Early History
The government of South Korea during the early 1960s began a new economic strategy which required large businesses known as "chaebols" to focus on manufacturing exports. This new strategy called for a series of five year plans which were designed to decrease the trade deficit the country was experiencing while helping to bolster the country's production. This was a plan which had already been used successfully by South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo was a key player in this effort to boost the importance of South Korea's exports.
The South Korean government sponsored cheap loans for chaebols manufacturing 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. The corporation Daewoo capitalized on the country's huge workforce, its primary asset. By focusing on labour-intensive industries, like for instance textile and clothing, the company generated high earnings. The factory of the corporation within Pusan made 3.6 million shirts each and every month. In addition, the company manufactured simple manufacturing machinery, that were labour intensive too. During this time, Daewoo helped to boost South Korea's level of exports, which were growing nearly 40 percent per year.
Korea's comparative advantage in labor-intensive production started to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the nation to focus on the businesses of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of Korea'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 country. The new emphasis in production was intended to further expand Korea's exports while simultaneously producing parts that previously had to be imported. Domestic parts manufacturing helped to strengthen domestic businesses and make possible a national defense industry.