Early History
The South Korean government in the early part of the 1960s began a new economic strategy that required big corporations known as "chaebols" to focus 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 experiencing while helping to bolster the nation's production. This was a plan which had already been successfully used 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 help the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was among these companies which benefited in 1967. This was at the start of the second five-year plan. Daewoo took advantage of the huge workforce of the nation, its primary asset. By focusing on labour-intensive businesses, such as textile and clothing, the company generated high earnings. The factory of the corporation within Pusan produced 3.6 million shirts on a monthly basis. The corporation also manufactured basic manufacturing equipment, which were labour intensive as well. In this time, the company Daewoo helped to boost South Korea's level of exports, that were growing nearly 40 percent 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, which forced the nation to concentrate on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This particular phase of the country's economic recovery lasted from the year 1973 to 1981. This occurred at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while at the same time producing parts which previously had to be imported. Domestic components production helped to make possible a national defense industry and strengthen domestic industries.