Early History
The government of South Korea in the early 1960s started a new economic strategy that required big companies called "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans that were intended to lessen the trade deficit the nation was going through while helping to bolster the nation's production. This was a plan which had already been successfully used y both South Korea's Far East competitors, Hong Kong and Taiwan. The company Daewoo was a significant player in this effort to improve the significance 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 in 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the country's large workforce, its primary asset. By focusing on labour-intensive businesses, like clothing and textile, the business generated high earnings. The corporation's factory in Pusan made 3.6 million shirts each and every month. Moreover, the company made basic manufacturing machinery, that were labour intensive too. In this time, Daewoo helped to increase South Korea's level of exports, that were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production began to decline, once the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, that forced the country to concentrate on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of the nation's economic recovery lasted from 1973 to nineteen eighty one. This occurred at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further expand Korea's exports while simultaneously manufacturing parts which had to be imported previously. Local components production helped to strengthen domestic businesses and make possible a national defense industry.