Early History
The South Korean government in the early 1960s started a new economic plan which required large companies known as "chaebols" to concentrate on producing exports. This new plan called for a series of five year plans that were intended to lessen the trade deficit the nation was going through while helping to bolster the country's production. This was a plan that had already been utilized successfully y both the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo was a major player in this effort to boost the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing goods 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. Daewoo capitalized on the country's huge labor force, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the business generated high profits. The corporation's factory in Pusan made 3.6 million shirts on a monthly basis. Furthermore, the company made basic manufacturing machinery, that were also labour intensive. During this time, the corporation Daewoo helped to increase South Korea's level of exports, that 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, that forced the nation to concentrate on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of the nation'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 the expansion of Korea's exports while at the same time making parts that had to be imported before. Domestic components manufacturing helped to strengthen domestic businesses and make possible a national defense industry.