Early History
In the early part of the 1960s, the government of South Korea 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 policy for decreasing South Korea's trade deficit while strengthening domestic production. This was a plan that had already been successfully used y both South Korea's Far East competitors, 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 which benefited in the year 1967. This was at the beginning of the second five-year plan. The company Daewoo capitalized on the large labor force of the nation, its primary asset. By concentrating on labour-intensive businesses, like for instance clothing and textile, the company generated high profits. The factory of the company within Pusan produced 3.6 million shirts each month. The corporation also made simple manufacturing equipment, which were labour intensive as well. In this time, Daewoo helped to increase South Korea's level of exports, that were growing nearly 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 industries, such as petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of Korea's economic recovery lasted from the year 1973 to nineteen eighty one. This happened at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously producing parts that previously had to be imported. Domestic components production helped to strengthen domestic businesses and make possible a national defense industry.