The government of South Korea during the early 1960s began a new economic strategy which required huge companies referred to as "chaebols" to focus on producing exports. This new strategy called for a series of five year plans that were designed to reduce the trade deficit the nation was experiencing while helping to bolster the country's production. This was a strategy that had already been utilized successfully by Hong Kong and Taiwan, South Korea's Far East competitors. The corporation Daewoo was a key player in this effort to improve the significance of South Korea's exports.
To help the chaebols in their efforts for production of exports, the South Korean government sponsored cheap loans for chaebols. Daewoo was one of these companies that benefited during the year 1967. This was at the beginning of the second five-year plan. The company Daewoo took advantage of the huge workforce of the country, its primary asset. By concentrating on labour-intensive industries, like textile and clothing, the business yielded high profits. The company's factory in Pusan made 3.6 million shirts each and every month. The company also manufactured simple manufacturing machinery, that were also labour intensive. In this time, Daewoo helped to increase South Korea's level of exports, which were growing almost 40% per year.
Korea's comparative advantage in labor-intensive production began to decline, once the demand for labour pushed the wages upwards. Thailand and Malaysia became market competitors to South Korea, which forced the nation to concentrate on the industries of shipbuilding, petrochemicals, electrical and mechanical engineering, and construction. This phase of the country's economic recovery lasted from 1973 to the year 1981. This took place 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 simultaneously producing components that previously had to be imported. Local components manufacturing helped to strengthen domestic industries and make possible a national defense industry.