Early History
The government of South Korea in the early 1960s began a new economic strategy that required huge companies referred to as "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans that were designed to lessen the trade deficit the nation was experiencing while helping to bolster the nation's production. This was a plan which had already been successfully used y both Taiwan and Hong Kong, South Korea's Far East competitors. The company Daewoo was a key player in this effort to improve the significance 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 amongst these companies that benefited in 1967. This was at the start of the second five-year plan. The company Daewoo capitalized on the large workforce of the country, its primary asset. By focusing on labour-intensive businesses, like clothing and textile, the company yielded high earnings. The corporation's factory within Pusan made 3.6 million shirts each and every month. In addition, the corporation made basic 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 percent per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of the nation's economic recovery lasted from the year 1973 to the year 1981. This happened at the same time as the US announced its intentions to totally withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was intended to further expand Korea's exports while simultaneously making parts that had to be imported previously. Domestic parts production helped to make possible a national defense industry and strengthen domestic industries.