Early History
The South Korean government during the early 1960s began a new economic strategy that required large companies referred to as "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans which were designed to reduce the trade deficit the country was experiencing while helping to bolster the nation's production. This was a plan that had already been used successfully y both South Korea's Far East competitors, Taiwan and Hong Kong. The corporation Daewoo had a significant part in this effort to enhance the importance 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 amongst these companies that benefited during 1967. This was at the start of the second five-year plan. The corporation Daewoo capitalized on the huge workforce of the nation, its primary asset. By focusing on labour-intensive businesses, like for instance clothing and textile, the company generated high profits. The factory of the company in Pusan made 3.6 million shirts on a monthly basis. The company also made simple manufacturing machines, which were also labour intensive. In this time, Daewoo helped to boost South Korea's level of exports, which were growing nearly 40 percent per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, such as shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This happened at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was intended to further expand Korea's exports while at the same time making components which previously had to be imported. Local parts manufacturing helped to make possible a national defense industry and strengthen domestic businesses.