Early History
During the early part of the 1960s, the government of South Korea started a new economic strategy that requires 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 domestic production. This was a plan that had already been utilized successfully y both Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo had a key part in this effort to enhance the significance 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 company Daewoo capitalized on the nation's huge workforce, its primary asset. By focusing on labour-intensive industries, like for instance textile and clothing, the business generated high profits. The factory of the corporation in Pusan made 3.6 million shirts every month. What's more, the corporation made simple manufacturing machinery, that were labour intensive too. In this time, Daewoo helped to boost South Korea's level of exports, 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 began to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, such as shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from 1973 to the year 1981. This happened at the same time as the United States announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further expand Korea's exports while at the same time manufacturing parts which previously had to be imported. Local parts manufacturing helped to strengthen domestic industries and make possible a national defense industry.