Early History
The South Korean government in the early 1960s started a new economic strategy which required huge businesses referred to as "chaebols" to focus on manufacturing exports. This new strategy called for a series of five year plans that were intended to reduce the trade deficit the country was experiencing while helping to bolster the nation's production. This was a strategy which had already been successfully utilized by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo had a major part in this effort to improve 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 one of these companies which benefited during 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the large labor force of the country, its primary asset. By focusing on labour-intensive businesses, such as clothing and textile, the company yielded high earnings. The factory of the company in Pusan made 3.6 million shirts on a monthly basis. What's more, the corporation made basic manufacturing machinery, which were labour intensive as well. Throughout this time, the company Daewoo helped to increase South Korea's level of exports, which were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, once the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, that forced the nation to focus on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of the country's economic recovery lasted from 1973 to the year 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 expand Korea's exports while at the same time making parts which previously had to be imported. Local components production helped to make possible a national defense industry and strengthen domestic businesses.