Early History
The government of South Korea during the early 1960s started a new economic strategy that required big corporations referred to as "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans that were designed to lessen the trade deficit the country was experiencing while helping to bolster the country's production. This was a strategy which had already been successfully employed by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo had a key part in this effort to boost the significance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing products for export. Daewoo benefited from the loans when it started trading in 1967. This was at the beginning of the second five-year plan. The company Daewoo capitalized on the large workforce of the country, its primary asset. By focusing on labour-intensive industries, like textile and clothing, the business generated high earnings. The company's factory in Pusan made 3.6 million shirts on a monthly basis. The company also made simple manufacturing machines, which were labour intensive as well. In this time, the corporation Daewoo helped to boost the level of South Korea's exports, which were growing almost 40 percent per year.
Korea's comparative advantage in labor-intensive production began to decline, once the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, that forced the nation to focus on the industries of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to 1981. This took place at the same time as the US announced its intentions 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 at the same time making components that had to be imported before. Domestic components manufacturing helped to strengthen domestic industries and make possible a national defense industry.