Early History
During the early 1960s, the government of South Korea started a new economic plan requiring the conglomerates, or chaebols, 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 local production. This was a plan that had already been successfully used by South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo was a major player in this effort to enhance 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 one of these companies which benefited during the year 1967. This was at the start of the second five-year plan. The corporation Daewoo capitalized on the large labor force of the nation, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the company yielded high earnings. The corporation's factory in Pusan produced 3.6 million shirts on a monthly basis. Additionally, the company manufactured simple manufacturing machinery, that were labour intensive as well. During this time, the company Daewoo helped to boost South Korea's level of exports, that 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, that forced the nation to concentrate on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from 1973 to 1981. This took place at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further the expansion of Korea's exports while at the same time making components which previously had to be imported. Local components manufacturing helped to make possible a national defense industry and strengthen domestic businesses.