Early History
In the early part of the 1960s, the South Korean government began a new economic plan that requires 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 domestic production. This was a strategy which had already been successfully used y both Taiwan and Hong Kong, 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 South Korean government sponsored cheap loans for chaebols. Daewoo was among these companies which benefited during 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the huge workforce of the nation, its primary asset. By concentrating on labour-intensive businesses, such as textile and clothing, the company yielded high earnings. The factory of the company in Pusan produced 3.6 million shirts each and every month. The company also made simple manufacturing equipment, which were also labour intensive. Throughout this time, the corporation Daewoo helped to boost South Korea's level of exports, that were growing almost 40 percent per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other industries, like shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This specific 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 intentions 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. Domestic components manufacturing helped to make possible a national defense industry and strengthen domestic industries.