Early History
During the early 1960s, the South Korean government started a new economic plan requiring the chaebols, or conglomerates, to focus on increasing production for export. A series of five year plans laid out the policy for decreasing South Korea's trade deficit while strengthening local production. This was a plan which had already been used successfully y both South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo had a significant 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 government of South Korea sponsored cheap loans for chaebols. Daewoo was among these businesses which benefited during the year 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the nation's large labor force, its primary asset. By concentrating on labour-intensive businesses, such as clothing and textile, the business yielded high earnings. The corporation's factory in Pusan produced 3.6 million shirts on a monthly basis. Furthermore, the company made simple manufacturing machinery, that were labour intensive too. Throughout this time, Daewoo helped to increase South Korea's level of exports, which were growing almost 40% per year.
Once 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 industries, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This specific phase of the nation's economic recovery lasted from 1973 to 1981. This happened at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further expand Korea's exports while at the same time producing parts that previously had to be imported. Local components manufacturing helped to strengthen domestic industries and make possible a national defense industry.