Early History
The government of South Korea during the early part of the 1960s started a new economic strategy which required large businesses called "chaebols" to focus on manufacturing exports. This new plan called for a series of five year plans which were designed to reduce the trade deficit the nation was experiencing while helping to bolster the nation's production. This was a strategy which had already been successfully used by Taiwan and Hong Kong, South Korea's Far East competitors. Daewoo had a significant part in this effort to enhance 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 that benefited in 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the large workforce of the country, its primary asset. By focusing on labour-intensive industries, like for example textile and clothing, the company generated high earnings. The company's factory in Pusan made 3.6 million shirts on a monthly basis. In addition, the company manufactured basic manufacturing machinery, which were also labour intensive. In this time, the corporation Daewoo helped to increase the level of South Korea's exports, that were growing almost 40 percent per year.
Korea's comparative advantage in labor-intensive production started to decline, when 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 industries of shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from the year 1973 to the year 1981. 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 expand Korea's exports while at the same time making components that had to be imported before. Local components production helped to make possible a national defense industry and strengthen domestic industries.