Early History
During the early part of the 1960s, the government of South Korea began a new economic strategy that requires the conglomerates, or chaebols, to concentrate on increasing production for export. A series of five year plans laid out the strategy for decreasing South Korea's trade deficit while strengthening domestic production. This was a strategy that had already been successfully employed by Hong Kong and Taiwan, South Korea's Far East competitors. The corporation Daewoo was a major player in this effort to boost 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 amongst these businesses which benefited during the year 1967. This was at the start of the second five-year plan. The company Daewoo took advantage of the huge labor force of the country, its primary asset. By focusing on labour-intensive industries, like textile and clothing, the company yielded high profits. The factory of the corporation in Pusan made 3.6 million shirts on a monthly basis. The corporation also made simple manufacturing equipment, that were also labour intensive. During this time, the company Daewoo helped to boost the level of exports of South Korea, that were growing nearly 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, which forced the country to focus on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to nineteen eighty one. This took place at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further expand Korea's exports while simultaneously manufacturing components that previously had to be imported. Domestic parts manufacturing helped to strengthen domestic businesses and make possible a national defense industry.