Early History
The government of South Korea in the early 1960s started a new economic plan that required large businesses known as "chaebols" to concentrate on producing exports. This new plan called for a series of five year plans which were intended to lessen the trade deficit the nation was going through while helping to bolster the nation's production. This was a strategy that had already been successfully utilized by Hong Kong and Taiwan, South Korea's Far East competitors. The company Daewoo had a key part in this effort to enhance the importance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing products for export. Daewoo benefited from the loans when it began trading during the year 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the nation's huge workforce, its primary asset. By focusing on labour-intensive industries, like for example textile and clothing, the business yielded high earnings. The factory of the corporation in Pusan made 3.6 million shirts each and every month. The corporation also manufactured simple manufacturing equipment, that were labour intensive too. Throughout this time, the company Daewoo helped to boost the level of exports of South Korea, 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. Thailand and Malaysia became market competitors to South Korea, which forced the country to focus on the industries of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to the year 1981. This took place at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further the expansion of Korea's exports while at the same time producing parts that had to be imported before. Local parts production helped to strengthen domestic businesses and make possible a national defense industry.