Early History
In the early 1960s, the South Korean government started a new economic plan requiring the conglomerates, or chaebols, to concentrate on increasing production for export. A series of five year plans laid out the strategy for decreasing South Korea's trade deficit while strengthening domestic production. This was a strategy that had already been utilized successfully by South Korea's Far East competitors, Hong Kong and Taiwan. The corporation Daewoo was a significant player in this effort to enhance the importance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols producing goods for export. Daewoo benefited from the loans when it started trading in the year 1967. This was at the start of the second five-year plan. The corporation Daewoo took advantage of the large labor force of the country, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the company generated high profits. The factory of the corporation in Pusan made 3.6 million shirts each month. What's more, the corporation made simple manufacturing machines, which were also labour intensive. In this time, Daewoo helped to boost South Korea's level of exports, that were growing almost 40 percent per year.
Korea's comparative advantage in labor-intensive production started to decline, once 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 shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular 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 totally withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further expand Korea's exports while simultaneously manufacturing parts that previously had to be imported. Domestic parts production helped to strengthen domestic businesses and make possible a national defense industry.