Early History
During the early part of the 1960s, the government of South Korea initiated a new economic strategy that requires the chaebols, or conglomerates, to focus 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 plan which had already been utilized successfully y both Taiwan and Hong Kong, South Korea's Far East competitors. Daewoo had a major part in this effort to boost the significance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was among these businesses that benefited during the year 1967. This was at the start of the second five-year plan. The corporation Daewoo capitalized on the country's huge workforce, its primary asset. By concentrating on labour-intensive industries, like clothing and textile, the company yielded high earnings. The corporation's factory within Pusan made 3.6 million shirts every month. The corporation also manufactured basic manufacturing equipment, that were also labour intensive. In this time, Daewoo helped to increase the level of exports of South Korea, which were growing nearly 40% per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other industries, like petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from the year 1973 to 1981. This took place at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously making parts which previously had to be imported. Domestic components manufacturing helped to make possible a national defense industry and strengthen domestic businesses.