Early History
The government of South Korea in the early part of the 1960s began a new economic strategy that required big businesses known as "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans that were designed to decrease the trade deficit the nation was going through while helping to bolster the nation's production. This was a plan that had already been successfully utilized by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo was a major player in this effort to enhance the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it began trading during 1967. This was at the start of the second five-year plan. The corporation Daewoo capitalized on the country's large workforce, its primary asset. By focusing on labour-intensive businesses, like for example clothing and textile, the business generated high profits. The corporation's factory in Pusan produced 3.6 million shirts on a monthly basis. The company also manufactured basic manufacturing machinery, that were also labour intensive. During this time, Daewoo helped to boost South Korea's level of exports, which were growing nearly 40 percent per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, like petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from the year 1973 to the year 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 expand Korea's exports while simultaneously producing components that previously had to be imported. Domestic parts production helped to make possible a national defense industry and strengthen domestic industries.