During the early 1960s, the South Korean government initiated a new economic plan requiring the chaebols, or conglomerates, to concentrate on increasing production for export. A series of five year plans laid out the policy for decreasing South Korea's trade deficit while strengthening domestic production. This was a strategy that had already been used successfully y both Taiwan and Hong Kong, South Korea's Far East competitors. Daewoo was a key player in this effort to improve the importance 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 1967. This was at the start of the second five-year plan. The company Daewoo took advantage of the country's huge workforce, its primary asset. By concentrating on labour-intensive businesses, such as textile and clothing, the business generated high profits. The company's factory in Pusan produced 3.6 million shirts on a monthly basis. The corporation also manufactured simple manufacturing machinery, which were labour intensive too. During this time, the corporation Daewoo helped to boost the level of exports of South Korea, that were growing nearly 40% per year.
Korea's comparative advantage in labor-intensive production started to decline, when the demand for labour pushed the wages upwards. Malaysia and Thailand became market competitors to South Korea, which forced the country to concentrate on the industries of petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This particular phase of Korea's economic recovery lasted from the year 1973 to the year 1981. This occurred at the same time as the United States announced its plans to totally withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was intended to further expand Korea's exports while at the same time producing components that had to be imported before. Domestic parts manufacturing helped to make possible a national defense industry and strengthen domestic businesses.