Early History
The government of South Korea during the early 1960s began a new economic plan that required large companies referred to as "chaebols" to focus on manufacturing exports. This new strategy called for a series of five year plans that were intended to lessen the trade deficit the country was going through while helping to bolster the country's production. This was a plan which had already been successfully utilized by Hong Kong and Taiwan, South Korea's Far East competitors. The company Daewoo had a key part in this effort to enhance the significance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was amongst these companies that benefited in 1967. This was at the beginning of the second five-year plan. The company Daewoo capitalized on the huge workforce of the nation, its primary asset. By focusing on labour-intensive businesses, like clothing and textile, the company generated high profits. The company's factory within Pusan produced 3.6 million shirts on a monthly basis. The corporation also manufactured basic manufacturing machinery, that were labour intensive too. During this time, the corporation Daewoo helped to increase South Korea's level of exports, that were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production began to decline, when the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the nation to focus on the industries of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to the year 1981. This happened at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further expand Korea's exports while at the same time manufacturing components that had to be imported before. Domestic parts production helped to make possible a national defense industry and strengthen domestic businesses.