Early History
During the early 1960s, the government of South Korea began a new economic plan that requires the conglomerates, or chaebols, to concentrate on increasing production for export. A series of five year plans laid out the policy for decreasing the trade deficit of South Korea while strengthening local production. This was a strategy that had already been successfully used by Taiwan and Hong Kong, the Far East competitors of South Korea. The corporation Daewoo had a major part in this effort to enhance the significance of South Korea's exports.
To help 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 in the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the nation's large workforce, its primary asset. By focusing on labour-intensive businesses, such as clothing and textile, the company yielded high earnings. The factory of the company in Pusan produced 3.6 million shirts every month. Also, the corporation manufactured basic manufacturing equipment, which were labour intensive as well. Throughout this time, the company 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 began to decline, when the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, which forced the nation to focus on the businesses of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of Korea's economic recovery lasted from the year 1973 to nineteen eighty one. This occurred at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further expand Korea's exports while at the same time making parts that previously had to be imported. Local components manufacturing helped to strengthen domestic industries and make possible a national defense industry.