Early History
During the early part of the 1960s, the government of South Korea started 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 policy for decreasing South Korea's trade deficit while strengthening local production. This was a plan that had already been utilized successfully y both Hong Kong and Taiwan, the Far East competitors of South Korea. Daewoo was a key player in this effort to boost 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 among these companies which benefited in 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the huge workforce of the country, its primary asset. By concentrating on labour-intensive industries, like clothing and textile, the business generated high profits. The corporation's factory in Pusan produced 3.6 million shirts on a monthly basis. In addition, the company manufactured simple manufacturing machinery, which were labour intensive as well. During this time, the corporation Daewoo helped to boost South Korea's level of exports, which were growing almost 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other industries, like shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of the nation'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 totally 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 making parts which previously had to be imported. Local components production helped to make possible a national defense industry and strengthen domestic industries.