Early History
During 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 strategy for decreasing the trade deficit of South Korea while strengthening domestic production. This was a plan which had already been employed successfully by Hong Kong and Taiwan, 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 South Korean government sponsored cheap loans for chaebols manufacturing goods for export. Daewoo benefited from the loans when it began trading during 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the country's huge workforce, its primary asset. By focusing on labour-intensive industries, like for instance clothing and textile, the company yielded high profits. The factory of the company within Pusan produced 3.6 million shirts each and every month. Moreover, the corporation manufactured simple manufacturing machinery, that were labour intensive as well. During this time, the corporation Daewoo helped to boost South Korea's level of exports, which were growing almost 40 percent per year.
Korea's comparative advantage in labor-intensive production started to decline, when the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, that forced the nation to concentrate on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This particular phase of Korea's economic recovery lasted from 1973 to 1981. This happened at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while at the same time manufacturing components which previously had to be imported. Domestic parts production helped to make possible a national defense industry and strengthen domestic businesses.