Early History
During the early 1960s, the South Korean government began 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 domestic production. This was a plan that had already been utilized successfully y both Taiwan and Hong Kong, South Korea's Far East competitors. The corporation Daewoo had a significant 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 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the large labor force of the nation, its primary asset. By focusing on labour-intensive industries, such as textile and clothing, the company generated high earnings. The company's factory within Pusan made 3.6 million shirts on a monthly basis. The corporation also manufactured basic manufacturing machines, that were labour intensive too. Throughout this time, the company Daewoo helped to boost the level of South Korea's exports, which were growing nearly 40 percent 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, which forced the country to concentrate on the industries of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This took place at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while at the same time manufacturing parts that previously had to be imported. Local parts production helped to strengthen domestic businesses and make possible a national defense industry.