Early History
The government of South Korea in the early part of the 1960s started a new economic plan which required large companies known as "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans that were intended to decrease the trade deficit the country was going through while helping to bolster the country's production. This was a plan which had already been employed successfully y both South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo had a key part in this effort to enhance the significance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was among these companies which benefited in 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 country, its primary asset. By focusing on labour-intensive industries, like textile and clothing, the business yielded high profits. The factory of the corporation in Pusan produced 3.6 million shirts each and every month. The company also made simple manufacturing equipment, which were also labour intensive. In this time, the company Daewoo helped to increase the level of exports of South Korea, which 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. Thailand and Malaysia became market competitors to South Korea, that forced the nation to concentrate on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of Korea's economic recovery lasted from 1973 to nineteen eighty one. This happened at the same time as the US announced its plans to totally 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 components that previously had to be imported. Domestic components production helped to make possible a national defense industry and strengthen domestic industries.