Early History
In the early part of the 1960s, the South Korean government started a new economic plan that requires the chaebols, or conglomerates, to concentrate on increasing production for export. A series of five year plans laid out the policy for decreasing the trade deficit of South Korea while strengthening local production. This was a strategy that had already been utilized successfully y both Hong Kong and Taiwan, South Korea's Far East competitors. The corporation Daewoo was a key player in this effort to enhance 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 businesses that benefited during 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the nation's huge labor force, its primary asset. By focusing on labour-intensive businesses, like clothing and textile, the company generated high earnings. The factory of the company within Pusan produced 3.6 million shirts on a monthly basis. What's more, the corporation manufactured simple manufacturing machines, which were also labour intensive. Throughout this time, the corporation Daewoo helped to boost the level of South Korea's exports, that were growing nearly 40% per year.
Once the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from the year 1973 to the year 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 production was meant to further the expansion of Korea's exports while simultaneously making parts which had to be imported previously. Local components manufacturing helped to make possible a national defense industry and strengthen domestic businesses.