Early History
During the early part of the 1960s, the South Korean government began a new economic strategy requiring the chaebols, or conglomerates, to focus on increasing production for export. A series of five year plans laid out the strategy for decreasing the trade deficit of South Korea while strengthening domestic production. This was a plan that had already been utilized successfully y both the Far East competitors of South Korea, Taiwan and Hong Kong. The company Daewoo had a major part 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 among these companies that benefited during 1967. This was at the beginning of the second five-year plan. The company Daewoo capitalized on the country's huge workforce, its primary asset. By concentrating on labour-intensive industries, like clothing and textile, the company yielded high profits. The factory of the corporation within Pusan made 3.6 million shirts each month. The company also manufactured simple manufacturing machines, which were also labour intensive. Throughout this time, the company Daewoo helped to increase the level of South Korea's exports, which were growing nearly 40 percent per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of the nation's economic recovery lasted from the year 1973 to 1981. This took place at the same time as the US announced its intentions to totally withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while simultaneously making parts which had to be imported before. Domestic parts manufacturing helped to make possible a national defense industry and strengthen domestic industries.