LIG D&A faces growing hurdles in global arms export amid bribery scandal

LIG Defense & Aerospace's (LIG D&A) overseas expansion plans could be in jeopardy, as an ongoing bribery scandal threatens to disrupt its defense development and production pipeline through a potential two-year government bidding ban.

The Seoul Administrative Court will hold a hearing on Thursday to review the company's request to suspend the enforcement of a two-year restriction imposed by the Defense Acquisition Program Administration (DAPA).

Last week, the defense authority imposed the penalty on allegations that the firm’s executives offered bribes worth hundreds of millions of won to a DAPA employee during the bidding process for a weapons development project.

LIG D&A denied the allegations and has taken legal steps for a temporary suspension of the penalty, which was originally scheduled to take effect on Thursday. The suspension will remain in place until Nov. 20.

The potential disruption carries significant implications for the company's business structure. Its government and public institution clients accounted for 64.5 percent, or 2.78 trillion won ($2.07 billion), of LIG D&A's total sales last year.

Although the restriction does not affect existing delivery contracts or overseas export agreements, a prolonged bidding ban could prevent the company from securing new development and production contracts.

This could disrupt the pipeline of future defense programs, with potential consequences for production planning, investment and its ability to expand its export business.

The timing is particularly challenging, as LIG D&A is expected to compete for major upcoming defense projects, including a next-generation combat unmanned surface vessel program.

For a defense contractor seeking to expand its international footprint, losing access to new domestic procurement projects could also weaken its position in overseas markets. Domestic defense contracts often provide opportunities to develop and validate weapons systems before pursuing larger export orders.

“Reduced access to new programs could consequently limit the company's ability to build its future product portfolio and secure additional overseas sales,” an official from the defense industry said. “The immediate priority for LIG D&A is to maintain its bidding eligibility while contesting the sanction.”

However, even if the company secures a temporary reprieve, the legal dispute will not end immediately, so it will still remain a source of uncertainty for its future projects and global expansion strategy.

LIG D&A shares have been on a steep decline over the past month due to the bribery scandal. The stock price of the firm reached a one-month high of 773,000 won on Oct. 6, but has since dropped by around 40 percent to trade around 410,000 won as of Friday.

Brokerage houses are also on track to downgrade the stock price for the company. Daishin Securities and Hyundai Motor Securities lowered their target prices for LIG D&A to 830,000 won from 990,000 won and 925,000 won from 1.32 million won, respectively.