Early History
In the early 1960s, the government of South Korea began 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 successfully employed y both Taiwan and Hong Kong, the Far East competitors of South Korea. The company 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 government of South Korea sponsored cheap loans for chaebols. Daewoo was among these companies which benefited in 1967. This was at the start of the second five-year plan. The corporation Daewoo took advantage of the huge workforce of the nation, its primary asset. By focusing on labour-intensive industries, like for instance textile and clothing, the business yielded high earnings. The factory of the corporation in Pusan produced 3.6 million shirts on a monthly basis. The corporation also made simple manufacturing machinery, that were labour intensive as well. During this time, Daewoo helped to increase South Korea's level of exports, that were growing nearly 40% per year.
Korea's comparative advantage in labor-intensive production started 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 focus on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to 1981. This occurred at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously making parts which previously had to be imported. Local components production helped to make possible a national defense industry and strengthen domestic industries.