By Ju-min Park

SEOUL (Reuters) - Close by the luxury high-rises of Seoul's most expensive neighborhood, 80-year-old Kim Ok-nyo burns charcoal to heat her two-room shack in Guryong, a shantytown of 2,000 residents.

Demolition of Guryong, the last slum in Seoul's glitzy Gangnam district made famous by Psy's Gangnam Style song and video, is expected to start this summer after redevelopment plans were mired for years in squabbling among the city, district and developers, and even battling residents.

Left behind by South Korea's economic miracle, Guryong is a grim symbol of growing income inequality in a country where nearly half the elderly live in poverty, the highest rate in the Organization for Economic Cooperation and Development (OECD)grouping.

Kim, a widow who shares her cramped wooden dwelling with one of her sons, is ready to leave the fire-prone slum, where the church she attended burned down about five months ago.

"I am scared that I will continue to live here and die here," she said. "I want to die in a slightly better place."

After her husband died of a heart attack nearly 30 years ago, Kim moved into the farmland-turned-slum, doing temporary work at building sites, and once even cleaning at one of the nearby high-rise apartments.

"I envy them," the mother of five said in her shack, which is too small to accommodate even a television. "Why wouldn't I? I pray every day that some day my kids can have a life like them."

Kim, who depends on a monthly government living subsidy of 200,000 won ($187), uses a shared toilet around the corner and takes showers and does laundry at public baths.

"Later you will see all kinds of bugs, like cockroaches, and rats," she said. "Bug killers don't work."

In December, city and district officials agreed on a redevelopment plan to build thousands of units of low-cost housing, including subsidized homes for current slum residents.

"We need to develop the area quickly to improve housing security for people there, because these illegal shacks are old, so they are vulnerable," said Cho Gyu-tae, a Gangnam official handling the redevelopment.

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Slum residents were old and ailing, said Ahn Young-chan, a 79-year-old grandfather and victim of backaches, who has lived in the shantytown since it sprang up in the late 1980s.

After the failure of previous resettlement efforts, he is wary of getting his hopes up.

"We have to wait and see," he said. "Honestly we don't have power. We have no choice but to follow what the authorities tell us."

($1=1,067.9000 won)

(Editing by Tony Munroe and Clarence Fernandez)