Early History
The government of South Korea in the early 1960s began a new economic strategy which required large companies called "chaebols" to focus on manufacturing exports. This new strategy called for a series of five year plans that were intended to reduce the trade deficit the nation was experiencing while helping to bolster the nation's production. This was a plan that had already been successfully employed y both Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo had a key part in this effort to improve the significance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing 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 company Daewoo capitalized on the country's large workforce, its primary asset. By concentrating on labour-intensive businesses, like textile and clothing, the business yielded high profits. The company's factory in Pusan made 3.6 million shirts every month. In addition, the company made simple manufacturing machines, that were also labour intensive. Throughout this time, Daewoo helped to boost South Korea's level of exports, 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 country to concentrate on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of the country's economic recovery lasted from 1973 to 1981. This happened at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously making components which previously had to be imported. Domestic components manufacturing helped to strengthen domestic industries and make possible a national defense industry.