Early History
The South Korean government in the early 1960s started a new economic strategy which required big corporations called "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans that were intended to reduce the trade deficit the country was going through while helping to bolster the nation's production. This was a strategy which had already been successfully used y both Taiwan and Hong Kong, South Korea's Far East competitors. The company Daewoo had a significant part in this effort to enhance the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols manufacturing products for export. Daewoo benefited from the loans when it began trading during the year 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the large workforce of the nation, its primary asset. By focusing on labour-intensive businesses, like clothing and textile, the company yielded high profits. The company's factory in Pusan made 3.6 million shirts on a monthly basis. The corporation also made basic manufacturing equipment, that were labour intensive too. In this time, Daewoo helped to increase 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, once 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 specific phase of Korea's economic recovery lasted from 1973 to nineteen eighty one. This happened at the same time as the United States announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further expand Korea's exports while simultaneously making components which had to be imported previously. Domestic parts production helped to strengthen domestic businesses and make possible a national defense industry.