Early History
During the early part of the 1960s, the South Korean government initiated a new economic strategy requiring the chaebols, or conglomerates, to concentrate 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 strategy which had already been successfully employed y both Hong Kong and Taiwan, the Far East competitors of South Korea. Daewoo was a key player in this effort to enhance the importance 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 one of these businesses which benefited in the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo capitalized on the nation's huge labor force, its primary asset. By concentrating on labour-intensive industries, like textile and clothing, the company yielded high earnings. The factory of the corporation in Pusan produced 3.6 million shirts on a monthly basis. What's more, the company made simple manufacturing machines, which were also labour intensive. During this time, Daewoo helped to boost South Korea's level of exports, that were growing nearly 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other businesses, like shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from the year 1973 to the year 1981. This occurred at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further expand Korea's exports while at the same time manufacturing components which previously had to be imported. Local parts production helped to make possible a national defense industry and strengthen domestic industries.