Early History
The South Korean government during the early part of the 1960s started a new economic plan that required large companies called "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans that were intended to reduce the trade deficit the nation was experiencing while helping to bolster the nation's production. This was a strategy that had already been successfully employed by the Far East competitors of South Korea, Hong Kong and Taiwan. The company Daewoo had a key part in this effort to enhance the importance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the government of South Korea 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 country's large workforce, its primary asset. By concentrating on labour-intensive businesses, such as textile and clothing, the company yielded high earnings. The factory of the corporation within Pusan made 3.6 million shirts on a monthly basis. In addition, the company made simple manufacturing machines, that were also labour intensive. Throughout this time, Daewoo helped to increase South Korea's level of exports, which were growing almost 40% per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This particular phase of Korea's economic recovery lasted from 1973 to 1981. This happened at the same time as the United States announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while at the same time manufacturing parts that previously had to be imported. Local parts production helped to strengthen domestic industries and make possible a national defense industry.