The government of South Korea in the early 1960s began a new economic plan which required big corporations referred to as "chaebols" to concentrate on manufacturing exports. This new plan called for a series of five year plans that were intended to decrease the trade deficit the country was going through while helping to bolster the country's production. This was a plan which had already been successfully used y both Hong Kong and Taiwan, the Far East competitors of South Korea. The corporation Daewoo was a major player in this effort to boost the significance of South Korea's exports.
The government of South Korea sponsored cheap loans for chaebols manufacturing goods for export. Daewoo benefited from the loans when it began trading during the year 1967. This was at the beginning of the second five-year plan. Daewoo took advantage of the country's large workforce, its primary asset. By focusing on labour-intensive businesses, like for instance clothing and textile, the company yielded high profits. The factory of the company in Pusan made 3.6 million shirts on a monthly basis. The company also manufactured simple manufacturing equipment, which were labour intensive as well. Throughout this time, Daewoo helped to increase the level of exports of South Korea, which were growing almost 40 percent per year.
Once the demand for labour pushed wages up, Korea's comparative advantage in labor-intensive production started to decline. Competition from Thailand and Malaysia forced Korea to refocus its energies on other businesses, like petrochemicals, shipbuilding, mechanical and electrical engineering, and construction. This particular phase of the country's economic recovery lasted from 1973 to 1981. This occurred at the same time as the US announced its plans to completely withdraw its peacekeeping forces from the country. The new emphasis in manufacturing was meant to further the expansion of Korea's exports while at the same time producing components that had to be imported before. Domestic parts manufacturing helped to strengthen domestic businesses and make possible a national defense industry.