LIG Nex1 banned from public bidding
LIG Nex1 has been banned from taking part in bids organized by the government and public institutions for three months, for allegedly fabricating documents on the performance assessment of its long-range radar.
According to the local defense company on Sunday, the Defense Acquisition Program Administration (DAPA) imposed the restrictions after the Board of Audit and Inspection (BAI) revealed the alleged fraud.
The law prohibits companies from participating in public bids for up to six months, if they forge or fabricate documents on tenders and contracts.
The recent measure is expected to deal a severe blow to the credibility and exports of the company, which has expanded its presence in Europe and Southeast Asia. The company participated in international defense industry exhibitions in Poland this month and in Indonesia last year.
With its exports growing, the company — which specializes in guided missiles — posted 473.9 billion won in sales, up 6.5 percent year-on-year, and 31.6 billion won operating profit, up 43.9 percent.
Analysts attributed the good performances to overseas contracts in 2015, worth 1.1 trillion won.
However, LIG Nex1, which has also taken advantage of the misfortunes of Korea Aerospace Industries (KAI) and Hanwha Techwin, is expected to face as gloomy an outlook as its rivals in the second half, because of the DAPA measure.
A KAI executive has been arrested for allegedly inflating the cost for producing components of the T-50 supersonic trainer jet, in order to pocket an extra 10 billion won.
Another KAI executive is suspected of hiring a person recommended by an ex-presidential aide.
Hanwha Techwin has undergone a tax investigation and faced criticism for alleged unfair labor practices.
Also, its K-9 self-propelled howitzer was involved in an explosion last month that killed two soldiers and wounded five.
KAI shares have plunged 19.13 percent and Hanwha Techwin’s dropped 15.13 percent over the past two months.
Nex1 is expected to suffer a similar fate unless it can disprove DAPA’s claim. The company plans to take legal action, asking that the ban be temporarily suspended and ultimately withdrawn.
If the court decides to suspend the ban, the company will be able to take part in public bids, until the ruling on the revocation suit.
If the court decides not to suspend the measure or LIG Nex1 loses the revocation suit, the company will not be able to participate.
LIG Nex1 claims DAPA has imposed the measure over the inadequacy of documents, not the product’s quality.
DAPA will soon decide whether to continue LIG Nex1’s ongoing development of its long-range radar system.