Early History
The government of South Korea during the early part of the 1960s began a new economic plan which required big corporations referred to as "chaebols" to focus on producing exports. This new strategy called for a series of five year plans which were designed to reduce the trade deficit the country was experiencing while helping to bolster the nation's production. This was a strategy that had already been employed successfully y both Taiwan and Hong Kong, the Far East competitors of South Korea. Daewoo had a key part in this effort to enhance the significance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing goods for export. Daewoo benefited from the loans when it began trading during the year 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the nation's huge labor force, its primary asset. By concentrating on labour-intensive industries, like clothing and textile, the business generated high earnings. The factory of the corporation in Pusan produced 3.6 million shirts on a monthly basis. Additionally, the corporation manufactured simple manufacturing machinery, that were also labour intensive. During this time, Daewoo helped to boost South Korea's level of exports, that were growing nearly 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, when the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, which forced the country to focus on the industries of shipbuilding, petrochemicals, 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 production was meant to further expand Korea's exports while at the same time producing components which previously had to be imported. Local parts production helped to make possible a national defense industry and strengthen domestic businesses.