Early History
The government of South Korea during the early 1960s started a new economic plan which required huge corporations known as "chaebols" to focus on producing exports. This new plan called for a series of five year plans that were designed to reduce the trade deficit the nation was going through while helping to bolster the nation's production. This was a strategy that had already been employed successfully by South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo was a key player in this effort to boost 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 1967. This was at the start of the second five-year plan. Daewoo took advantage of the country's large workforce, its primary asset. By concentrating on labour-intensive businesses, like clothing and textile, the company yielded high profits. The company's factory within Pusan produced 3.6 million shirts each and every month. Also, the corporation made simple manufacturing machinery, which were also labour intensive. Throughout this time, the corporation Daewoo helped to boost South Korea's level of exports, that were growing nearly 40 percent per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other businesses, such as petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of Korea's economic recovery lasted from the year 1973 to 1981. This occurred at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while simultaneously manufacturing parts that previously had to be imported. Domestic components production helped to make possible a national defense industry and strengthen domestic businesses.