LIG Nex1 Bidding Ban Puts KF-21 Missile Program in Doubt

South Korea’s Defense Acquisition Program Administration has barred LIG Defense & Aerospace, the missile maker formerly known as LIG Nex1, from bidding for public contracts for two years, placing in doubt the 1.9 trillion won ($1.4 billion) program to develop a long-range air-to-air missile for the KF-21 Boramae fighter. The administration’s contract committee approved the ban in Gwacheon on October 20, the harshest penalty available under the State Contracts Act, with the restriction reported to take effect on October 29. LIG had been ranked first only weeks earlier for five of the missile’s key prototypes, including system integration and the seeker, with a final contract expected in December. The sanction comes barely a month after the first production KF-21 was delivered on September 22, and threatens to extend the fighter’s dependence on the European Meteor well into the next decade.

The ban follows an indictment announced by prosecutors in August, under which a detained administration official allegedly received around 460 million won through sham service contracts in exchange for favourable evaluations across six programs worth 91.5 billion won. Kim Il-dong, the administration’s deputy head who chaired the committee, called it the largest bribe since the administration was founded in 2006 and pledged a zero-tolerance principle. The Herald Business noted that all 27 earlier bribery sanctions against defence contractors had also been bidding bans. The current penalty covers only one of the six cases, a countermeasure system against small drones, leaving five more to be judged separately. LIG said it regretted a sanction imposed solely on the basis of an indictment while its trial was still under way, and that it would seek a court injunction.

The missile program is led by the Agency for Defense Development, with 753.5 billion won for development through 2033 and 1.15 trillion won for production from 2035, according to reporting by The Elec. Hanwha Aerospace was ranked first for the airframe and propulsion packages, which centre on a ducted ramjet. Korea JoongAng Daily noted that only the Meteor uses such propulsion among air-to-air missiles in service, and that South Korea has never built one. LIG had already described the eight years to 2033 as a tight schedule, with more than half needed for testing, so even a few months of litigation would consume a significant share of the margin. Its shares fell 14.69 percent on the morning of October 21, highlighting how central indigenous missile programs have become to the company.

The KF-21 began development in 2015 to replace the South Korea air force’s ageing F-4 and F-5 fleets, and is due to reach 40 Block I aircraft by 2028 and 80 Block II aircraft by 2032, with LIG also developing its short-range air-to-air missile under the Agency for Defense Development. The ban does not apply to exports, which have sustained the growth of Korean arms sales, and existing contracts are not terminated automatically. Financial News reported, however, that the administration may rescind earlier awards, including a 1.56 trillion won electronic warfare aircraft program, should a causal link to the bribery be established. LIG’s previous sanction, a three-month suspension in 2017 for falsified test records, was also contested in court.