Early History
In the early part of the 1960s, the South Korean government initiated a new economic plan requiring the chaebols, or conglomerates, to concentrate on increasing production for export. A series of five year plans laid out the strategy for decreasing South Korea's trade deficit while strengthening local production. This was a strategy that had already been successfully utilized by Taiwan and Hong Kong, the Far East competitors of South Korea. The corporation Daewoo had a significant part in this effort to enhance the significance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was amongst these companies which benefited in 1967. This was at the start of the second five-year plan. The corporation Daewoo took advantage of the country's huge labor force, its primary asset. By concentrating on labour-intensive industries, such as textile and clothing, the business yielded high profits. The factory of the company within Pusan made 3.6 million shirts every month. Furthermore, the company manufactured simple manufacturing machines, which were labour intensive as well. In this time, Daewoo helped to boost South Korea's level of exports, that were growing nearly 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, which forced the nation to concentrate on the industries of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular phase of the nation's economic recovery lasted from 1973 to nineteen eighty one. 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 meant to further expand Korea's exports while at the same time producing parts which previously had to be imported. Local parts production helped to make possible a national defense industry and strengthen domestic industries.