Early History
During the early 1960s, the South Korean government began a new economic plan requiring the conglomerates, or chaebols, 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 employed by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo had a significant part in this effort to boost the significance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols producing goods for export. Daewoo benefited from the loans when it began trading during the year 1967. This was at the start of the second five-year plan. Daewoo capitalized on the large labor force of the country, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the business yielded high earnings. The company's factory in Pusan made 3.6 million shirts on a monthly basis. What's more, the company manufactured simple manufacturing machines, that were labour intensive too. In this time, Daewoo helped to boost the level of exports of South Korea, that were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production began to decline, when the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, that forced the nation to concentrate on the businesses of shipbuilding, petrochemicals, mechanical and electrical engineering, and construction. This phase of the nation's economic recovery lasted from the year 1973 to nineteen eighty one. This took place at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was intended to further expand Korea's exports while simultaneously manufacturing components that previously had to be imported. Domestic parts manufacturing helped to strengthen domestic industries and make possible a national defense industry.