Early History
During the early 1960s, the government of South Korea began a new economic strategy that requires the chaebols, or conglomerates, 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 local production. This was a strategy that had already been utilized successfully y both Taiwan and Hong Kong, South Korea's Far East competitors. Daewoo had a significant part in this effort to improve 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 started trading in 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the huge workforce of the nation, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the company yielded high profits. The factory of the corporation in Pusan produced 3.6 million shirts on a monthly basis. The corporation also made basic manufacturing machines, that were also labour intensive. In this time, Daewoo helped to increase 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 started to decline. Competition from both Thailand and Malaysia forced Korea to refocus its energies on other businesses, such as petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of the nation's economic recovery lasted from 1973 to nineteen eighty one. This occurred at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in production was intended to further the expansion of Korea's exports while simultaneously manufacturing parts which previously had to be imported. Domestic parts production helped to make possible a national defense industry and strengthen domestic businesses.