Early History
The government of South Korea during the early 1960s began a new economic plan which required huge corporations referred to as "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans which were designed to reduce the trade deficit the country was going through while helping to bolster the nation's production. This was a plan which had already been successfully used y both Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo had a major part in this effort to improve 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 among these companies that benefited during 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the large workforce of the country, its primary asset. By concentrating on labour-intensive businesses, like clothing and textile, the company yielded high profits. The factory of the corporation within Pusan made 3.6 million shirts each month. The company also made simple manufacturing machines, which were labour intensive as well. During this time, the company Daewoo helped to boost South Korea's level of exports, that were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production began to decline, when the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, which forced the nation to focus on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This happened at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was meant to further the expansion of Korea's exports while at the same time making parts that previously had to be imported. Local components production helped to strengthen domestic industries and make possible a national defense industry.