Daewoo expanded into the construction sector, serving a development program for rural Korea, the new village movement. The corporation also took advantage of the growing Middle Eastern and African markets. Daewoo received its GTC designation during this time. Major investment help was provided by the South Korean government to the corporation in the form of subsidized loans. The competing countries were angered by the strict import controls of South Korea, but the government knew that, unaided, the chaebols will never survive the global recession caused by the 1970's oil crisis. Protectionist policies were required 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 assume 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 carry out actions based on responsibility instead of profit. Despite his reluctance, Kim was able to turn Daewoo Shipbuilding and Heavy Machinery into a very profitable company producing ships and oil rigs which are competitively priced on a tight production timetable. This happened in the 1980s when the economy within South Korea was going through a liberalization stage.
In 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 important textile corporations, and its shipbuilding industry faced stiffer competition from abroad. The government's objective 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 international dealings. Nevertheless, the new economic conditions caused some chaebols to fail. The Kukje Group, amongst the competitors of Daewoo, went into liquidation in the year 1985. The shift of government favour to small private companies was meant to spread the wealth that had previously been concentrated within Korea's industrial centers, Pusan and Seoul.