Daewoo expanded into the construction business, serving the new village movement, a development program for rural Korea. The company also capitalized on the burgeoning Middle Eastern and African markets. Daewoo received its GTC designation during this time. The South Korean government provided major investment help to the corporation in the form of subsidized loans. South Korea's strict import controls angered competing countries, but the government knew that, unaided, the chaebols would never survive the global recession caused by the 1970's oil crisis. Protectionist policies were essential to make sure that the economy continued to grow.
Daewoo's move into shipbuilding was required by the government, even though Kim felt that Samsung and Hyundai had better skill in heavy engineering and was more suitable to shipbuilding than Daewoo. Kim did not want to take responsibility for the largest dockyard in the world, at Okpo. He said numerous times that the Korean government was stifling his entrepreneurial instinct by forcing him to undertake actions based on duty instead of earnings. In spite of his unwillingness, Kim was able to turn Daewoo Shipbuilding and Heavy Machinery into a successful corporation making oil rigs and ships that are competitively priced on a tight production schedule. This took place during the 1980s when the economy in South Korea was experiencing a liberalization stage.
In this period, the government relaxed its protectionist measures and encouraged the existence of small- and medium-sized companies. Daewoo was forced to divest two of its important textile companies, and its shipbuilding industry faced stiffer competition from abroad. The government's goal was to shift to a free market economy by encouraging a more efficient allocation of resources. Such a policy was intended to make the chaebols more aggressive in their worldwide dealings. Nevertheless, the new economic conditions caused some chaebols to fail. The Kukje Group, among the competitors of Daewoo, went into bankruptcy during the year 1985. The shift of government favour to small private businesses was meant to spread the wealth which had previously been concentrated within Pusan and Seoul, Korea's industrial centers.