Early History
During the early part of the 1960s, the government of South Korea began a new economic strategy that requires the conglomerates, or chaebols, to focus on increasing production for export. A series of five year plans laid out the strategy for decreasing South Korea's trade deficit while strengthening domestic production. This was a plan which had already been successfully used by the Far East competitors of South Korea, Hong Kong and Taiwan. Daewoo was a major player in this effort to enhance the importance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was amongst these businesses that benefited in the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the huge labor force of the country, its primary asset. By concentrating on labour-intensive businesses, like for example clothing and textile, the business yielded high earnings. The factory of the corporation in Pusan made 3.6 million shirts on a monthly basis. Furthermore, the company manufactured basic manufacturing machines, that were also labour intensive. During this time, Daewoo helped to increase the level of South Korea's exports, that were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production began 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 concentrate on the industries of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This specific phase of the nation's economic recovery lasted from 1973 to the year 1981. This took place at the same time as the United States announced its plans to completely 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 producing components that had to be imported previously. Domestic components manufacturing helped to strengthen domestic businesses and make possible a national defense industry.