Early History
The South Korean government in the early 1960s began a new economic strategy which required big businesses referred to as "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans which were intended to reduce the trade deficit the country was experiencing while helping to bolster the country's production. This was a strategy that had already been employed successfully y both Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo had a significant part in this effort to boost the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it began trading during 1967. This was at the start of the second five-year plan. The corporation Daewoo capitalized on the huge workforce of the nation, its primary asset. By concentrating on labour-intensive industries, like for example textile and clothing, the business generated high earnings. The company's factory within Pusan produced 3.6 million shirts each month. The company also manufactured basic manufacturing equipment, which were also labour intensive. In this time, the company Daewoo helped to increase the level of exports of South Korea, that were growing nearly 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the country to concentrate on the businesses of shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of Korea's economic recovery lasted from the year 1973 to 1981. This took place at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further expand Korea's exports while simultaneously manufacturing components that had to be imported previously. Domestic parts manufacturing helped to strengthen domestic businesses and make possible a national defense industry.