Daewoo expanded into the construction industry, serving a development program for rural Korea, the new village movement. The corporation also capitalized on the growing Middle Eastern and African markets. Daewoo received its GTC designation at this time. Major investment support was provided by the government of South Korea to the corporation in the form of subsidized loans. The competing nations were angered by South Korea's strict import controls, but the government knew that, unaided, the chaebols would never survive the world recession caused by the oil crisis in the 1970s. Protectionist policies were required to make sure that the economy continued to grow.
Daewoo's move into shipbuilding was required by the government, even if Kim felt that both Hyundai and Samsung had better expertise in heavy engineering and was more suited to shipbuilding compared to Daewoo. Kim did not want to assume responsibility for the largest dockyard in the world, at Okpo. He stated many times that the Korean government was stifling his entrepreneurial instinct by forcing him to carry out actions based on responsibility rather than revenue. Despite his reluctance, Kim was able to turn Daewoo Shipbuilding and Heavy Machinery into a profitable corporation manufacturing competitively priced oil rigs and ships on a tight production schedule. This happened in the 1980s when South Korea's economy was going through a liberalization stage.
The government in 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 corporations at this time and the shipbuilding industry 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 intended to make the chaebols more aggressive in their worldwide dealings. Then again, the new economic conditions caused some chaebols to fail. The Kukje Group, one of the competitors of Daewoo, went into liquidation during the year 1985. The shift of government favour to small private companies was intended to spread the wealth which had before been concentrated within Korea's industrial centers, Seoul and Pusan.