Early History
During the early 1960s, the government of South Korea started a new economic plan requiring the chaebols, or conglomerates, to concentrate on increasing production for export. A series of five year plans laid out the policy for decreasing South Korea's trade deficit while strengthening local production. This was a strategy which had already been successfully used by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo had a major part in this effort to boost the significance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was among these businesses which benefited during the year 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the nation's large workforce, its primary asset. By concentrating on labour-intensive businesses, like for example textile and clothing, the business generated high profits. The company's factory within Pusan made 3.6 million shirts on a monthly basis. The company also manufactured basic manufacturing machines, that were labour intensive too. During this time, the corporation Daewoo helped to boost South Korea's level of exports, which were growing almost 40% per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other businesses, like shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to nineteen eighty one. This occurred at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further expand Korea's exports while simultaneously manufacturing parts that had to be imported before. Local components manufacturing helped to make possible a national defense industry and strengthen domestic industries.