Early History
During the early 1960s, the South Korean government began a new economic plan requiring the chaebols, or conglomerates, to focus on increasing production for export. A series of five year plans laid out the strategy for decreasing the trade deficit of South Korea while strengthening domestic production. This was a strategy that had already been successfully utilized y both Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo had a key part in this effort to improve the significance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it began trading in 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the country's huge labor force, its primary asset. By concentrating on labour-intensive businesses, such as textile and clothing, the business yielded high earnings. The corporation's factory in Pusan made 3.6 million shirts every month. The corporation also manufactured simple manufacturing machinery, which were also labour intensive. In this time, Daewoo helped to increase South Korea's level of exports, that were growing nearly 40% per year.
Korea's comparative advantage in labor-intensive production began to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the country to focus on the businesses of shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This specific phase of the country's economic recovery lasted from 1973 to the year 1981. This took place 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 the expansion of Korea's exports while at the same time manufacturing parts which had to be imported before. Domestic components manufacturing helped to make possible a national defense industry and strengthen domestic businesses.