Early History
In the early 1960s, the South Korean government began a new economic plan that requires the chaebols, or conglomerates, 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 local production. This was a strategy which had already been employed successfully by Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo had a key 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 businesses which benefited in the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo capitalized on the country's huge labor force, its primary asset. By concentrating on labour-intensive industries, like for instance textile and clothing, the company generated high earnings. The corporation's factory in Pusan produced 3.6 million shirts each and every month. Also, the company manufactured simple manufacturing machines, which were labour intensive as well. Throughout this time, the company Daewoo helped to boost the level of exports of South Korea, 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 concentrate on the industries of shipbuilding, petrochemicals, 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 US announced its plans to totally withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further expand Korea's exports while simultaneously making parts that previously had to be imported. Local components production helped to make possible a national defense industry and strengthen domestic industries.