Early History
The South Korean government in the early 1960s started a new economic strategy which required large companies called "chaebols" to focus on producing exports. This new plan called for a series of five year plans which were intended to decrease the trade deficit the nation was experiencing while helping to bolster the nation's production. This was a plan which had already been successfully used by Hong Kong and Taiwan, South Korea's Far East competitors. 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 one of these companies that benefited in the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the nation's huge labor force, its primary asset. By concentrating on labour-intensive businesses, such as textile and clothing, the company generated high profits. The corporation's factory within Pusan produced 3.6 million shirts on a monthly basis. The company also made simple manufacturing machines, which were also labour intensive. During this time, the company Daewoo helped to boost South Korea's level of exports, that were growing nearly 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other businesses, such as shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to nineteen eighty one. This happened at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further the expansion of Korea's exports while at the same time producing parts which had to be imported before. Local parts production helped to make possible a national defense industry and strengthen domestic industries.