Early History
During the early 1960s, the government of South Korea began a new economic strategy requiring the conglomerates, or chaebols, to focus 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 plan which had already been successfully used y both South Korea's Far East competitors, Hong Kong and Taiwan. Daewoo had a key part in this effort to boost the importance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was among these companies which benefited in 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the huge workforce of the nation, its primary asset. By concentrating on labour-intensive businesses, like textile and clothing, the company yielded high profits. The factory of the company in Pusan produced 3.6 million shirts on a monthly basis. The company also made basic manufacturing machinery, which were also labour intensive. In this time, the company Daewoo helped to increase South Korea's level of exports, which were growing almost 40 percent per year.
When 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 businesses, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This occurred at the same time as the US announced its plans 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 producing parts that previously had to be imported. Local parts manufacturing helped to make possible a national defense industry and strengthen domestic businesses.