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