Early History
In the early part of the 1960s, the government of South Korea began a new economic strategy requiring the chaebols, or conglomerates, to concentrate on increasing production for export. A series of five year plans laid out the policy for decreasing South Korea's trade deficit while strengthening domestic production. This was a plan which had already been successfully utilized y both Hong Kong and Taiwan, the Far East competitors of South Korea. The company Daewoo had a key part in this effort to improve the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols manufacturing goods 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. The corporation Daewoo took advantage of the large labor force of the nation, its primary asset. By concentrating on labour-intensive industries, like textile and clothing, the business generated high profits. The corporation's factory in Pusan produced 3.6 million shirts on a monthly basis. The company also made simple manufacturing machinery, that were labour intensive as well. Throughout this time, Daewoo helped to boost the level of exports of South Korea, that were growing almost 40 percent per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other businesses, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from the year 1973 to 1981. This took place at the same time as the United States announced its plans to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was intended to further expand Korea's exports while at the same time producing components which had to be imported previously. Domestic components manufacturing helped to make possible a national defense industry and strengthen domestic industries.