Early History
The government of South Korea in the early part of the 1960s started a new economic strategy that required big companies referred to as "chaebols" to focus on manufacturing exports. This new strategy called for a series of five year plans which were intended to reduce the trade deficit the country was experiencing while helping to bolster the nation's production. This was a plan that had already been successfully utilized by Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo had a significant part in this effort to enhance the significance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing goods for export. Daewoo benefited from the loans when it started trading in the year 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 businesses, like textile and clothing, the business generated high profits. The corporation's factory in Pusan made 3.6 million shirts on a monthly basis. The corporation also made simple manufacturing machinery, which were also labour intensive. Throughout this time, Daewoo helped to boost the level of exports of South Korea, that were growing nearly 40% 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 nation to concentrate on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to nineteen eighty one. This took place at the same time as the US announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while at the same time making parts that previously had to be imported. Local components manufacturing helped to make possible a national defense industry and strengthen domestic industries.