Early History
During the early part of the 1960s, the government of South Korea 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 South Korea's trade deficit while strengthening local production. This was a plan that had already been utilized successfully by 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.
To help the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was one of these companies which benefited during 1967. This was at the start of the second five-year plan. Daewoo capitalized on the large workforce of the country, its primary asset. By concentrating on labour-intensive industries, like for instance textile and clothing, the company yielded high earnings. The factory of the corporation within Pusan produced 3.6 million shirts each and every month. In addition, the corporation manufactured basic manufacturing equipment, that were also labour intensive. In this time, the company Daewoo helped to increase the level of exports of South Korea, which were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production began to decline, once the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, that forced the country to focus on the businesses of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of the country's economic recovery lasted from 1973 to 1981. This happened at the same time as the US announced its intentions 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 manufacturing parts which previously had to be imported. Domestic components manufacturing helped to strengthen domestic businesses and make possible a national defense industry.