Early History
The government of South Korea during the early part of the 1960s started a new economic plan which required large companies called "chaebols" to focus on manufacturing exports. This new strategy called for a series of five year plans which were intended to reduce the trade deficit the nation was experiencing while helping to bolster the nation's production. This was a plan which had already been used successfully by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo was a key player in this effort to improve the importance of South Korea's exports.
To assist 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 beginning of the second five-year plan. Daewoo took advantage of the huge labor force of the country, its primary asset. By concentrating on labour-intensive industries, like for example clothing and textile, the company generated high profits. The company's factory within Pusan made 3.6 million shirts on a monthly basis. The corporation also made basic manufacturing equipment, that were also labour intensive. Throughout this time, Daewoo helped to increase South Korea's level of exports, that were growing nearly 40% per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other businesses, such as petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of Korea's economic recovery lasted from 1973 to nineteen eighty one. This happened at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further expand Korea's exports while simultaneously making parts which previously had to be imported. Local components production helped to make possible a national defense industry and strengthen domestic industries.