Early History
The South Korean government in the early part of the 1960s started a new economic strategy which required huge businesses called "chaebols" to concentrate on producing exports. This new plan called for a series of five year plans which were designed to lessen the trade deficit the nation was going through while helping to bolster the country's production. This was a strategy that had already been successfully used by South Korea's Far East competitors, Hong Kong and Taiwan. The corporation Daewoo was a significant player in this effort to enhance the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it started trading during 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the country's huge labor force, its primary asset. By focusing on labour-intensive industries, like textile and clothing, the company generated high profits. The factory of the company within Pusan produced 3.6 million shirts each month. The corporation also made simple manufacturing equipment, that were also labour intensive. Throughout this time, the corporation Daewoo helped to increase South Korea's level of exports, which were growing almost 40 percent per year.
Korea's comparative advantage in labor-intensive production began to decline, when the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, which forced the country to concentrate on the businesses of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular phase of the country's economic recovery lasted from the year 1973 to nineteen eighty one. This happened at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further expand Korea's exports while simultaneously making components that previously had to be imported. Local parts manufacturing helped to strengthen domestic industries and make possible a national defense industry.