Early History
The government of South Korea in the early 1960s started a new economic plan which required huge companies known as "chaebols" to focus on manufacturing exports. This new strategy called for a series of five year plans which were intended to lessen the trade deficit the country was experiencing while helping to bolster the country's production. This was a strategy which had already been used successfully y both South Korea's Far East competitors, Taiwan and Hong Kong. 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 started trading during the year 1967. This was at the start of the second five-year plan. The corporation 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 business generated high profits. The factory of the corporation within Pusan produced 3.6 million shirts on a monthly basis. The corporation also made basic manufacturing equipment, which were labour intensive too. In this time, the company Daewoo helped to boost the level of exports of South Korea, that were growing almost 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other businesses, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to the year 1981. This occurred at the same time as the US announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further expand Korea's exports while simultaneously manufacturing components which previously had to be imported. Domestic parts production helped to make possible a national defense industry and strengthen domestic businesses.