Early History
The South Korean government during the early part of the 1960s started a new economic plan which required large companies known as "chaebols" to concentrate on producing exports. This new plan called for a series of five year plans which were designed to lessen the trade deficit the nation was going through while helping to bolster the country's production. This was a strategy that had already been used successfully by South Korea's Far East competitors, Hong Kong and Taiwan. Daewoo had a key part in this effort to boost the importance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was amongst these companies which benefited during the year 1967. This was at the start of the second five-year plan. The corporation Daewoo capitalized on the large labor force of the country, its primary asset. By focusing on labour-intensive businesses, such as clothing and textile, the company yielded high profits. The company's factory within Pusan made 3.6 million shirts on a monthly basis. The corporation also made basic manufacturing machines, that were also labour intensive. In this time, the corporation 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 Thailand and Malaysia forced Korea to refocus its energies on other industries, like shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from 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 nation. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously producing parts which had to be imported before. Domestic parts manufacturing helped to make possible a national defense industry and strengthen domestic businesses.