Early History
During the early part of the 1960s, the government of South Korea started a new economic strategy requiring 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 strategy that had already been successfully utilized y both South Korea's Far East competitors, Hong Kong and Taiwan. Daewoo was a key player in this effort to enhance the significance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was one of these businesses that benefited in the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo capitalized on the huge workforce of the nation, its primary asset. By concentrating on labour-intensive businesses, like clothing and textile, the business yielded high earnings. The factory of the company in Pusan made 3.6 million shirts each and every month. What's more, the company manufactured basic manufacturing machines, that were also labour intensive. During this time, the company Daewoo helped to boost the level of South Korea's exports, that were growing almost 40% per year.
Once the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production 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 phase of the nation's economic recovery lasted from the year 1973 to nineteen eighty one. This took place at the same time as the United States announced its intentions to totally withdraw its peacekeeping forces from the country. The new emphasis in production was meant to further the expansion of Korea's exports while simultaneously manufacturing parts that previously had to be imported. Local components production helped to strengthen domestic businesses and make possible a national defense industry.