Daewoo expanded into the construction business, serving a development program for rural Korea, the new village movement. The company also capitalized on the growing Middle Eastern and African markets. Daewoo was given its GTC designation at this time. Major investment assistance was offered by the government of South Korea to the company in the form of subsidized loans. The competing countries were angered by the strict import controls of South Korea, but the government knew that, independently, the chaebols will never survive the world recession caused by the 1970's oil crisis. Protectionist policies were needed to make sure that the economy continued to grow.
Daewoo's move into shipbuilding was required by the government, even though Kim felt that both Samsung and Hyundai had greater expertise in heavy engineering and was more suitable to shipbuilding compared to Daewoo. Kim did not want to take responsibility for the largest dockyard within the world, at Okpo. He said many times that the government of Korea was stifling his entrepreneurial instinct by forcing him to undertake actions based on duty rather than earnings. In spite of his reluctance, Kim was able to turn Daewoo Shipbuilding and Heavy Machinery into a successful corporation producing ships and oil rigs which are competitively priced on a tight production schedule. This happened in the 1980s when South Korea's economy was going through a liberalization stage.
The government during this time was reducing its protectionist measures which helped to fuel the rise of small companies and medium-sized businesses. Daewoo had to rid two of its textile companies at this time and the shipbuilding business was starting to attract more foreign competition. The goal of the government was to shift to a free market economy by encouraging a more effective allocation of resources. Such a policy was intended to make the chaebols more aggressive in their worldwide dealings. However, the new economic conditions caused some chaebols to fail. One of the competitors of Daewoo, the Kukje Group, went into liquidation during the year 1985. The shift of government favour to small private businesses was intended to spread the wealth that had before been concentrated in Seoul and Pusan, Korea's industrial centers.