Early History
In the early 1960s, the government of South Korea initiated a new economic plan 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 the trade deficit of South Korea while strengthening local production. This was a strategy which had already been successfully used by the Far East competitors of South Korea, Hong Kong and Taiwan. Daewoo had a significant part in this effort to improve the importance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was among these companies which benefited in 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the large workforce of the nation, its primary asset. By concentrating on labour-intensive industries, such as textile and clothing, the company yielded high earnings. The factory of the company in Pusan produced 3.6 million shirts each and every month. The corporation also manufactured basic manufacturing machines, which were labour intensive as well. Throughout this time, Daewoo helped to boost South Korea's level of exports, that were growing almost 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, that forced the country to focus on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to nineteen eighty one. This took place at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further the expansion of Korea's exports while at the same time making components that previously had to be imported. Local parts production helped to strengthen domestic businesses and make possible a national defense industry.