Early History
The South Korean government during the early 1960s began a new economic plan which required big businesses referred to as "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans that were designed to decrease the trade deficit the nation was experiencing while helping to bolster the country's production. This was a strategy which had already been employed successfully by the Far East competitors of South Korea, Taiwan and Hong Kong. The company Daewoo had a major part in this effort to improve the importance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was among these companies that benefited during 1967. This was at the beginning of the second five-year plan. The company Daewoo capitalized on the huge labor force of the nation, its primary asset. By focusing on labour-intensive industries, like textile and clothing, the business yielded high earnings. The factory of the corporation in Pusan produced 3.6 million shirts each and every month. The company also made simple manufacturing equipment, that were labour intensive as well. During this time, Daewoo helped to boost the level of South Korea's exports, which were growing almost 40% per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other industries, such as shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from the year 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 manufacturing was intended to further the expansion of Korea's exports while simultaneously producing components that previously had to be imported. Domestic parts manufacturing helped to strengthen domestic businesses and make possible a national defense industry.