The South Korean government during the early 1960s began a new economic plan which required big businesses called "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans which were designed to reduce the trade deficit the country was going through while helping to bolster the nation's production. This was a strategy that had already been employed successfully by Taiwan and Hong Kong, South Korea's Far East competitors. Daewoo was a significant player in this effort to improve the importance 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 businesses which benefited in 1967. This was at the start of the second five-year plan. The corporation Daewoo took advantage of the huge workforce of the country, its primary asset. By concentrating on labour-intensive industries, such as textile and clothing, the company yielded high earnings. The factory of the corporation within Pusan made 3.6 million shirts each month. The corporation also made simple manufacturing equipment, which were also labour intensive. Throughout this time, the company Daewoo helped to boost the level of South Korea's exports, which 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 nation to concentrate on the industries of petrochemicals, shipbuilding, electrical and mechanical engineering, and construction. This phase of the country's economic recovery lasted from 1973 to the year 1981. This happened at the same time as the US announced its intentions to completely withdraw its peacekeeping forces from the nation. The new emphasis in manufacturing was intended to further expand Korea's exports while simultaneously manufacturing components that had to be imported previously. Domestic parts manufacturing helped to make possible a national defense industry and strengthen domestic industries.