Early History
The South Korean government in the early part of the 1960s started a new economic plan that required huge corporations known as "chaebols" to concentrate on producing exports. This new strategy called for a series of five year plans which were designed to reduce 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 y both the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo was a significant player in this effort to boost the significance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was amongst these businesses that benefited during 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the large workforce of the country, its primary asset. By concentrating on labour-intensive industries, like for instance textile and clothing, the business yielded high earnings. The corporation's factory in Pusan made 3.6 million shirts each month. The corporation also manufactured basic manufacturing machines, that were also labour intensive. During this time, Daewoo helped to boost South Korea's level of exports, that were growing nearly 40 percent per year.
Once the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other industries, such as shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to nineteen eighty one. This occurred at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further the expansion of Korea's exports while at the same time manufacturing components that had to be imported previously. Local parts production helped to make possible a national defense industry and strengthen domestic industries.