Early History
During the early 1960s, the government of South Korea initiated a new economic strategy requiring the chaebols, or conglomerates, 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 which had already been successfully utilized by Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo had a key part in this effort to improve the importance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing products for export. Daewoo benefited from the loans when it began trading during 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the nation's large labor force, its primary asset. By concentrating on labour-intensive industries, like for example clothing and textile, the business generated high profits. The factory of the corporation in Pusan made 3.6 million shirts each and every month. Additionally, the corporation manufactured basic manufacturing machinery, which were also labour intensive. Throughout this time, the company Daewoo helped to boost South Korea's level of exports, that were growing almost 40 percent per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, like shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to 1981. This took place 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 meant to further expand Korea's exports while at the same time manufacturing parts which had to be imported previously. Domestic components production helped to make possible a national defense industry and strengthen domestic businesses.