every day,'' the 56-year-old said with a smirk, while motioning toward the protesters.

As chairman of South Korea's Financial Supervisory Commission, Kim is overseeing the nation's so-called Big Bang. The daunting effort aims to integrate capital markets and morph Asia's No. 4 economy into a global financial hub. It may be Korea's best hope of finding a place between wealthy Japan and developing China and accelerating the rise in living standards.

``We are located in between Japan and China, and we need to find possible areas for growth engines,'' Kim said in an Oct. 10 interview in Seoul.

The process is potentially destabilizing, though. The protesters outside Kim's window are a reminder that as Kim endeavors to raise Korea's profile, there's a spirited, change- averse population of 49 million people with which to contend. Their drum rhythms speak to the conflicting agendas he must navigate to shake up Korea's rigid financial system.

Amid such high stakes, tapping Kim was one of President Roh Moo Hyun's better economic decisions. The former director- general of international finance has the market equivalent of street credibility. Kim came to be known as ``Mr. Won'' for his ability to move currency markets. When he speaks, investors can tell he's a guy who knows what he's talking about.

Awkward Position

It won't be easy. Two months into the job, Kim finds himself in the awkward position of having to rationalize a bank deal. HSBC Holdings Plc's effort to buy Korea Exchange Bank has gotten tangled with another brouhaha, involving Lone Star Funds, that spooked many an international investor.

The conditions surrounding Lone Star's 2003 purchase of Korea Exchange Bank are working their way through the courts and could play out for another three years. Lone Star stands accused of conspiring with government officials to reduce the price of Korea's sixth-biggest lender. It denies the charges. Kim's agency won't approve the HSBC deal until all court cases are resolved.

To many, the dustup is emblematic of the challenges foreigners face tapping one of Asia's most promising economies. Yet Kim is sticking to his guns, arguing that his leadership will strive to convince the outside world that Korea welcomes overseas investment.

`Mr. Won'

Kim has his work cut out as he moves from ``Mr. Won'' to ``Mr. Big Bang.'' Look no further than Japan's Big Bang in the late 1990s, which ended up being more of a big fizzle. Japan's investment banks and markets remain more insular than envisioned, and Tokyo's markets have fallen further behind London and New York.

Success will help Korea reinvent the economy. Manufacturing is no longer an option amid the rise of China, India and a variety of emerging competitors in Southeast Asia. Korea's future is in ideas, innovation and services. And financial services may be the most promising area.

It's hardly news that Korea's capital markets hold great potential. None other than billionaire Warren Buffett said in May that his company, Berkshire Hathaway Inc., ``made more money in Korean stocks in the last four or five years than in the United States.'' Buffett is expected to visit Korea later this month for the first time.

Buffett's Interest

Getting the Buffetts of the world more interested in Korea could get it closer to becoming a financial hub. To do that, the country is relaxing restrictions preventing brokerages, futures traders and asset managers from entering each other's businesses.

Encouraging market integration, Kim said, will enliven competition and create more efficient supervision of market activities. Along with attracting the biggest players to Korea, it's about creating a domestic financial champion.

``First,'' Kim said, ``we will provide a level playing field for all investors. Second, we will give equal treatment to domestic and foreign investors without discrimination. And third, we will enforce our rules and regulations consistently and strictly against all unlawful conduct ranging from insider trading to market manipulations to questionable accounting and disclosure practices.''

The Carl Icahns of global finance may have their doubts. In recent years, the U.S. billionaire whose name is synonymous with the heady 1980s has been thwarted in attempted takeovers of targets such as KT&G Corp., Korea's biggest tobacco company.

Also, observers tend to think Asia's future financial center will be Hong Kong or Singapore, not Seoul. Another challenge is to staff Korea's homegrown equivalents of Goldman Sachs Group Inc. and Merrill Lynch & Co. ``One of the most critical factors now lacking is human resources,'' Kim admitted.

It's heartening to see Kim stepping up efforts to globalize Korea Inc. The nation's economy could be a livelier place in the years ahead for his efforts.

``If we use our strengths effectively, I believe domestic financial institutions stand an excellent chance of doing well in overseas markets,'' Kim said. ``That goes for foreign institutions coming to Korea, too.''

To contact the writer of this column: William Pesek in Singapore at wpesek@bloomberg.net

Last Updated: October 16, 2007 16:20 EDT