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 focus on producing exports. This new strategy called for a series of five year plans which were designed to decrease the trade deficit the country was going through while helping to bolster the country's production. This was a strategy which had already been used successfully by South Korea's Far East competitors, Hong Kong and Taiwan. Daewoo had a key part in this effort to boost 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 amongst these businesses that benefited during the year 1967. This was at the start of the second five-year plan. Daewoo capitalized on the nation's huge labor force, its primary asset. By concentrating on labour-intensive businesses, like textile and clothing, the company yielded high earnings. The company's factory in Pusan produced 3.6 million shirts on a monthly basis. The corporation also manufactured basic manufacturing machinery, that were also labour intensive. During this time, Daewoo helped to increase the level of exports of South Korea, which were growing almost 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, which forced the country to concentrate on the industries of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This took place at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously producing components which previously had to be imported. Local components manufacturing helped to make possible a national defense industry and strengthen domestic industries.