Early History
The government of South Korea in the early part of the 1960s began a new economic strategy which required huge corporations 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 plan that had already been utilized successfully by Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo was a key player in this effort to improve the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it started trading during the year 1967. This was at the start of the second five-year plan. Daewoo took advantage of the large workforce of the country, its primary asset. By concentrating on labour-intensive industries, like for instance clothing and textile, the company generated high profits. The factory of the company within Pusan made 3.6 million shirts each and every month. The corporation also made basic manufacturing equipment, that were labour intensive as well. During this time, Daewoo helped to boost the level of South Korea's exports, that were growing nearly 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other industries, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to the year 1981. This occurred 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 meant to further expand Korea's exports while at the same time manufacturing components which had to be imported previously. Domestic components manufacturing helped to make possible a national defense industry and strengthen domestic industries.