Early History
The South Korean government during the early part of the 1960s started a new economic plan that required big businesses referred to as "chaebols" to concentrate on producing exports. This new strategy called for a series of five year plans that were intended to lessen the trade deficit the nation was going through while helping to bolster the nation's production. This was a strategy which had already been successfully utilized y both the Far East competitors of South Korea, Taiwan and Hong Kong. The company Daewoo had a significant part in this effort to boost the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols manufacturing products for export. Daewoo benefited from the loans when it started trading during the year 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the nation's huge labor force, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the business yielded high earnings. The factory of the corporation within Pusan made 3.6 million shirts on a monthly basis. The corporation also made simple manufacturing equipment, that were labour intensive as well. Throughout this time, Daewoo helped to boost the level of exports of South Korea, that 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 both Thailand and Malaysia forced Korea to refocus its energies on other industries, like shipbuilding, petrochemicals, mechanical and electrical 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 intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further expand Korea's exports while simultaneously producing components that had to be imported previously. Local parts production helped to make possible a national defense industry and strengthen domestic businesses.