Early History
The South Korean government in the early 1960s began a new economic strategy that required big businesses called "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans which were intended to lessen the trade deficit the country was going through while helping to bolster the nation's production. This was a plan that had already been used successfully by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo was a major player in this effort to enhance the significance 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 among these businesses which benefited during the year 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the huge labor force of the nation, its primary asset. By concentrating on labour-intensive industries, such as clothing and textile, the business generated high profits. The factory of the company within Pusan produced 3.6 million shirts on a monthly basis. The corporation also made basic manufacturing machines, that were labour intensive as well. In this time, the corporation Daewoo helped to boost the level of exports of South Korea, which were growing almost 40 percent per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to nineteen eighty one. 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 simultaneously making components that previously had to be imported. Domestic parts production helped to strengthen domestic businesses and make possible a national defense industry.