Early History
During the early 1960s, the South Korean government began a new economic plan that requires the chaebols, or conglomerates, to concentrate on increasing production for export. A series of five year plans laid out the strategy for decreasing South Korea's trade deficit while strengthening domestic production. This was a plan that had already been successfully employed y both Taiwan and Hong Kong, the Far East competitors of South Korea. 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 South Korean government sponsored cheap loans for chaebols. Daewoo was amongst these businesses which benefited during the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the large workforce of the country, its primary asset. By focusing on labour-intensive businesses, such as clothing and textile, the company yielded high profits. The factory of the company in Pusan produced 3.6 million shirts every month. Furthermore, the corporation made simple manufacturing equipment, which were also labour intensive. Throughout this time, the corporation Daewoo helped to increase South Korea's level of exports, which 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 nation to concentrate on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This particular phase of the nation's economic recovery lasted from the year 1973 to 1981. This happened at the same time as the US announced its plans 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 which previously had to be imported. Domestic parts manufacturing helped to make possible a national defense industry and strengthen domestic industries.