Early History
During the early part of the 1960s, the South Korean government started a new economic plan that requires the chaebols, or conglomerates, 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 strategy which had already been successfully used by Taiwan and Hong Kong, South Korea's Far East competitors. Daewoo was a key player in this effort to improve 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 in the year 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the large labor force of the nation, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the business yielded high profits. The corporation's factory in Pusan produced 3.6 million shirts on a monthly basis. The company also manufactured basic manufacturing machines, which were labour intensive as well. Throughout this time, the corporation Daewoo helped to increase the level of South Korea's exports, which were growing almost 40% per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of the country's economic recovery lasted from the year 1973 to the year 1981. This happened at the same time as the US announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further the expansion of Korea's exports while at the same time manufacturing components that previously had to be imported. Domestic components production helped to make possible a national defense industry and strengthen domestic businesses.