Early History
The South Korean government during the early 1960s started a new economic strategy which required large businesses known as "chaebols" to focus on manufacturing exports. This new plan called for a series of five year plans that were designed to lessen the trade deficit the country was going through while helping to bolster the country's production. This was a plan which had already been successfully employed y both the Far East competitors of South Korea, Hong Kong and Taiwan. The corporation Daewoo had a key part in this effort to improve the significance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing goods for export. Daewoo benefited from the loans when it started trading in 1967. This was at the start of the second five-year plan. Daewoo took advantage of the large workforce of the country, its primary asset. By concentrating on labour-intensive businesses, like clothing and textile, the business yielded high earnings. The factory of the corporation in Pusan produced 3.6 million shirts on a monthly basis. The company also made basic manufacturing equipment, which were labour intensive too. Throughout this time, 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 began to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the country to focus on the industries of shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This specific phase of the country's economic recovery lasted from the year 1973 to 1981. This occurred at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further expand Korea's exports while simultaneously producing components that previously had to be imported. Local components manufacturing helped to make possible a national defense industry and strengthen domestic industries.