Early History
In the early part of the 1960s, the government of South Korea started a new economic strategy requiring the chaebols, or conglomerates, to focus 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 utilized successfully y both South Korea's Far East competitors, Hong Kong and Taiwan. The company Daewoo had a major part in this effort to enhance the significance 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 that benefited during the year 1967. This was at the start of the second five-year plan. The corporation Daewoo took advantage of the large labor force of the nation, its primary asset. By concentrating on labour-intensive industries, like clothing and textile, the company yielded high earnings. The factory of the corporation within Pusan made 3.6 million shirts each month. Additionally, the corporation made simple manufacturing machinery, which were also labour intensive. In this time, Daewoo helped to increase the level of South Korea's exports, that were growing nearly 40% per year.
Once the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other businesses, such as shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This 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 intended to further the expansion of Korea's exports while at the same time producing components which previously had to be imported. Local parts production helped to strengthen domestic businesses and make possible a national defense industry.