Early History
During the early part of the 1960s, the government of South Korea initiated a new economic plan requiring 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 strategy which had already been successfully employed y both Hong Kong and Taiwan, the Far East competitors of South Korea. The corporation Daewoo had a key part in this effort to enhance the importance 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 businesses that benefited in 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the large workforce of the nation, its primary asset. By concentrating on labour-intensive industries, such as clothing and textile, the business yielded high profits. The company's factory in Pusan produced 3.6 million shirts each month. Additionally, the corporation manufactured basic manufacturing machines, which were also labour intensive. Throughout this time, Daewoo helped to boost South Korea's level of exports, which were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production began to decline, when 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 industries of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of the nation's economic recovery lasted from the year 1973 to nineteen eighty one. This happened 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 expand Korea's exports while at the same time producing parts that previously had to be imported. Domestic parts manufacturing helped to make possible a national defense industry and strengthen domestic industries.