Early History
The government of South Korea during the early part of the 1960s started a new economic strategy which required large businesses referred to 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 experiencing while helping to bolster the country's production. This was a plan which had already been successfully used by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo was a key player in this effort to boost the significance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was one of these companies that benefited during the year 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the huge workforce of the country, its primary asset. By focusing on labour-intensive businesses, like textile and clothing, the company generated high earnings. The factory of the corporation within Pusan produced 3.6 million shirts each and every month. Additionally, the corporation manufactured basic manufacturing machinery, that were labour intensive too. In this time, the corporation Daewoo helped to increase South Korea's level of exports, that were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, when the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, which forced the nation to concentrate on the industries of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to the year 1981. 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 production was meant to further the expansion of Korea's exports while at the same time making parts that had to be imported before. Domestic parts production helped to strengthen domestic businesses and make possible a national defense industry.