Early History
The South Korean government during the early 1960s began a new economic strategy which required large companies known as "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans that were designed to reduce the trade deficit the nation was going through while helping to bolster the nation's production. This was a plan which had already been successfully utilized by Taiwan and Hong Kong, the Far East competitors of South Korea. The corporation Daewoo had a major 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 one of these businesses which benefited during the year 1967. This was at the start of the second five-year plan. The corporation Daewoo capitalized on the large labor force of the country, its primary asset. By focusing on labour-intensive businesses, like textile and clothing, the business yielded high profits. The factory of the company within Pusan produced 3.6 million shirts each and every month. The company also manufactured basic manufacturing machines, which were labour intensive as well. Throughout this time, Daewoo helped to increase 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 Thailand and Malaysia forced Korea to refocus its energies on other industries, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This took place at the same time as the United States announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while at the same time making components which had to be imported previously. Local components production helped to make possible a national defense industry and strengthen domestic industries.