Early History
In the early 1960s, the government of South Korea began a new economic plan that requires the conglomerates, or chaebols, to concentrate 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 domestic production. This was a plan which had already been successfully used y both the Far East competitors of South Korea, Hong Kong and Taiwan. Daewoo was a major player in this effort to improve 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 amongst these companies that benefited during the year 1967. This was at the beginning of the second five-year plan. The company Daewoo capitalized on the large labor force of the country, its primary asset. By focusing on labour-intensive businesses, such as clothing and textile, the company yielded high profits. The corporation's factory within Pusan produced 3.6 million shirts on a monthly basis. Additionally, the corporation made basic manufacturing machines, which were also labour intensive. During this time, the company Daewoo helped to boost the level of South Korea's 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 Thailand and Malaysia forced Korea to refocus its energies on other industries, such as shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This particular phase of the nation's economic recovery lasted from the year 1973 to the year 1981. This took place at the same time as the United States announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further expand Korea's exports while at the same time manufacturing components which had to be imported before. Domestic parts production helped to make possible a national defense industry and strengthen domestic businesses.