Early History
The government of South Korea during the early part of the 1960s started a new economic strategy which required large businesses called "chaebols" to focus on manufacturing exports. This new plan called for a series of five year plans which were intended to decrease the trade deficit the nation was going through while helping to bolster the country's production. This was a plan which had already been successfully employed by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo had a major part in this effort to improve 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 amongst these companies that benefited in 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the large workforce of the nation, its primary asset. By focusing on labour-intensive industries, like clothing and textile, the business yielded high earnings. The factory of the corporation within Pusan produced 3.6 million shirts on a monthly basis. The corporation also made simple manufacturing equipment, which were labour intensive as well. During this time, Daewoo helped to boost the level of exports of South Korea, that were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, when the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, which forced the nation to concentrate on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of the country's economic recovery lasted from the year 1973 to the year 1981. This occurred at the same time as the US announced its plans to totally withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while simultaneously manufacturing components which had to be imported previously. Local components manufacturing helped to make possible a national defense industry and strengthen domestic businesses.