Early History
The government of South Korea in the early 1960s began 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 designed to reduce the trade deficit the country was going through while helping to bolster the nation's production. This was a plan that had already been utilized successfully by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo had a major part in this effort to boost the significance 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 amongst these companies which benefited during 1967. This was at the start of the second five-year plan. The company Daewoo took advantage of the nation's huge labor force, its primary asset. By concentrating on labour-intensive businesses, like for example clothing and textile, the company generated high profits. The company's factory in Pusan produced 3.6 million shirts on a monthly basis. The company also made basic manufacturing equipment, that were labour intensive as well. During this time, the corporation Daewoo helped to boost South Korea's level of exports, which were growing almost 40 percent per year.
Once the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of the country'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 completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while at the same time making parts which previously had to be imported. Domestic parts production helped to make possible a national defense industry and strengthen domestic businesses.