Early History
During the early 1960s, the government of South Korea initiated a new economic strategy that requires the chaebols, or conglomerates, to focus 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 local 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 was a major player in this effort to boost the significance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was among these businesses that benefited during 1967. This was at the start of the second five-year plan. The corporation Daewoo took advantage of the huge workforce of the country, its primary asset. By focusing on labour-intensive industries, such as textile and clothing, the company yielded high profits. The company's factory within Pusan produced 3.6 million shirts each month. Furthermore, the company manufactured simple manufacturing machinery, that were labour intensive as well. During this time, the corporation Daewoo helped to increase South Korea's level of exports, which were growing almost 40 percent per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other businesses, such as shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This specific phase of the country's economic recovery lasted from the year 1973 to nineteen eighty one. This occurred at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the nation. The new emphasis in production was meant to further the expansion of Korea's exports while at the same time making components which had to be imported previously. Local components manufacturing helped to make possible a national defense industry and strengthen domestic industries.