Early History
The South Korean government in the early 1960s started a new economic plan that required big companies known as "chaebols" to focus on producing exports. This new plan called for a series of five year plans that were intended to decrease the trade deficit the nation was going through while helping to bolster the country's 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 had a significant part in this effort to boost the importance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it started trading during 1967. This was at the start of the second five-year plan. Daewoo took advantage of the huge workforce of the nation, its primary asset. By focusing on labour-intensive businesses, like for instance clothing and textile, the business yielded high profits. The corporation's factory in Pusan made 3.6 million shirts each and every month. In addition, the corporation manufactured simple manufacturing equipment, which were also labour intensive. In this time, Daewoo helped to increase the level of South Korea's exports, which were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, once the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, which forced the nation to concentrate on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from the year 1973 to nineteen eighty one. This took place 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 simultaneously making components which previously had to be imported. Local parts production helped to strengthen domestic industries and make possible a national defense industry.