During the early 1960s, the government of South Korea initiated a new economic strategy that requires the conglomerates, or chaebols, to focus on increasing production for export. A series of five year plans laid out the strategy for decreasing South Korea's trade deficit while strengthening domestic production. This was a strategy that had already been employed successfully y both Hong Kong and Taiwan, the Far East competitors of South Korea. Daewoo was a significant player in this effort to boost the importance of South Korea's exports.
The South Korean government 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 large workforce of the nation, its primary asset. By focusing on labour-intensive industries, like clothing and textile, the company generated high profits. The company's factory within Pusan produced 3.6 million shirts each and every month. Moreover, the company made basic manufacturing machinery, which were also labour intensive. During this time, the corporation Daewoo helped to increase South Korea's level of exports, which were growing almost 40% per year.
When the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production began to decline. Competition from malasya and Thailand forced Korea to refocus its energies on other businesses, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This particular phase of Korea'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 country. The new emphasis in manufacturing was intended to further the expansion of Korea's exports while at the same time manufacturing components which had to be imported previously. Domestic components production helped to make possible a national defense industry and strengthen domestic industries.