Early History
In the early part of the 1960s, the South Korean government initiated a new economic plan that requires the chaebols, or conglomerates, to focus on increasing production for export. A series of five year plans laid out the strategy for decreasing the trade deficit of South Korea while strengthening domestic production. This was a strategy that had already been successfully employed by Hong Kong and Taiwan, South Korea's Far East competitors. The corporation Daewoo had a major part in this effort to boost 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 one of these businesses which benefited during 1967. This was at the start of the second five-year plan. Daewoo took advantage of the huge labor force of the nation, its primary asset. By concentrating on labour-intensive industries, such as textile and clothing, the company yielded high profits. The factory of the company within Pusan made 3.6 million shirts on a monthly basis. The company also made basic manufacturing machinery, that were labour intensive too. During this time, the corporation Daewoo helped to boost the level of South Korea's exports, which were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, when the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, that forced the nation to concentrate on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from 1973 to the year 1981. This occurred at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further the expansion of Korea's exports while simultaneously producing parts which had to be imported previously. Local components production helped to make possible a national defense industry and strengthen domestic businesses.