Early History
The South Korean government during the early part of the 1960s started a new economic strategy that required large businesses known as "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans that were intended to decrease the trade deficit the nation was going through while helping to bolster the nation's production. This was a plan that had already been employed successfully by Hong Kong and Taiwan, South Korea's Far East competitors. The corporation Daewoo was a significant player in this effort to improve the importance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was one of these companies that benefited in 1967. This was at the start of the second five-year plan. Daewoo capitalized on the large labor force of the nation, its primary asset. By focusing on labour-intensive industries, like for instance textile and clothing, the company generated high earnings. The factory of the company in Pusan made 3.6 million shirts each month. The company also made simple manufacturing equipment, which were also labour intensive. In this time, the company Daewoo helped to increase South Korea's level of exports, which were growing nearly 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other businesses, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of the country's economic recovery lasted from the year 1973 to the year 1981. This happened at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further expand Korea's exports while simultaneously making parts that previously had to be imported. Domestic components production helped to make possible a national defense industry and strengthen domestic industries.