Early History
In the early 1960s, the South Korean government initiated a new economic strategy 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 South Korea's trade deficit while strengthening local production. This was a plan which had already been utilized successfully by the Far East competitors of South Korea, Taiwan and Hong Kong. The corporation Daewoo had a significant part in this effort to enhance 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 in 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the country's large labor force, its primary asset. By concentrating on labour-intensive industries, like textile and clothing, the company generated high earnings. The factory of the corporation in Pusan produced 3.6 million shirts each and every month. In addition, the company made basic manufacturing equipment, that were also labour intensive. In this time, the corporation Daewoo helped to boost the level of exports of South Korea, that were growing nearly 40% per year.
Korea's comparative advantage in labor-intensive production began to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the nation to concentrate on the businesses of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to 1981. This occurred at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further expand Korea's exports while simultaneously producing parts which previously had to be imported. Local components manufacturing helped to strengthen domestic businesses and make possible a national defense industry.