Early History
In the early 1960s, the South Korean government began a new economic plan requiring the conglomerates, or chaebols, to concentrate on increasing production for export. A series of five year plans laid out the strategy for decreasing the trade deficit of South Korea while strengthening local production. This was a strategy which had already been successfully utilized by South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo was a significant player in this effort to boost the significance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was among these companies that benefited during the year 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 businesses, such as clothing and textile, the company generated high profits. The corporation's factory within Pusan produced 3.6 million shirts each month. The company also manufactured basic manufacturing machinery, which were also labour intensive. In this time, Daewoo helped to increase the level of exports of South Korea, that were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production started to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the country to concentrate on the industries of shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This particular phase of the nation's economic recovery lasted from 1973 to the year 1981. This took place at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the nation. The new emphasis in production was meant to further expand Korea's exports while at the same time producing parts which previously had to be imported. Domestic components production helped to strengthen domestic industries and make possible a national defense industry.