Early History
The South Korean government in the early part of the 1960s started a new economic plan that required huge businesses called "chaebols" to focus on producing exports. This new strategy called for a series of five year plans which were designed to reduce the trade deficit the nation was going through while helping to bolster the nation's production. This was a plan which had already been employed successfully by South Korea's Far East competitors, Hong Kong and Taiwan. The corporation Daewoo had a significant part in this effort to improve the significance 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 in the year 1967. This was at the start of the second five-year plan. The corporation Daewoo took advantage of the nation's huge workforce, its primary asset. By focusing on labour-intensive industries, such as textile and clothing, the business generated high earnings. The corporation's factory in Pusan produced 3.6 million shirts on a monthly basis. Moreover, the corporation manufactured basic manufacturing equipment, that were labour intensive too. During this time, the corporation 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 started to decline, when 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 shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular phase of the country's economic recovery lasted from the year 1973 to the year 1981. 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 manufacturing was intended to further expand Korea's exports while at the same time making components that had to be imported previously. Domestic parts production helped to strengthen domestic industries and make possible a national defense industry.