Early History
During the early 1960s, the South Korean government initiated 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 strategy for decreasing South Korea's trade deficit while strengthening local production. This was a plan that had already been used successfully y both Hong Kong and Taiwan, the Far East competitors of South Korea. Daewoo had a major part 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 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the large labor force of the nation, its primary asset. By concentrating on labour-intensive industries, like for example textile and clothing, the company yielded high earnings. The factory of the company within Pusan made 3.6 million shirts on a monthly basis. Moreover, the corporation manufactured basic manufacturing machines, that were also labour intensive. During this time, the corporation Daewoo helped to increase the level of exports of South Korea, which were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production began to decline, once the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, which forced the nation to focus on the industries of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from the year 1973 to nineteen eighty one. This occurred at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was meant to further the expansion of Korea's exports while simultaneously producing parts which had to be imported previously. Local parts manufacturing helped to strengthen domestic businesses and make possible a national defense industry.