Early History
The South Korean government during the early part of the 1960s started a new economic strategy that required big businesses called "chaebols" to focus on manufacturing exports. This new plan called for a series of five year plans that were designed to decrease the trade deficit the nation was going through while helping to bolster the country's production. This was a strategy which had already been employed successfully y both Hong Kong and Taiwan, the Far East competitors of South Korea. The corporation Daewoo had a significant part in this effort to improve the importance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was among these businesses which benefited during 1967. This was at the start of the second five-year plan. The corporation Daewoo took advantage of the nation's huge workforce, its primary asset. By concentrating on labour-intensive industries, such as textile and clothing, the business yielded high earnings. The factory of the company in Pusan produced 3.6 million shirts each month. The company also made basic manufacturing equipment, which were also labour intensive. Throughout this time, the company Daewoo helped to boost South Korea's level of exports, which were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production started to decline, when the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, which forced the nation to focus on the industries of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from 1973 to 1981. This occurred at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the nation. The new emphasis in production was meant to further the expansion of Korea's exports while at the same time manufacturing components which previously had to be imported. Domestic components manufacturing helped to make possible a national defense industry and strengthen domestic businesses.