Early History
In the early part of the 1960s, the government of South Korea initiated a new economic plan that requires the conglomerates, or chaebols, to focus on increasing production for export. A series of five year plans laid out the policy for decreasing the trade deficit of South Korea while strengthening local production. This was a plan that had already been successfully used y both the Far East competitors of South Korea, Hong Kong and Taiwan. The corporation Daewoo had a significant part in this effort to boost the significance of South Korea's exports.
To assist 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 the year 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the nation's large workforce, its primary asset. By focusing on labour-intensive industries, like textile and clothing, the company yielded high earnings. The factory of the corporation within Pusan made 3.6 million shirts every month. The corporation also made basic manufacturing machinery, which were labour intensive too. During this time, the corporation Daewoo helped to boost South Korea's level of exports, which were growing almost 40 percent per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other businesses, like shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of the nation's economic recovery lasted from the year 1973 to nineteen eighty one. This occurred at the same time as the US announced its plans 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 at the same time producing components that previously had to be imported. Local components manufacturing helped to make possible a national defense industry and strengthen domestic businesses.