Early History
The South Korean government during the early 1960s started a new economic plan which required large businesses known as "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans that were designed to decrease the trade deficit the country was experiencing while helping to bolster the nation's production. This was a strategy that had already been successfully employed by Taiwan and Hong Kong, the Far East competitors of South Korea. The company Daewoo was a major player 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 businesses that benefited during the year 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the huge workforce of the nation, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the company generated high profits. The factory of the company within Pusan produced 3.6 million shirts on a monthly basis. The corporation also made basic manufacturing machinery, that were labour intensive as well. During this time, Daewoo helped to boost South Korea's level of exports, which were growing nearly 40 percent per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other businesses, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of the country's economic recovery lasted from 1973 to 1981. This took place at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously making parts that had to be imported before. Domestic parts production helped to make possible a national defense industry and strengthen domestic businesses.