Early History
The government of South Korea during the early 1960s began a new economic strategy that required big businesses known as "chaebols" to focus on manufacturing exports. This new plan called for a series of five year plans which were intended to reduce the trade deficit the nation was experiencing while helping to bolster the country's production. This was a plan that had already been used successfully by South Korea's Far East competitors, Hong Kong and Taiwan. The corporation Daewoo was a major player in this effort to improve the significance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was one of these businesses that benefited in the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the large labor force of the nation, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the business generated high earnings. The corporation's factory within Pusan made 3.6 million shirts on a monthly basis. In addition, the company manufactured basic manufacturing equipment, that were also labour intensive. Throughout this time, the corporation Daewoo helped to increase South Korea's level of exports, which were growing almost 40% per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other businesses, like shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular phase of Korea'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 intended to further expand Korea's exports while simultaneously making components that previously had to be imported. Local components manufacturing helped to strengthen domestic businesses and make possible a national defense industry.