Early History
During 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 policy for decreasing the trade deficit of South Korea while strengthening domestic production. This was a plan which had already been used successfully y both the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo was a significant player in this effort to improve the significance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols manufacturing goods for export. Daewoo benefited from the loans when it started trading during the year 1967. This was at the start of the second five-year plan. The company Daewoo capitalized on the nation's huge workforce, its primary asset. By focusing on labour-intensive industries, like for example textile and clothing, the business yielded high earnings. The factory of the corporation in Pusan produced 3.6 million shirts every month. The corporation also made simple manufacturing machines, that were labour intensive too. During this time, Daewoo helped to boost South Korea's level of exports, which were growing nearly 40% per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other businesses, such as shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to 1981. This occurred at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further expand Korea's exports while simultaneously making components that had to be imported before. Local components production helped to make possible a national defense industry and strengthen domestic industries.