Early History
In the early part of the 1960s, the South Korean government initiated a new economic plan requiring the conglomerates, or chaebols, to focus 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 employed by South Korea's Far East competitors, Hong Kong and Taiwan. The company Daewoo was a significant player in this effort to enhance the significance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was one of these businesses that benefited during 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the huge workforce of the nation, its primary asset. By concentrating on labour-intensive businesses, like for instance clothing and textile, the company generated high profits. The corporation's factory in Pusan made 3.6 million shirts on a monthly basis. The corporation also manufactured simple manufacturing machinery, which were labour intensive too. Throughout this time, the company 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. Malaysia and Thailand became market competitors to South Korea, which forced the country to focus on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from 1973 to 1981. This took place at the same time as the US announced its plans to totally withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously producing components which had to be imported previously. Local components manufacturing helped to make possible a national defense industry and strengthen domestic industries.