Early History
The government of South Korea during the early part of the 1960s began a new economic strategy which required big companies called "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans which were intended to lessen the trade deficit the nation was experiencing while helping to bolster the country's production. This was a plan which had already been successfully used by South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo had a major part in this effort to enhance the significance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing goods for export. Daewoo benefited from the loans when it began trading in the year 1967. This was at the start of the second five-year plan. Daewoo took advantage of the nation's large labor force, its primary asset. By focusing on labour-intensive industries, like for example clothing and textile, the company yielded high profits. The factory of the corporation within Pusan produced 3.6 million shirts on a monthly basis. Also, the corporation made simple manufacturing machines, which were also labour intensive. Throughout this time, Daewoo helped to boost South Korea's level of exports, which were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, once the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, which forced the country to focus on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to 1981. This happened at the same time as the US announced its plans to totally withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously manufacturing parts which had to be imported before. Local components production helped to make possible a national defense industry and strengthen domestic businesses.