Early History
During the early part of the 1960s, the government of South Korea initiated a new economic plan that requires the chaebols, or conglomerates, 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 domestic production. This was a strategy which had already been used successfully by the Far East competitors of South Korea, Taiwan and Hong Kong. Daewoo had a major part in this effort to enhance the significance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was one of these companies which benefited during 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the nation's large workforce, its primary asset. By concentrating on labour-intensive businesses, like textile and clothing, the company yielded high earnings. The factory of the company in Pusan produced 3.6 million shirts on a monthly basis. The company also made simple manufacturing machines, which were also labour intensive. In this time, Daewoo helped to boost South Korea's level of exports, that were growing nearly 40 percent per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other businesses, such as petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of the nation's economic recovery lasted from the year 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 meant to further the expansion of Korea's exports while at the same time making parts which had to be imported previously. Domestic components production helped to strengthen domestic industries and make possible a national defense industry.