The South Korean government during the early 1960s began a new economic strategy that required large corporations known as "chaebols" to concentrate on manufacturing exports. This new strategy called for a series of five year plans which were designed to lessen the trade deficit the country was going through while helping to bolster the country's production. This was a strategy which had already been successfully used by Hong Kong and Taiwan, the Far East competitors of South Korea. The corporation Daewoo was a major player in this effort to improve the significance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing goods for export. Daewoo benefited from the loans when it started trading during the year 1967. This was at the beginning of the second five-year plan. The corporation Daewoo took advantage of the country's large workforce, its primary asset. By concentrating on labour-intensive industries, like for instance textile and clothing, the company generated high profits. The company's factory in Pusan made 3.6 million shirts on a monthly basis. The corporation also made simple manufacturing machines, that were also labour intensive. In this time, Daewoo helped to increase the level of exports of South Korea, that were growing nearly 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 both Thailand and Malaysia forced Korea to refocus its energies on other businesses, such as shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to nineteen eighty one. This happened at the same time as the United States announced its plans 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 at the same time producing parts which had to be imported previously. Domestic parts production helped to make possible a national defense industry and strengthen domestic industries.