Daewoo expanded into the construction business, helping a development program for rural Korea, the new village movement. The company also took advantage of the burgeoning Middle Eastern and African markets. Daewoo was given its GTC designation at this time. Major investment support was offered by the South Korean government to the company in the form of subsidized loans. The strict import controls of South Korea angered competing nations, but the government knew that, independently, the chaebols will never survive the world recession caused by the oil crisis during 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 both Samsung and Hyundai had better knowledge in heavy engineering and was more suitable to shipbuilding than Daewoo. Kim did not want to take responsibility for the biggest dockyard in 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 responsibility rather than earnings. In spite of his reluctance, Kim was able to turn Daewoo Shipbuilding and Heavy Machinery into a profitable corporation manufacturing ships and oil rigs that are competitively priced on a tight production timetable. This happened during the 1980s when South Korea's economy was going through a liberalization stage.
During this period, the government relaxed its protectionist measures and encouraged the existence of medium- and small-sized companies. Daewoo was forced to divest two of its crucial textile companies, and its shipbuilding industry faced stiffer competition from abroad. 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. Nevertheless, the new economic climate caused some chaebols to fail. One of the competitors of Daewoo, the Kukje Group, went into bankruptcy in the year 1985. The shift of government favour to small private companies was meant to spread the wealth that had before been concentrated within Pusan and Seoul, Korea's industrial centers.