Early History
The South Korean government during the early 1960s began a new economic plan which required huge companies referred to as "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans that were designed to lessen the trade deficit the country was going through while helping to bolster the nation's production. This was a plan which had already been used successfully y both South Korea's Far East competitors, Hong Kong and Taiwan. Daewoo was a major 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 government of South Korea sponsored cheap loans for chaebols. Daewoo was amongst these companies which benefited during the year 1967. This was at the start of the second five-year plan. Daewoo capitalized on the large workforce of the nation, its primary asset. By focusing on labour-intensive industries, such as textile and clothing, the company yielded high profits. The corporation's factory in Pusan made 3.6 million shirts each month. Furthermore, the corporation manufactured basic manufacturing machines, which were labour intensive too. Throughout this time, Daewoo helped to boost South Korea's level of exports, that were growing nearly 40 percent 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 the nation's economic recovery lasted from the year 1973 to 1981. This happened at the same time as the US announced its intentions to totally withdraw its peacekeeping forces from the nation. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously producing parts that previously had to be imported. Local components production helped to strengthen domestic businesses and make possible a national defense industry.