The government of South Korea during the early 1960s began a new economic strategy which required huge businesses referred to as "chaebols" to concentrate on producing exports. This new plan called for a series of five year plans which were intended to decrease the trade deficit the nation was going through while helping to bolster the nation's production. This was a strategy which had already been utilized successfully y both South Korea's Far East competitors, Hong Kong and Taiwan. The corporation Daewoo was a significant player in this effort to enhance the importance 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 began trading in 1967. This was at the beginning of the second five-year plan. Daewoo capitalized on the large workforce of the country, its primary asset. By focusing on labour-intensive industries, like for example clothing and textile, the company generated high profits. The company's factory within Pusan produced 3.6 million shirts every month. The company also made basic manufacturing equipment, that were also labour intensive. Throughout this time, the company Daewoo helped to increase the level of South Korea's exports, which were growing almost 40 percent per year.
Korea's comparative advantage in labor-intensive production began to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, that forced the nation to focus on the industries of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This took place at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was meant to further expand Korea's exports while at the same time making parts that previously had to be imported. Local parts production helped to make possible a national defense industry and strengthen domestic industries.