Early History
During the early part of the 1960s, the government of South Korea began a new economic strategy requiring the chaebols, or conglomerates, to focus on increasing production for export. A series of five year plans laid out the policy for decreasing South Korea's trade deficit while strengthening local production. This was a plan which had already been used successfully by South Korea's Far East competitors, Hong Kong and Taiwan. The corporation Daewoo was a key player in this effort to enhance the importance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing goods for export. Daewoo benefited from the loans when it began trading during the year 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the large labor force of the country, its primary asset. By focusing on labour-intensive businesses, like for instance textile and clothing, the business yielded high profits. The corporation's factory within Pusan made 3.6 million shirts each month. Furthermore, the corporation manufactured basic manufacturing machinery, which were labour intensive too. Throughout this time, the company Daewoo helped to increase the level of South Korea's exports, which were growing nearly 40% per year.
Once the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other industries, such as shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This specific phase of the nation's economic recovery lasted from 1973 to nineteen eighty one. This took place at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was intended to further expand Korea's exports while at the same time manufacturing components which previously had to be imported. Domestic parts production helped to make possible a national defense industry and strengthen domestic businesses.