Early History
During the early part of the 1960s, the South Korean government initiated a new economic strategy requiring the conglomerates, or chaebols, to focus on increasing production for export. A series of five year plans laid out the policy for decreasing the trade deficit of South Korea while strengthening local production. This was a strategy which had already been utilized successfully y both the Far East competitors of South Korea, Hong Kong and Taiwan. The corporation Daewoo was a significant player in this effort to improve the importance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols producing products for export. Daewoo benefited from the loans when it started trading in the year 1967. This was at the start of the second five-year plan. Daewoo capitalized on the large workforce of the nation, its primary asset. By concentrating on labour-intensive industries, such as textile and clothing, the business generated high profits. The factory of the company within Pusan produced 3.6 million shirts on a monthly basis. The corporation also manufactured basic manufacturing machines, that were labour intensive too. During this time, Daewoo helped to boost the level of exports of South Korea, that were growing almost 40 percent per year.
Once the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea started to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other businesses, like petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to nineteen eighty one. 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 had to be imported before. Domestic components production helped to strengthen domestic industries and make possible a national defense industry.