Early History
The government of South Korea in the early 1960s started a new economic strategy that required huge businesses referred to as "chaebols" to focus on manufacturing exports. This new strategy called for a series of five year plans which were intended to reduce the trade deficit the nation was going through while helping to bolster the country's production. This was a strategy which had already been utilized successfully by Hong Kong and Taiwan, South Korea's Far East competitors. Daewoo was a key player in this effort to enhance the importance 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 began trading in 1967. This was at the start of the second five-year plan. The company Daewoo took advantage of the large workforce of the nation, its primary asset. By concentrating on labour-intensive industries, like clothing and textile, the business yielded high earnings. The factory of the corporation in Pusan made 3.6 million shirts each month. The company also made simple manufacturing machines, which were labour intensive as well. During this time, Daewoo helped to increase the level of exports of South Korea, which 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 Thailand and Malaysia forced Korea to refocus its energies on other industries, like petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This specific phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This took place at the same time as the United States announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while simultaneously making components which previously had to be imported. Local parts production helped to make possible a national defense industry and strengthen domestic businesses.