Early History
The government of South Korea during the early part of the 1960s started a new economic plan which required large companies called "chaebols" to concentrate on producing exports. This new strategy called for a series of five year plans that were intended to reduce the trade deficit the nation was experiencing while helping to bolster the nation's production. This was a plan that had already been used successfully by Taiwan and Hong Kong, the Far East competitors of South Korea. The corporation Daewoo had a major part in this effort to boost the importance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was among these businesses that benefited during the year 1967. This was at the start of the second five-year plan. The company Daewoo took advantage of the huge workforce of the nation, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the company generated high earnings. The company's factory in Pusan made 3.6 million shirts each and every month. The company also made simple manufacturing machines, that were labour intensive too. Throughout this time, the corporation Daewoo helped to increase South Korea's level of exports, that were growing almost 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 malasya and Thailand forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from the year 1973 to nineteen eighty one. This occurred at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further expand Korea's exports while at the same time making parts that had to be imported previously. Local parts production helped to strengthen domestic industries and make possible a national defense industry.