Early History
The government of South Korea during the early part of the 1960s started a new economic plan that required large businesses known as "chaebols" to focus on producing exports. This new plan called for a series of five year plans which were intended to lessen the trade deficit the country was going through while helping to bolster the country's production. This was a plan which had already been employed successfully by Hong Kong and Taiwan, South Korea's Far East competitors. The corporation Daewoo was a key player in this effort to boost the significance of South Korea's exports.
To assist 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 during 1967. This was at the start of the second five-year plan. Daewoo took advantage of the large workforce of the nation, its primary asset. By concentrating on labour-intensive businesses, like for example clothing and textile, the company yielded high earnings. The factory of the company within Pusan produced 3.6 million shirts each and every month. Also, the company manufactured basic manufacturing machinery, that were labour intensive as well. In this time, the company Daewoo helped to increase the level of South Korea's exports, which were growing nearly 40% 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 phase of the nation's economic recovery lasted from 1973 to 1981. This happened 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 expand Korea's exports while simultaneously producing components that previously had to be imported. Domestic components manufacturing helped to make possible a national defense industry and strengthen domestic businesses.