Early History
The South Korean government in the early part of the 1960s started a new economic strategy that required huge companies known as "chaebols" to focus on producing exports. This new strategy called for a series of five year plans which were intended to lessen the trade deficit the country was going through while helping to bolster the nation's production. This was a plan which had already been successfully utilized y both South Korea's Far East competitors, Taiwan and Hong Kong. The corporation Daewoo was a significant player in this effort to improve the importance 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 one of these companies that benefited in the year 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the nation's huge labor force, its primary asset. By concentrating on labour-intensive industries, like textile and clothing, the company yielded high profits. The factory of the corporation in Pusan made 3.6 million shirts every month. What's more, the corporation manufactured basic manufacturing equipment, which were labour intensive too. During this time, Daewoo helped to increase the level of exports of South Korea, that were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production started to decline, once the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, which forced the country to focus on the businesses of shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This happened at the same time as the US announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further expand Korea's exports while simultaneously producing components that had to be imported before. Local parts production helped to make possible a national defense industry and strengthen domestic businesses.