Early History
The government of South Korea in the early 1960s began a new economic plan which required huge businesses referred to as "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans which were intended to reduce the trade deficit the country was experiencing while helping to bolster the nation's production. This was a strategy which had already been used successfully y both South Korea's Far East competitors, Hong Kong and Taiwan. Daewoo had a key part in this effort to enhance the importance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing products 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 corporation Daewoo took advantage of the large labor force of the country, its primary asset. By concentrating on labour-intensive industries, like for example textile and clothing, the company yielded high earnings. The factory of the corporation in Pusan made 3.6 million shirts each and every month. In addition, the corporation made simple manufacturing equipment, that were labour intensive too. During this time, Daewoo helped to increase South Korea's level of exports, that were growing nearly 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 both Thailand and Malaysia forced Korea to refocus its energies on other industries, such as shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of the country's economic recovery lasted from 1973 to 1981. This occurred at the same time as the United States announced its plans to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further expand Korea's exports while simultaneously making components that had to be imported previously. Domestic components manufacturing helped to make possible a national defense industry and strengthen domestic industries.