Early History
During the early 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 strategy for decreasing the trade deficit of South Korea while strengthening domestic production. This was a strategy which had already been used successfully y both Hong Kong and Taiwan, the Far East competitors of South Korea. The corporation Daewoo had a major part in this effort to boost the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it began trading in the year 1967. This was at the start of the second five-year plan. The corporation Daewoo capitalized on the nation's large labor force, its primary asset. By focusing on labour-intensive industries, such as clothing and textile, the company yielded high profits. The factory of the company in Pusan made 3.6 million shirts every month. The corporation also made basic manufacturing machinery, that were labour intensive too. In this time, the company Daewoo helped to boost South Korea's level of exports, that were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, when the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the nation to focus on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of Korea'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 nation. The new emphasis in production was meant to further expand Korea's exports while at the same time producing parts that had to be imported before. Local components production helped to strengthen domestic industries and make possible a national defense industry.