Early History
The government of South Korea during the early part of the 1960s started a new economic plan which required big companies known as "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans that were designed to lessen the trade deficit the nation was experiencing while helping to bolster the country's production. This was a plan that had already been utilized successfully by the Far East competitors of South Korea, Hong Kong and Taiwan. The company Daewoo was a key player in this effort to boost the significance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing 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 corporation Daewoo took advantage of the nation's large labor force, its primary asset. By focusing on labour-intensive industries, such as clothing and textile, the company yielded high earnings. The company's factory in Pusan produced 3.6 million shirts each and every month. Also, the corporation made simple manufacturing machines, which were labour intensive too. During this time, the company Daewoo helped to boost South Korea's level of exports, which were growing nearly 40% per year.
Korea's comparative advantage in labor-intensive production started 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 focus on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of the country's economic recovery lasted from the year 1973 to 1981. This took place at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further the expansion of Korea's exports while at the same time producing components which had to be imported before. Domestic components production helped to strengthen domestic businesses and make possible a national defense industry.