The South Korean government in the early 1960s began a new economic plan that required huge companies called "chaebols" to concentrate 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 experiencing while helping to bolster the country's production. This was a plan which had already been successfully utilized y both South Korea's Far East competitors, Taiwan and Hong Kong. Daewoo had a key part in this effort to enhance the significance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing products for export. Daewoo benefited from the loans when it began trading during the year 1967. This was at the start of the second five-year plan. Daewoo capitalized on the nation's huge labor force, its primary asset. By concentrating on labour-intensive industries, such as clothing and textile, the business yielded high profits. The factory of the corporation in Pusan made 3.6 million shirts every month. What's more, the corporation made basic manufacturing equipment, which were labour intensive as well. During this time, Daewoo helped to increase the level of exports of South Korea, which were growing nearly 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other businesses, such as shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular phase of the nation's economic recovery lasted from 1973 to 1981. This occurred at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in production was meant to further the expansion of Korea's exports while at the same time manufacturing components which previously had to be imported. Local parts manufacturing helped to make possible a national defense industry and strengthen domestic industries.