Early History
During the early part of the 1960s, the government of South Korea began a new economic plan requiring the conglomerates, or chaebols, to concentrate 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 that had already been successfully used y both the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo had a major part in this effort to enhance the significance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was amongst these businesses that benefited during the year 1967. This was at the start of the second five-year plan. The company Daewoo took advantage of the large workforce of the nation, its primary asset. By focusing on labour-intensive industries, like for instance clothing and textile, the business yielded high earnings. The corporation's factory in Pusan produced 3.6 million shirts on a monthly basis. Additionally, the corporation made basic manufacturing equipment, that were labour intensive as well. Throughout this time, Daewoo helped to boost South Korea's level of exports, that were growing almost 40% per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other businesses, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of Korea's economic recovery lasted from the year 1973 to 1981. This took place at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the nation. The new emphasis in production was meant to further the expansion of Korea's exports while simultaneously manufacturing components that had to be imported before. Domestic components production helped to strengthen domestic industries and make possible a national defense industry.