Early History
The government of South Korea in the early part of the 1960s began a new economic strategy which required huge companies known as "chaebols" to focus 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 experiencing while helping to bolster the country's production. This was a plan that had already been successfully utilized y both South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo was a key player in this effort to boost the importance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was amongst these companies which benefited in 1967. This was at the beginning of the second five-year plan. The corporation Daewoo capitalized on the large workforce of the nation, its primary asset. By focusing on labour-intensive industries, such as clothing and textile, the company generated high earnings. The company's factory within Pusan made 3.6 million shirts on a monthly basis. Furthermore, the company manufactured basic manufacturing equipment, which were also labour intensive. Throughout this time, Daewoo helped to boost the level of South Korea's exports, which were growing nearly 40% 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, that forced the nation to focus on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to 1981. This occurred at the same time as the United States announced its plans to totally 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 making components that previously had to be imported. Domestic components production helped to make possible a national defense industry and strengthen domestic businesses.