South Korea bars missile maker LIG D&A from defence bids for two years over bribery

South Korea's arms procurement agency on Tuesday, 20 October, barred LIG Defense & Aerospace, the missile and electronics maker formerly known as LIG Nex1, from bidding for defence contracts for two years after a bribery case involving one of the agency's own officials. The Defense Acquisition Program Administration, known as DAPA, said a 24-month ban is the most severe penalty available under the law on state contracts.

The decision was taken at a meeting of DAPA's defence contract review committee at the government complex in Gwacheon, south of Seoul. According to the agency, a number of civilian members took part, the committee heard explanations from the company, and it weighed both a bidding restriction and a financial penalty before settling on the maximum ban. The committee was chaired by DAPA's deputy minister, Kim Il-dong, who said illegal acts such as bribery and cost fraud could never be tolerated in a field responsible for national security and that the agency would keep a zero-tolerance line on procurement corruption.

DAPA gave three reasons for the severity of the sanction: the bribe was the largest in the agency's history since it was founded in 2006, the misconduct, including the inflation of cost calculations, was planned and went on for a long time, and it damaged national security and trust in the defence acquisition system as a whole.

The case centres on a mid-ranking DAPA official who was detained and indicted on charges of taking about 460 million won, roughly 340,000 US dollars, from officials at LIG and other contractors. Financial News reported that, between 2021 and 2025, the official gave LIG top marks in proposal evaluations for six programmes worth a combined 91.5 billion won, receiving money and other benefits through sham service contracts in return. Prosecutors also charged two LIG executives with offering bribes to win favourable scores, Hankyoreh reported.

The ban takes effect five business days after the company is notified. From then on, LIG cannot take part in new tenders run by DAPA or other public bodies, although contracts it has already signed are not, in principle, cancelled, according to Financial News.

The most immediate risk is to the long-range air-to-air missile planned for the KF-21 fighter, a development programme worth about 1.9 trillion won. LIG, teamed with Hyundai Rotem, had been ranked first in the competition, including for system integration and the seeker, and a final contract was expected in December. Hankyoreh said the ban could affect LIG's part in the programme, depending on when it takes effect, and Financial News said it could delay the project or reshape the competition.

Financial News added that prosecutors regard some of the projects the official is accused of evaluating unfairly as precursor technology for the Korean electronic warfare aircraft, a development contract worth about 1.56 trillion won that LIG signed last year. If a causal link is established, that could become grounds for terminating the contract, the paper said. Hankyoreh noted that South Korean defence firms depend almost entirely on government orders at home and that the industry is built around four large companies, so a sanction on one of them can affect weapons programmes and delivery schedules for the armed forces.

LIG said it regretted that the agency had imposed the sanction on the basis of an indictment alone while court proceedings were still under way. The company said it would apply for a suspension of the measure and take every step to prevent disruption to its programmes.