During the early 1960s, the government of South Korea began a new economic strategy requiring the chaebols, or conglomerates, to focus on increasing production for export. A series of five year plans laid out the policy for decreasing the trade deficit of South Korea while strengthening local production. This was a plan that had already been used successfully by the Far East competitors of South Korea, Hong Kong and Taiwan. The corporation Daewoo was a key player in this effort to boost the importance of South Korea's exports.
To assist the chaebols in their efforts for production of exports, the government of South Korea sponsored cheap loans for chaebols. Daewoo was one of these companies that benefited in the year 1967. This was at the start of the second five-year plan. Daewoo took advantage of the large labor force of the nation, its primary asset. By concentrating on labour-intensive businesses, like for example textile and clothing, the company generated high earnings. The corporation's factory in Pusan made 3.6 million shirts each month. The company also manufactured simple manufacturing machinery, that were also labour intensive. Throughout this time, Daewoo helped to increase the level of South Korea's exports, that were growing nearly 40% per year.
When the demand for labour pushed wages up, the comparative advantage in labor-intensive production in Korea began to decline. Competition from both malasya and Thailand forced Korea to refocus its energies on other industries, like shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of the nation's economic recovery lasted from 1973 to 1981. This occurred at the same time as the United States 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 components that had to be imported previously. Local parts production helped to make possible a national defense industry and strengthen domestic businesses.