Early History
The government of South Korea during the early part of the 1960s began a new economic strategy which required big businesses known as "chaebols" to focus on manufacturing exports. This new plan called for a series of five year plans which were intended to lessen the trade deficit the nation was experiencing while helping to bolster the country's production. This was a strategy which had already been utilized successfully by South Korea's Far East competitors, Hong Kong and Taiwan. Daewoo was a key player in this effort to improve the significance 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 among these companies which benefited in 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the large workforce of the nation, its primary asset. By focusing on labour-intensive industries, such as textile and clothing, the business yielded high earnings. The company's factory within Pusan made 3.6 million shirts every month. The company also made basic manufacturing machinery, which were labour intensive too. In this time, Daewoo helped to increase the level of exports of South Korea, that were growing almost 40% per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other businesses, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This 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 nation. The new emphasis in production was intended to further the expansion of Korea's exports while at the same time manufacturing parts that had to be imported before. Local parts production helped to make possible a national defense industry and strengthen domestic businesses.