The South Korean government in the early 1960s began a new economic strategy that required huge companies referred to as "chaebols" to focus on manufacturing exports. This new plan called for a series of five year plans that were designed to lessen the trade deficit the country was experiencing while helping to bolster the country's production. This was a strategy which had already been successfully employed y both Hong Kong and Taiwan, 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 producing 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 huge workforce of the nation, its primary asset. By focusing on labour-intensive industries, like textile and clothing, the business yielded high profits. The corporation's factory within Pusan made 3.6 million shirts on a monthly basis. The corporation also made basic manufacturing machinery, that were also labour intensive. During this time, Daewoo helped to boost the level of exports of South Korea, that were growing almost 40 percent per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This phase of Korea's economic recovery lasted from 1973 to nineteen eighty one. This occurred 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 simultaneously manufacturing parts that previously had to be imported. Local components production helped to strengthen domestic industries and make possible a national defense industry.