Early History
The South Korean government during the early part of the 1960s started a new economic strategy that required big corporations called "chaebols" to focus on producing exports. This new strategy called for a series of five year plans which were intended to decrease the trade deficit the country was going through while helping to bolster the country's production. This was a strategy which had already been successfully used y both the Far East competitors of South Korea, Taiwan and Hong Kong. The company Daewoo had a major part in this effort to boost the significance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it began trading in the year 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the large workforce of the nation, its primary asset. By concentrating on labour-intensive industries, like textile and clothing, the company yielded high earnings. The corporation's factory within Pusan produced 3.6 million shirts on a monthly basis. Additionally, the company manufactured simple manufacturing equipment, which were labour intensive as well. In this time, the corporation Daewoo helped to increase South Korea's level of exports, that were growing almost 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of the nation's economic recovery lasted from the year 1973 to 1981. This took place at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was intended to further the expansion of Korea's exports while simultaneously producing components that previously had to be imported. Local components production helped to make possible a national defense industry and strengthen domestic businesses.